Friday, July 01, 2005
Rural Credit Markets and Poverty in Latin America Issues and Policy Options
By: Paul Holden, The Enterprise Research Institute
For: The InterAmerican Development Bank, 2000
Poverty in rural areas in Latin America and the Caribbean is substantially more widespread and deeper than it is in urban areas. At the same time, in most countries in the region, the share of agriculture in GDP and the proportion of the workforce employed in rural areas is small compared with developing countries in other parts of the world. If agriculture is to modernize and become more efficient, rural agricultural employment will continue to fall. A key finding of the paper is the importance of promoting non-farm rural enterprises as an instrument of rural poverty alleviation. Solving the problem of rural poverty will require that non-farm rural enterprises grow and provide alternative employment. This is hampered, among other factors, by the deficiency of rural credit markets. The paucity of rural credit is not due to the closing of state-owned agricultural banks in many countries – they did little to alleviate poverty in the past. However, the lack of private lenders has serious consequences for rural poverty. The issue, though, is not a uniquely rural phenomenon. The paucity of rural lending is another manifestation of the general underdevelopment of credit markets in Latin America.
For: The InterAmerican Development Bank, 2000
Poverty in rural areas in Latin America and the Caribbean is substantially more widespread and deeper than it is in urban areas. At the same time, in most countries in the region, the share of agriculture in GDP and the proportion of the workforce employed in rural areas is small compared with developing countries in other parts of the world. If agriculture is to modernize and become more efficient, rural agricultural employment will continue to fall. A key finding of the paper is the importance of promoting non-farm rural enterprises as an instrument of rural poverty alleviation. Solving the problem of rural poverty will require that non-farm rural enterprises grow and provide alternative employment. This is hampered, among other factors, by the deficiency of rural credit markets. The paucity of rural credit is not due to the closing of state-owned agricultural banks in many countries – they did little to alleviate poverty in the past. However, the lack of private lenders has serious consequences for rural poverty. The issue, though, is not a uniquely rural phenomenon. The paucity of rural lending is another manifestation of the general underdevelopment of credit markets in Latin America.