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Overcoming Obstacles to Agricultural Microfinance: Looking at Broader Issues

Author

Listed:
  • Llanto, Gilberto M.
Abstract
This paper presents a general picture of the difficulties in developing a sustainable lending service geared toward smallholder agriculture. Drawing on the experiences of the Philippines and other countries, it traces the rethinking of the agricultural credit policy following the collapse of subsidized agricultural credit programs, and the subsequent rise of microfinance, as pioneered by nongovernmental organizations. Acknowledging that the main challenge is not about the straightforward application of microfinance technologies to agriculture, the paper discusses how crafting an approach to sustainable agriculture microfinance is influenced by myriad of issues. The paper concludes that overcoming the barriers to agricultural microfinance goes beyond the simple provision of credit, extends outside agriculture, and shuns a “one size fits all” approach. To be able to deal with the complexity and risks in agriculture, rural lenders would have to innovate on their product design, lending technologies and risk management strategies; improve their information base; and strive to have access to market-based risk management products. Moreover, policymakers have to recognize and understand the peculiarities of the rural and agriculture sector, namely: information asymmetry, geographic dispersion, heterogeneity of the population, covariant risks, insecure property rights, and the absence of insurance markets and risk-reducing institutions.

Suggested Citation

  • Llanto, Gilberto M., 2007. "Overcoming Obstacles to Agricultural Microfinance: Looking at Broader Issues," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 4(2), pages 1-18, December.
    • Handle: RePEc:ags:phajad:166010
    DOI: 10.22004/ag.econ.166010
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    References listed on IDEAS

    as
    1. Boehlje, Michael D. & Hofing, Steven L. & Schroeder, R. Christopher, 1999. "Financing and Supplying Inputs to the 21st Century Producer," Staff Papers 200410, Purdue University, Department of Agricultural Economics.
    2. Llanto, Gilberto M. & Ballesteros, Marife M., 2003. "Land Issues in Poverty Reduction Strategies and the Development Agenda: Philippines," Discussion Papers DP 2003-03, Philippine Institute for Development Studies.
    3. Unknown, 2005. "Forward," 2005 Conference: Slovenia in the EU - Challenges for Agriculture, Food Science and Rural Affairs, November 10-11, 2005, Moravske Toplice, Slovenia 183804, Slovenian Association of Agricultural Economists (DAES).
    4. Arsenio M. Balisacan & Leocadio S. Sebastian, 2006. "Securing Rice, Reducing Poverty: Challenges and Policy Directions," Books on Agricultural Research and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), number 2006:38.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    2. Daniel Domeher & Raymond T., Abdulai, 2012. "Land registration and access to SME credit: preliminary findings," ERES eres2012_002, European Real Estate Society (ERES).
    3. Pelka, Niels & Weber, Ron & Musshoff, Oliver, 2015. "Does weather matter? How rainfall shocks affect credit risk in agricultural micro-finance," 2015 Conference, August 9-14, 2015, Milan, Italy 212617, International Association of Agricultural Economists.
    4. Weber, Ron & Musshoff, Oliver, 2015. "Does pre-defined flexibility come with teh cost of higher credit risk? Evidence from agricultural micro lending in Madagascar," 2015 Conference, August 9-14, 2015, Milan, Italy 211905, International Association of Agricultural Economists.
    5. Dalla Pellegrina, Lucia, 2011. "Microfinance and Investment: A Comparison with Bank and Informal Lending," World Development, Elsevier, vol. 39(6), pages 882-897, June.
    6. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    7. Anubhav Agarwal & Shubhangi Kumar, 2020. "Interest rate subvention in Indian agriculture: A demand-side analysis and proposed alternatives," ASARC Working Papers 2020-02, The Australian National University, Australia South Asia Research Centre.

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