Credit Programs for Small Farmers in Latin America Can Be Improved

ID-77-1: Published: Dec 9, 1977. Publicly Released: Dec 9, 1977.

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Providing credit to small farmers is one way the Agency for International Development (AID) has implemented the congressional mandate to improve the lives of the poorest people in developing nations. AID has been successful in providing credit to small farmers in Latin America, but more can be done by better identifying small farmer target groups and by developing consistent and more appropriate criteria for qualifying small farmer recipients of credit assistance.

The United States has provided about $54 million of credit assistance yearly to rural credit programs, about two-thirds of which has gone to Latin America. The objective is to increase the food production and income of small farmers by providing credit to operators of small farms who are considered too high a risk to receive credit from the traditional banking systems. Interest rates charged to farmers on AID-funded loans were generally lower than those of local financial institutions. Economic, social, and other conditions vary so widely from country to country that adopting rigid guidelines for identifying farmer target groups is not practical; thus, some degree of flexibility is needed. However, broadly defined target groups and criteria for direct credit aid to farmers should be refined so that AID can better meet its objective of getting credit aid down to more small farmers and to be more responsive to the overall objective of aiding the poorest majorities.

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