Removal of Obstacles Preventing Access to Credit

49. Concrete access to legal credit is another issue to be met and solved by agrarian reform programmes. Those who have received land must be guaranteed the possibility of obtaining modern inputs at reasonable prices.

The beneficiaries of land redistribution do not usually have sufficient savings to purchase such inputs, and therefore have to resort to loans. However, the high administrative cost of loans to small borrowers means that credit institutions are reluctant to grant them. The only alternative for such farmers is, therefore, recourse to the informal credit sector, with all the costs and risks entailed. With a view to avoiding such risks, initiatives that promote the establishment of local co-operative banks should be encouraged.

Programmes for an effective agrarian reform need to include support for the credit demands of the new farm units born of the reform. Steps should be envisaged that encourage the offer of complementary forms of guarantee and reduce the handling costs of credit operations.

Credit must be facilitated and encouraged for the various forms of association of the ventures born of the reform in view of the joint management of production services, joint purchase of inputs and joint marketing of produce.