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like the county and plimaly cooperatives, is mhltipurpose: it extends
loans and provides input supply, produce marketing, and extension
services. Nevertheless, NACF had negative net margins in both 1967 and
1970, although it broke even in 1975 and 1976. The reasons are largely
related to (1) nonfinancial activities undertaken directly, rather than
indirecdy, by extending financial services to the lower-level cooperatives
for input supplies and produce marketing; (2) inadequate decentralization;
(3) inability to mobilize deposits despite upward revision in interest
rates cn deposit; and (4) a large amount of nonearning and costly assets
like acounts receivable, .dvance payment, and inventory in its total
s.These suggest that net margins of an RFI are dependent on
complex and interdependent factors. In addition to holding less costly
and higher income-earning assets, reforms in nonprice policies and
perhaps in interest rates on deposits would improve NAC-r's viability.
Cooperatives in the Republic of Korea have a long history. They
were initiated tinder the Japanese occupation. During that time and
after, reorganizations were made to benefit the farmers and agricultural
development. The cooperatives arc vertically organized. The Financial
Associations were established in 1907 to extend credit services to farmers.
whereas the Farmers' Associations were organized in 1920 to condtrct
purchasing and sales of commodities. Both these institutions were
"run under the auspices and control of the government" (Korea, Republicof,
NACF various years, 6). "Under Japanese control, a national
cooperative federation was established to jcintly handle banking and
bu! :ness activities for agriculture" (Brake 1971, 1).
But inl 1956 tle Financial Associations were reorganized into the
Korean Agricultural Bank (KAB), dealing exchisively with institutional
agricultural credit, and in 1957 the Agricultural Cooper atives (AC) were
established through the reorganization of the Farmers' Associations.
But, these two agricultural institutions "lacked close linkage and efficiency
in operation due to duplication and competition in business
activities. Therefore, harmony and cooperation betwCCn these institutions
were imperative for the benefit of farmers as well as agricultural
development" (Korea, Republic of, NACF various years, 6). In 1961,
KAB and AC were merged into the present multipurpose cooperatives
in compliance with the new ' 'ricultural Cooperative Law.
hllese coo)eratives are now vertically organized at tlree levels: the
pfriiaiy cooperatives at the township level, cotty Cooperatives at county
and city levels, and the federal organization (NACF) at the national level.
NACF's loanable resources constitute funds fiom (1) the government,
inchdiiig foreign loans and ti-ansfers; (2) dle)osits in its owl
banking system and borrowings from other banks, primarily the Bank ot
Korea; and (3) accumulation of its share ca)ital and reserves. The
credit-deposit ratio of NACF was much greater than 1.00-1.78 in 1967,
3.15 in 1970, 1.31 in 1975, and 1.33 in 1976.
NACF's banking and credit operations include both agricultural and
nonagricultural deposits and loans for both individuals and institutions,
mutual savings, credit su peivision and farm management guidance, and
linkages between credit and the farm supply and product marketing
activities of this institution. The fartn supply activities provide fertilizer,