I Fiance Apicultural

34
marketing agencies help increase the availability of such supplies.
Through tile various types of agricultural credit, RFIs can accomplish
two necessary tasks: they can achieve better balance between demand
and supply forces and hence are noninflationary, and they can promote
backward (BWL) and forward (FWL) linkages among the three directly
interdependent subsystems of agdiculture shown in the diagram below.
The three subsystems are the agricultural production system (APS), the
agricultural inputs distribution systnn (AIS), and the agro-marketing
and processing system (AMPS) (B. M. Desai 1989; Desai, Gupta, and
Singh 1988; Dcsai, Gupta, and Tripathi 1989; and Desai and Namboodiri
1991).
BWL FWL
AIS APS AMPS
FWL BWL
Multifunctional RFIs can be an effective alternative to informal
lenders because they undertake a range of functions. Inmost developing
countries, informal private lenders extend loans in kind as well as in
cash. That is, they loan seeds, raw materials, grain, and so forth and
recover their value through produce or wage labor. In other words, their
operations are characterized by horizonutal integration of local conmmodity,
land, labor, and credit markets (Asian lroductivity Organization
1984t, 1985; D. G. R. Belshaw 1988b; i. Belshaw 1959; Blhaduri 1973;
IBhattachaliya 1978; Braverman and Guash 1986; Dantwala 1966; B. M.
Desai 1976, 1980; Donald 1976; FAO 1973, 1974la, 197,11, 1975, 1976;
Feder et al. 1989; Firth- and Yamey 196,t; Hossain 1988; Kato 1984;
Mellor 1966; Reserve Bank of India 19,15, 1954; Rosen 1975). Under
these circumstances, if forma! RFIs concentrate on merely providing
credit alone, they cannot compete as effectively as informal lenders in
integrating rural people, especially the rural poor, into a national financial
system. Moreover, rural clients urgently need modern physical
inputs and services to improve their land and labor productivity.
Multifunctional RFIs benefit greatly from economies of scale and
scope and thereby improve their viability. Such economics result fr'om
spreading mnany commnion transaction costs among the various Functions;
mobilizing low-cost deposits, hence lowering inte rest costs; extending
loans that carry lower as well as higher lending rates; improving loan
recovci- ,rates, thus being able to recycle finds quicker; and increasing
earnings froim many nonfinancial activities, including commissions on
nonfund-based credit, check-clearing fees, discounts on bills, and income
from auxiliary services such as input sales, consumer goods sales,
and farm-produce marketing (B. M.Desai 1989; Dcsai, Gupta, and Singh
1988; Desai, Gupta, and Tripathi 1989; Desai and Namboodiri 1991).
Empirical evidence quantifying each of these advantages does not
exist. But deductive reasoning, observations, cross-national comparisons