Farm credit and microfinance – is there a critical mismatch?
Old-style, subsidized, farming finance has largely disappeared and has been replaced by 'new paradigm' microfinance. This article examines the characteristics of a standard microfinance loan and compares them with the frequency, seasonality and loan size requirements of typical microfinanceborrowers, including farmers and petty traders. It also examines data on the rate of return from investments for a number of micro-enterprises and compares them with the rate of return from a number of farming investments to discover whether these businesses make sufficient profit to cover
the interest payments on the loan. It concludes that microfinance institutions will have to bring their interest charges down and introduce new loan products to meet the needs of farmers.
borrowers, including farmers and petty traders. It also examines data on the rate of return from investments for a number of micro-enterprises and compares them with the rate of return from a number of farming investments to discover whether these businesses make sufficient profit to cover
the interest payments on the loan. It concludes that microfinance institutions will have to bring their interest charges down and introduce new loan products to meet the needs of farmers.
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