Providing loans for rural development

Investing financial resources in rural development

Context

In food production there was also an emphasis on greater self-dependence. For some, natural farming was simply more practical. It cost less, and gave the farmer greater autonomy; by relying on natural fertilisers and pesticides and crop rotation, he controlled more of the inputs. Similarly, with animals or crops grown for income, the emphasis was on small scale activities where the producer could control more of the factors. Development, focused in this direction, produces people who need to rely less upon external financing.

Counter-claim

Some policies have a negative impact on labour demand and income distribution. Of particular concern is the common provision of subsidized credit to large farmers and the exclusion of small farmers from the formal credit market. Institutional credit in developing countries rarely reaches more than a quarter of the farm population; most of it is usually secured by large farmers, often at very low or negative or even negative real rates of interest. Subsidized credit programmes have often had the unintended effect of encouraging questionable mechanization with major labour-displacing consequences. Selective mechanization may be appropriate where output is limited by seasonal shortages of labour, but its general encouragement through subsidized credit is unwarranted, especially in poor countries.