Risk and Vulnerability Mailing List Archive

["Bezemer, Dirk" <<address removed>>]

Thanks, James, for your suggestion. In effect, the idea is to let rural banks 
take care of the co-ordination problem. If only it were so simple!

If rural finance would work well in SSA we would indeed have disposed with a 
major problem. But the large literature on this topic indicates that the high 
hopes placed on it previously have proven not well founded. Reasons include 
collateral uncertainty, farmers' fluctuating income pattern, low returns, high 
loan collection costs in sparsely populated areas, or areas with bad 
infrastructure - along with nationwide factors such as corruption and 
inflation, with make it hard for banks to operate. No success model like the 
Grameen bank in Asia exists for Africa. (Am I wrong? I'd love to hear.) Also, 
the Grameen succes was predicated on returns made in the non-farm rural 
economy, which is motoring in e.g India and Bangladesh but not in SSA.

Not very constructuve, this, but it serves to lead us back to what we need: a 
model that works for smallholders in SSA, an institution that co-ordinates 
their transaction and shields them from transaction risk. 

Options may include increasing farm size, so that farmers themselves can take 
on the co-ordination role; or farmer organizations achieving the necessary 
scale; or large private investors, such as domestic firms or multinationals 
stepping in, investing in co-ordination systems in their own (enlightened?) 
interest; or, again, some form of government intervention, either temporary 
(helping to build capacity to co-ordinate transactions) or permanent (acting as 
buyers and sellers). The answer will need to take into account that farmers in 
Sub Saharan Africa are mostly smallholders. It will also need to accommodate 
the natural and political conditions in the region, which generally make the 
copying of successful post-liberalization performances in Asian countries 
infeasible.

Dirk Bezemer

Overseas Development Institute
111 Westminster Bridge Road, London SE1 7JD, UK
phone/fax: (0044) (020) 79220313/399
e-mail: <address removed>
http://www.odi.org.uk/rpeg/staff.html#dirk

Imperial College, Wye campus, Kent TN25 5AH, UK
Phone/fax: (0044) (020) 75942913/838
e-mail: <address removed>
http://www.wye.ic.ac.uk/staff/biogs/bezemerd.html