Date Published:
Jun 01, 1982
Staff Papers
Focus Area(s):
SP 1982-02

Credit has been a major instrument used in the pursuit of agricultural development in the Philippines. As a result of the Rural Bank Law enacted in the early fifties, financial institutions catering to the rural sector have grown. While there are more than a thousand rural banks operating in about 60 percent of municipalities, this paper argues that the government’s objective of increasing the credit flow to agriculture has been hampered by low interest rate policies. It is argued that the use of credit policies to compensate for the effects of policies that turn terms of trade against food and agricultural exports will have limited effects. Hence, interest rate subsidies have not significantly altered the unfavorable economic incentives in agriculture.

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