Micro–macro linkages in financial markets: the impact of financial liberalization on access to rural credit in four African countries
✍ Scribed by Paul Mosley
- Publisher
- John Wiley and Sons
- Year
- 1999
- Tongue
- English
- Weight
- 176 KB
- Volume
- 11
- Category
- Article
- ISSN
- 0954-1748
No coin nor oath required. For personal study only.
✦ Synopsis
Almost every programme of economic reform contains a ®nancial liberalization component; but little work has been done to assess the eects of ®nancial liberalization on access to credit in individual markets. We present a model of this linkage, which predicts that conventional ®nancial de-repression will have no signi®cant eect on the price and availability of credit in the informal sector, but that ®nancial innovation in the informal sector will aect such availability considerably. We test this proposition speci®cally against data for the period of ®nancial reform in four African countries: Uganda, Kenya, Malawi and Lesotho. Such reforms had signi®cant eects on interest rates, but except in Uganda these eects did not feed through into an increase in savings rates or in access to rural credit. Such access was, however, favourably in¯uenced by institutional innovation on the supply side of the market for small-business and small-farm credit. Likewise, in two of the case-study countries Ð Malawi and Uganda Ð ®nancial de-repression had insigni®cant eects on poverty and privatisation of the bottom end of the credit market on its own had disastrous eects, but expansion of the supply of smallholder credit had a highly positive poverty-reduction eect.