Fw: When is Rural Finance Not Appropriate?
H. C. Covington (ach1@sprynet.com)
Tue, 13 Jan 1998 06:51:54 -0600
H. C. Sonny Covington @ I CAN! America
318 Indest Street - New Iberia, LA 70563
427 St. John Street - Lafayette 70501
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-----Original Message-----
From: Gerhard Coetzee <Gerhard@dbsa.org>
To: devfinance@lists.acs.ohio-state.edu
<devfinance@lists.acs.ohio-state.edu>
Date: Tuesday, January 13, 1998 3:31 AM
Subject: RE: When is Rural Finance Not Appropriate?
This question goes to the heart of interventions in developing
countries. Two main issues are important. Firstly, how do we see the
role of finance in economic development? Recent work on this topic
indicates that finance plays an important role. The next question is,
is it a follower or a leader in economic development. The conventional
supply-led approach blindly worked on the assumption that it must be a
leader. We all can elaborate for hours on the results of the
conventional approach. The best in terms of policy interventions that
we could come up with over the last two decades was a more cautionary
demand driven approach. We still have not find the golden key and will
probably never. This question is evident from the discussions on the
devfinlist. Jane quite often calls us back to the market and to the
examples in informal financial activities. Recent discussions on
subsidies presents a more middle of the road approach. Very few people,
if any see the state in the role of intermediary anymore. Thus, a
paradigm shift is evident.
Second, the way the question is phrased creates the perception that
rural finance is defined as an outside intervention. I see rural
finance as far broader than this in that it also refers to current
financial transactions in rural areas where we may have no outside
intervention ( read state intervention). This leads me to the following
observation that outside intervention can also take many forms. This
may range from the creation of institutions, to the facilitation of home
grown village level financial institutions, to the changing of
legislation to free up some resources. In looking at financial projects
most of us write as a standard phrase that it should be linked into more
comprehensive approaches. This brings us to that bad word co-ordination
of activities. We also mention this word quite a lot, but normally
neglect to take any action in exercising it in practice. Thus, we may
start with social investment, infrastructure investment etc., however,
we do not have to wait with giving attention to the functioning of
financial markets, and our interventions should not necessarily mean
full blown activities. Manfred Zeller showed in recent publications
that we can take measurement of impact further than just counting heads
by looking at impact on social indicators. I agree that we need a lot
of work in the area, at least we have started.
Gerhard Coetzee
Development Bank of Southern Africa