I Fiance Apicultural

76
farm chemicals, seed, feed, farm machinery, tools and equipment,
brceding livestock, and otier production inputs. The product marketing
activities include general marketing of nmbers' agricultural products
as well as operation oftie tuarketing ofgovernmcnt products purchased -
and ,old for pice stabiliation purposes. It also handles sales and plroilo
tiort of farm handiwork products such as straw mats, banl)oo products,
an I other items. And finally, it also Illllsa Inutual insurance program for
-Cc and fire insurance protection for policy-hoding iethers.2"
Despite the nnuhiptmrpose nature of NACF, it had negative net
margins in 2V967 and 1970, the .yearsfor which relevant (lata arc available
(Table 33). Because this finding appears cont radictoy to the proposed
hypothesis, it needs to be analyzed further in spite of Ihe limited data
available. The following reasons for these losses seenl possible.
" Perhaps NACF, as an open institution, undertook too inany activities,
rather thatn ailing as a financial institution.
• In doing so, it m11ay llax" (ccndtalized too little, not only in
appraising and nmoniloring loans, but also in undertaking noncdit
operations that could have beemi promoted by x.eClirig
financial se.vie(.s to its cotstitiellmits at ow"r lveils, nalliely, coty
cooperatives and ptrimay coi0)eralive's.
" The preceding two sen to have led to higher average transaction
costs.
• Even unit financial costs scen high, and they were increasing.
This resulted frioni higher interest rates on deposits (which were
introduced under ie iinterest-rate relbrns of tte mid-1960s)
without increasing collection of d e p osits (Table 3,4).98
* The increase in ave:age transaction costs was nuclh smaller than
increases in average financial costs audi average revenle (Table
33). Moreover, unit financial costs increascd more (21 percent)
than unit revenue (16 picenit). Although averagc reveute was
fairly high and even increase, in 1970, it did not itcre;Ise enough
to offset Ihe higl. and increasi,:g average transaction and financial
costs I)-cauise NACF's mnionearnitig asscls, such as acconlits receivable,
advance paymletnts, and it\vettoly accounted for as Inuch as
35 percent in total assets in both vars. Moreover, they also
increased in absolute \al~tr in 1970 ('l'able 34).
Clearly, net tnargins of a RFI suclh as NACF are dependent on a
number of conmplex atd interrelated ilhtors, not just interest rates. The're
is a need for reforims of' factoms rclated to nonprice and deposit rates.
261rak er(197 1) ecO m m endtd th a~tth e" f]in llC . and Cl el'l and insur aUce oper altions
should ultinmately biecome+st-pamitt itmiltiils fiom tile NACF.
27Even in 1975 andt 197fi this institution mitely' v bioke even with unit net mIgills at
barely 0.0003 and 0.000.1 pecient, respectiv'h., 1m)ittl- fi 0o the data given ill Korea,
Republic of, NACF (various years).
28,This is onsis!entt witth the earlier ob el"va loll about iiteuest rate inelasticity of'deposits,
which is discussed ill Cnlpirical terms fIo tile Repultic of Koei as well as some other
developing countries it; Chaptcr 7.