The role of credit in the farmer support programme: is it the key to success?

Abstract

This paper concentrates on the credit element of Farmer Support Programmes (FSP) and the financial environment in which FSP cedit is applied with a view to assess the importance of the credit component in the FSP. First, the theory on rural financial markets and intermediation is briefly reviewed. This is followed by an application to the FSP. The paper concludes with some policy implications of the findings. The main points that FSP financial policy should incorporate are: avoid loan subsidies and targeting; mobilise deposits; charge positive real rates of interest; avoid concessionary discount lines; reduce transaction costs; and emulate informal finance.