FROM OLD TO NEW ROLES OF GOVERNMENT IN ESTABLISHING SOUND RURAL FINANCIAL INSTITUTIONS

摘要

This paper elaborates on the new paradigm of the role of the state in promoting rural financial markets and institutions. It focuses on the shift from the old to the new paradigm and suggests that primary assessment criteria be used to evaluate the performance of rural finance institutions that benefit from access to scarce public funds. The paper underscores that when political economy considerations are taken into account, it is more instrumental to evaluate the cost, subsidies and "products" delivered by the supported rural financial institutions, rather than debate their right to exist. The paper further provides a succinct description how an extremely poor-performing, agricultural credit profit centre in a state-owned Asian bank emerged as the flagship of the rural micro-finance industry. It details how this profit centre, after drastically altering its modes of operations, now provides efficient financial intermediation services to millions of rural borrowers and savers while obtaining very high return on assets with no subsidy. What stands behind this success is a framework shift from narrowly directed, subsidized agricultural credit to financing all income-generating rural activities at a price intended to fully cover financial, administrative and risk costs, thus eliminating the need for subsidy dependence.