VOL.X
NO. 4
July-Au_pt
1992
ISSN 0115-9097
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Emerging Financial Innovations by Gilberto
Llanto, Ph.d.
In recent years, many developing countries started to rely more on the private sector and market signals to direct the allocation of financial resources. These countries took steps to liberalize their financial markets by deregulating interest rates, eliminating subsidized credit programs and encouraging more private bank lending. It was an entirely different approach to financial resource allocation in the rural credit markets as both borrowers and lenders had to rely more on the market mechanisms and less on government supply-led finance to finance economic and business enterprises,
This article tries to provide an overview of the responses of rural credit markets in Southeast Asia to the new orientation of rural credit policy; it argues that the rural economic agents were stimulated by the new policy environment to innovate and that the emerging financial innovations seem to bode well for the rural sector. More specifically, the emerging approach called "integrated savings and credit schemes" and the related "mutual guarantee schemes" that are observed in Southeast Asian rural credit markets wiU be discussed, Why Innovate? A directed credit regime, together with interest rate controls,
Necessity b called the mother of invention. But invention is not an only child as necessity gave birth to another offspring - innovation. Now, scant financial resources can be maximized as they are channeled to the ones that need them the most through some innovative but less costly redesigns. Dr. GUberto Llanto, former Executive Director of the Agricultural Credit Policy Council (ACPC) and Chairman of the Board of Trustees of the Asian .pacific Rural and Agricultural Credit Association - Center for Training and Research in Agricultural Banking (APRACA-CENTRAB) and now Research Fellow of the PIDS, discusses these innovations and how they are practised in Southeast Asia's rural creditmarkets. Intellectual property, though intangible, is consideredproperty"in the legal sense.Like any other property, it deservesthe protectionof the State.But doesthe strictenforcementof intellectualproperty laws equaldevelopment? Meanwhile, a very basic fact is always echoed - development has its human component. Yet, for whatever reasons, policymakers sometimes seem to miss this point. Human development as a precondition for development therefore cannot be overstated. The mangrove is one of the most underrated natural resources. There is more to mangroves than being a source of extractive timber products. They are a natural breakwater and a windbreaker. And in a country where prices of medicine are anything but inexpensive, the mangrove is home to exotic plants with medicinal values. All these, and more, will be tackled in this issue.
prevents efficient financial intermediation in the financial markets. Worldwide experience shows that the credit subsidies were captured by the unintended beneficiaries of the special credit programs who are most often the large farmers, merchants and traders in the community. The provision by governments of cheap money through the rediscount windows of state and central banks had often resulted to the dependence of financial institutions or governments for loanable funds and the neglect of savings mobilization. For developing countries, the decision in 1982 by foreign commercial banks to stop voluntary lending activity and the worsening terms of trade and fecession in major countries in the 1980s were eye-openers. The immediate message was that the era of cheap credits from recycled petrodollars was over and that governments, particularly those of developing countries, could not afford anymore the large credit subsidies lavished on various sectors of the economy. With
Inside
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The Reality of IPR$ for Glob Efficiency
6 Economic
8 Growth In the Midst Healthy Environment
11 where
Mangroves Concernecl
I S MIMAP Phase ii Results 18 Development with a Human Face
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