I Fiance Apicultural

4
Vertical Integration,
Density of Coverage, and
Multiproduct Structure of
Formal Rural Financial
Institutions
lie remaining four organizational principles of the six stated in
Chapter 3 for developing RFIs arc critical to attaining three basic
goals of agricultural credit policy: rural growth with equity, integration
of rural financial markets, and economics of scale and scope for
viability of formal Rlls.
Vertical Organization
of Various Types of RFIs
Should different types of RFIs he vertically integrated fiom their local
units to regional and national levels? Vertically organized RFIs arc better
able to integrat regional and national financial markets, to provide
managerial guidance to their lower-level units, to arrive at a more
interactive tnderstanding for strategic decisions, and to decentralize
implementation processes for rural finance operations. Such internal
management structires can lead to more effective and efficient mobili­
zation and utilization of both financial and human capital. l'hey also
facilitate identification and implementation of opportunitics For financial
intermediation gearedl to specific situations.
Without vertical integration, internal economics of scale in financial
and transaction costs cannot be reaped, with COllskwtittce:lit adverscimpli­ cations for viability. Such RFIs tend to be less uscfil to farmers and
other rural clients because of the irrcgularity and inadequacy of their
services. Local cooperatives without regional or national federations
cannot
survive long unless they have adequate financial resources and
professional management.
Cross-national information to identify the qualitative features of
vertically integrated RFIs is weak to nonexistent. However, whether an
RFI has its constituents at various levels (apex, intermediate, and local)
can be broadly approximated from the availablc literature. On that
ground and on the basis of observations, availability of the types of
capabilities that vertically organized RFIs have appears weak in Africa,
the Near East and Mediterranean Basin, and Latin America and the
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