MICROFINANCE PUBLICATION ROUND-UP: Financial Liberalization and Rural Banking in India, Agricultural Financing and Food Security in Developing Countries, European Small Business Finance Outlook

“Financial Liberalization and Rural Banking in India;” published by the Indian Statistical Institute, Kolkata; 2014; 29 pages; available at http://www.networkideas.org/feathm/dec2004/Conference_Papers/Financial_Liberalisation_Rural_Banking_India_VKR.pdf

This paper examines the effects of the recent trend of financial liberalization in India, including its impact on banking policy and the structure of rural economies in the country. After reviewing data collected from five other studies that used village surveys regarding the effectiveness of existing lending programs, the authors argue that financial liberalization has worsened regional inequalities in rural banking. According to the authors’ analysis, microcredit projects controlled by non-governmental organizations (NGOs) have failed to reduce transaction costs, instead transferring these costs to donors and borrowers. The authors conclude the paper by proposing several policy measures to curb these alleged negative consequences of rural banking schemes, suggesting that India is in need of large-scale public investment in the countryside, better access to regional rural banks and commercial banks in rural areas, and the reintroduction of “loans-cum-subsidy” schemes in these areas.

“Agricultural Financing: A Powerful Tool for Contributing to the Food Security of the Populations;” published by Desjardins international Developpement (DID); 2014; 24 pages; available at http://www.did.qc.ca/media/documents/en/positionnements/DID-AgriculturalFinancing-November2010.pdf

In this paper, Development international Desjardins (DID), a Canadian nonprofit providing technical support and investment for community finance institutions in emerging economies, presents its vision on agricultural financing, advocating for a comprehensive approach to agriculture that focuses on improving financial services for the agricultural sector and encouraging collaboration among food producers. According to the authors, strengthening agriculture, which is a critical sector in the economy of many developing countries, requires greater accessibility to financial services by farmers in rural areas. Financial institutions can best serve rural markets and promote rural food security by strengthening financial intermediation processes and increasing collaboration among other financial service providers. Furthermore, financial service providers and governments should work to ensure that farmers receive fair prices for their products and have access to insurance initiatives.

“European Small Business Finance Outlook;” published by the European Investment Fund (EIF); 2014; 92 pages; available at http://www.eif.org/news_centre/publications/eif_wp_26.pdf

This document provides an analysis of the main sectors and markets of relevance to the European Investment Fund, including microfinance, securitization and private equity. The paper notes that, over the course of 2014, these markets showed some signs of improvement, however there remain significant imbalances between European Union member states and nearby non-member states. Across both groups of countries, small and medium sized enterprises (SMEs) continue to face problems accessing cost-effective financial services and growth funding, which is exacerbated by slow growth in the private equity market.

By Makai McClintock, Research Associate

Sources and Additional Resources

[1] Indian Statistical Institute: Financial Liberalization and Rural Banking in India

[2] Desjardins international Developpement: Agricultural Financing: A Powerful Tool for Contributing to the Food Security of the Populations

[3] European Investment Fund: European Small Business Finance Outlook

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