Access to Credit
Previous IEG evaluations found that World Bank support to rural credit has been weak, in part because of the weak performance of line-of-credit operations (IEG 1996, 2006b). In the mid-1990s, the World Bank shifted from directed agricultural credit to a broader rural finance approach,10 prompted by a wider focus on rural poverty (see box 2.1) and evidence that well-managed financial intermediaries could reach rural areas and remain sustainable.11 The approach since that shift has emphasized reforms to better enable financial institutions to operate in rural areas by strengthening their capacity and helping them to develop appropriate lending instruments and risk-management mechanisms. The broader rural finance approach taken by the Bank makes it difficult to ascertain how much support has been provided specifically for agricultural credit. Thirteen percent of the 633 projects in the evaluation portfolio—81 projects with a total commitment of $2.32 billion, or an average of $211 million each year—included some aspect of agricultural credit and financial services. Forty-two percent of this commitment went to East Asia and the Pacific, 19 percent to Latin America and the Caribbean and to Sub-Saharan Africa, 12 percent to South Asia, 6 percent to Europe and Central Asia, and 2 percent to the Middle East and North Africa. Forty of the projects have closed and been evaluated by IEG, of which 78 percent were rated moderately satisfactory or better on outcome. The Europe and Central Asia Region has the best outcome performance (nearly 100 percent satisfactory), and Sub-Saharan Africa the worst (about 60 percent satisfactory). Given the administrative tracking arrangements in place in the Bank, it is difficult to tell precisely how much support has been provided for agricultural credit, and it is thus rarely possible to isolate the performance of the Bank in that area.
It is difficult to ascertain how much support the Bank has provided to agricultural credit. The findings from IEG project assessments and a desk review of 25 Bank-supported projects with relatively
Photo courtesy of Flore de Préneuf/World Bank.
Access to credit, whether for short-term working capital or productive capital investments, plays an important role in facilitating and promoting agricultural production. Rural credit is complicated by the seasonal nature of much agricultural production, weather- and price-related risks, and the dispersed nature of farming (World Bank 2004a, 2005f). Access to credit was found to be a constraint to farming in every country study conducted for this evaluation.
large rural finance components show lagged application of the broader rural finance strategy and weak linkage with agriculture. The desk review found projects with features of both a line-of-credit and a rural finance approach—among them the Philippines Third Rural Finance (fiscal 1999) and First Moldova First Rural Investment and Services (RISP I, fiscal 2002) Projects—and others focused on the rural finance approach—the second Moldova RISP (fiscal 2006) and Mexico Savings and Rural Finance Project (2002). In the 25 projects reviewed, the needs of the agricultural sector were generally taken into account indirectly, and often unintentionally.
The Bank’s rural finance approach appears to be benefiting the agriculture sector. That said, the Bank’s approach to rural finance appears to be benefiting the agriculture sector. Although data are limited, it is likely that these projects benefited agriculture because it is the main rural activity in most developing countries. Four recent IEG project assessments support this conclusion. The Romania Rural Finance Project (fiscal 2001) assessment found that although agricultural productivity and growth were not specified as development objectives, lending to agriculture increased almost threefold during the project period. The Moldova RISP I assessment found that the agriculture sector absorbed most of the lending and advisory assistance offered. The assessment of the Philippines Third Rural Finance Project found that even though an increase in agricultural productivity was not a stated objective, fisheries, aquaculture, grain milling, and poultry benefited substantially. An assessment of the Rural Finance Project in Vietnam had similar findings.
World Bank Group Activities and Results
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