Agricultural credit in the Dominican Republic

in the 1970"s to spur development among Dominican Republic small farmers. The first loan, channeled through the public-private Agricultural Bank, provided small farmers with credit, technical assistance, and vocational training and financed the construction of rural infrastructure. The second loan was designed mostly to upgrade the Ministry of Agriculture"s (MOA) capabilities to serve the small farm sector, although credit was still a notable component. The loans enabled the Government of the Dominican Republic (GODR) to increase the provision of credit to small farmers and contributed to ongoing training programs for Bank and MOA personnel and for farmers. However, there is no evidence that the increases in food crop production and in use of modern inputs during the projects" time frames were due to the higher availability of credit. Further, the local institutions which employed the projects" trainees were and remain weak and so have been unable to use their new personnel effectively. Finally, the MOA"s provision of agricultural services was ineffective and may have inhibited the growth of the for-profit agricultural services sector. Sustainability is a major issue. Few, if any, activities are being efficiently implemented and positive gains have not been sustained. The loans were overambitious and highlight the difficulty of promoting development through subsidized credit and services. The main lesson learned is that human and financial resources cannot have significant impact within a non-supportive economic policy and institutional environment; as the projects unfolded, P.L. 480 Title I proceeds had to used to prevent a complete collapse of some efforts. Another lesson is that credit cannot generate agricultural development, but only facilitate investment in existing productive activities - few of which, apart from rice, are available to Dominican Republic small farmers. A final lesson is that existing economic and development incentives must be favorable to project goals. Since the GODR"s pro-urban bias was clear at the time the loans were planned, a move to a neutral structure of incentives might have led to increased impacts.