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Rural Finance in World Perspective a Contemporary Scenario

Uploaded by nkavithambassm on Apr 13, 2007

RURAL FINANCE IN WORLD PERSPECTIVE ( A CONTEMPORARY SCENARIO)
by

N.KAVITHA MBA, M.PhiL, (Ph.D),
LECTURER, SSM SCHOOL OF MANAGEMENT,
SSM COLLEGE OF ENGINEERING,
KOMARAPALAYAM-638 183
NAMAKKAL – DIST
E-mail : nkavithamba@yahoo.co.in

&

Dr.A.Ramachandran M.com,M.Phil,Grad.CWA,Ph.D,
Reader in Commerce,
SNR Sons College (Autonomus),
Coimbatore.
E-mail: ram1200@rediffmail.com

Rural Financial Trends: How Are Lenders and Interest Rates Changing?

In recent history, it looked to many as if rural financial markets would become dominated by large banks that offered relatively expensive credit to agricultural firms. However, the 1990's have seen resurgence in smaller banks with a focus on smaller, agricultural producer loans. Moreover, small banks may be more competitive than ever with respect to interest rates. This report outlines some of the important trends in rural credit markets including the types of lenders, volume of loans, interest rate trends and some discussion of specific types and sizes of loans. It is our hope that such information will allow agricultural firms and organizations to make more informed decisions with respect to securing capital, as well as choosing an appropriate lending institution.


Introduction

Rural Finance

Rural finance comprises credit, savings and insurance (or insurance substitutes) in rural areas, whether provided through formal or informal mechanisms. The word ‘credit’ tends to be associated with enterprise development, whereas rural finance also includes savings and insurance mechanisms used by the poor to protect and stabilize their families and livelihoods (not just their businesses).

An understanding of rural finance helps explain the livelihood strategies and priorities of the rural poor. Rural finance is important to the poor. The poorest groups spend the highest
proportion of their income on food – typically more than 60% and sometimes as much as 90%. Under these circumstances, any drop in earnings, or any additional expenditure (health or funeral costs, for instance) has immediate consequences for family welfare – unless savings or loans can be accessed. Financial transactions are therefore an integral part of the livelihood system of the poor.

Rural finance consists of informal and formal sectors. Examples of formal sources of credit include: banks; projects; and contract farmer schemes. Reference is often made to micro-credit. Micro underlines the small loan size normally associated with the borrowing requirements of poor rural populations, and micro-credit schemes use specially developed pro-poor lending methodologies. Rural populations, however, are much more dependent on informal sources of finance (including loans from family...

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Uploaded by:   nkavithambassm

Date:   04/13/2007

Category:   Finance & Investing

Length:   14 pages (3,089 words)

Views:   3590

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