I Fiance Apicultural

8
A second approach, tile supply-leading finance policy, perceived
finance to play a proactive role iii economic development. It visualized
"the creation of financial instititions and extension of' their financial
assets, liabilities, and related financial services in advance of demand for
them, especially the demand from cntrepencurs in the modern,
growth-inducing sectors" (Patrick 1966, 175):' According to the policy
implications of this view, "Financial intermediation which transfers resources
fron traditional sectors, whetlhicr by collecting wealth and saving
from these sectors in exchange for its dleposits anod financial liabilities or
by credit creation and forced saving, is akin to the Schumpetcrian
conce 1)t of innovation financing" (Patrick 19!66, 176).
Patrick (1966, 17) further notes that "it cannot be stated that supplyleading
finance is a ncccssaiy condition or precondition for inaugurating
self-sustained economic developnent. Rather, it presents an opportunity
to induce real growth by linancial means. It is, thus, likely to play
a more significant role at the beginning of the growth process than
lalcr." In other words, finance is perceived to play a catalytic role in
inducing development of coSodit'-lroor,:,:g sectors.
A tlhird alplroach of dl;iad-following fini'tiice perceived financial
policy to play a mainly neutral and passive role in overall development.
Patrick (1961, 171) states that "... where enterprise leads, finance
follows,' and refers to it as the (lciiiand-following financial policy. According
to this, thw evolution of' the financial system is a consequetnce of
A fourth, hybrid alppjroach of financial policy where supply interacts
with demand perceives tile role of finance in promoting economnic
development as resulting from both tile demand for and supply of
financial services. Patrick (1966, 177) articulates this as follows:
In actual practice, there is likely to be an interaction of si pply-leading and
demand-following phenomena. Nevertheless, the following sequence may
be postulated. Before sustained modeln iiindustrial growth gets underw'ay,
SUl)ply-leading fiaince may be able to induce real iIll 1ovat ive-type inivestiuent.
As tle process of leal growti occurs, the SullJly-leading impetus
gradually becomes less impoitalt and the deniand-following financial
lespollse beco Il eS (omllanlt.
Mellor (1966, 1976) has synthesized lie suiply-leading and deniandfollowing
role of filance for economic development and agricultural
development in particular. Il his perception, institutional finance
should accompany or closely follow programs of technical change. He is
clear, however, that institutional finance will fail if it is not closely
associated with iinovatioi that increases factor productivity in agriculture.
In this context, it must be kept in mind that developing RFIs takes
time; therefore, need must be anticipated and carly action taken.
3Fhis paperlIhas at limcs been classi'ie a;ls l vOcating deiclan(-followinlg tfnace, and at
other times as recommending skipply-eadi ng finance (Adamns 1977; Olu 1985; Vogel
1981).