Seasonality of Rural Finance

Khandker, Shahidur R. ; Samad, Hussain A. ; Badruddoza, Syed

World Bank, Washington, DC

关键词: rural finance;    seasonality;    crop cycles;    lean seasons;    microfinance;   

DOI  :  10.1596/1813-9450-7986
RP-ID  :  WPS7986

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Simultaneity of borrowing, withdrawal ofsavings, and loan defaults due to the pronounced seasonalityof agriculture often leads to investment failure of ruralfinancial institutions. Lack of borrowing leads to lack ofin-come- and consumption-smoothing, and in turn, causesinefficient resource allocation by rural households.Financial institutions that are active in rural areas takedifferent measures to address the covariate risks inintermediation. For example, microfinance institutions havesought various measures such as supporting non-farmactivities to diversify income, introducing seasonal loans,and bringing flexibility in loan repayments to reducenon-payments in lean seasons.This paper examines whetherthe financial inclusion policies of micro-financeinstitutions have successfully helped reduce the adverseeffects of covariate risks. Analysis of house-hold andprogram level data from Bangladesh suggests that despite theinnovative measures taken by the MFIs to cope with thecovariate risks, seasonality of income still affectsseasonality of borrowing and investment decisions of boththe households and MFIs beyond and above what is causednormally by agricultural seasonality. Innovation is neededto promote, among other things, sectoral diversification offinancial inter-mediation and to avert the extremeseasonality of rural income. Rural labor markets should bediversified enough to address the seasonality of income andconsumption.Public policies guiding rural financialinter-mediation must reflect such realities of rural economies.