The Role of Specialized Agricultural Credit Institutions in the Development of the Rural Finance Sector of Armenia: Case of Credit Clubs

Source: RePEc

ABSTRACT The paper aims at studying the challenges of agricultural finance in Armenia. Strengthening the rural credit markets and institutions in Armenia is of paramount importance. The study reviews and analyzes the outcomes of the Agricultural Credit Club Program implemented by the US Department of Agriculture Marketing Assistance Program in Armenia. The study identifies the attitudes and perceptions of member farmers relating to the level of interest rates and access to credit. The findings provided clear indications of the challenges facing the improvement or even development of rural financial markets and agricultural credit institutions from the demand side of agricultural credits. The study concentrates on several important issues like: problems with loan collateralization in rural areas, land reform and property rights, transaction costs for monitoring rural credits, the role of government in rural credit and finance markets, and the role of specialized agricultural credit institutions like credit clubs. The research was based on surveys and interviews. Surveys have been conducted among credit club members to identify and measure the benefits of such a rural credit cooperative initiative. Based on findings, certain recommendations have been proposed regarding the rural finance and credit mechanisms.

Download full-text


Available from: Vardges H Hovhannisyan, May 06, 2014
80 Reads
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper assesses the problems of financing Central and Eastern European agriculture during the present transitionary period and the role of government in this process. Initially the paper looks at why credit markets work imperfectly, even in well developed market economies, focusing on problems related to asymmetric information, adverse selection, moral hazard, credit rationing, optimal debt instrument choice and initial wealth. It shows why these and related problems may cause transaction costs to be so high that credit rationing and high interest rates are rational and efficient responses by lenders to the imperfect information problems of the agricultural sector. A series of specific, transition-related issues are then discussed which have worsened these problems within the Central and Eastern European agricultural sector. The potential roles of governments in solving these issues and actual observed interventions by Central and Eastern Europe governments through credit subsidies, loan guarantees and specialised agricultural lending institutions are analysed. Finally, the paper discusses how financial market innovations have solved some of the credit market problems and derives the implications for government policies.
    Food Policy 02/1999; 24(1-24):21-47. DOI:10.1016/S0306-9192(98)00067-0 · 1.80 Impact Factor
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This article explores the structure of the rural economy in Armenia from a farm household perspective. Ownership of capital and access to activities are examined on the basis of data from a recent large-scale survey of farm households in Armenia. Different measures for the outcome of livelihood strategies in terms of well-being are observed. Income-poor households are found to be less well endowed especially with financial and social capital. They derive smaller income shares from economic activities and more from dissaving and social payments. The findings are relevant to policies aimed at alleviating rural poverty.
    Post Communist Economies 02/2004; 16(3):333-348. DOI:10.1080/1463137042000257555 · 0.46 Impact Factor
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Initially, we explore the attitudes and perceptions of farmers and low farm profitability as potential constraints to rural financial intermediation and investment in agriculture. As part of this discussion we consider what is factual about the "access to credit problem." Second, we summarize recent changes in agricultural finance and credit conditions in the CEE, NIS, and Baltic countries. The focus here is on observed financing patterns, sources of credit, and the set of constraints which are thought to affect the level of rural financial intermediation. Third, we consider how banks are adapting to the new farming structures. Fourth, we review the primary modes of government intervention in financial markets and the role of government in dealing with the bad loans problem by providing "soft credits" via the banks. We conclude by suggesting the means by which governments can foster development of effective rural financial markets.