Small agricultural producers credit programs : El Salvador : a case study

FIVE CONDITIONS MUST BE SATISFIED: (1) THERE MUST BE A MORE PRODUCTIVE AGRICULTURAL TECHNOLOGY TO ENCOURAGE FARMERS TO INVEST; (2) FARMERS MUST KNOW ABOUT THE NEW CAPITAL INTENSIVE TECHNOLOGY AND ITS PROFITABILITY; (3) PROFITABILITY DEPENDS ON THE TIMELY AVAILABILITY OF INPUTS AND ACCESS TO COMMODITY MARKETS; (4) PUBLIC INSTITUTIONS MUST LEND THE BULK OF THEIR FUNDS TO SMALL FARMERS; (5) AND THE VALUE OF THE ADDITIONAL AGRICULTURAL OUTPUT MUST EXCEED THE COSTS OF THE PROGRAM. THE ADMINISTRACION DE BIENISTAR CAMPRESINO (ABC), A SUPERVISED CREDIT PROGRAM IN EL SALVADOR, GENERALLY MEETS THESE CONDITIONS. THE LOANS MUST BE HIGHLY SECURED, ARE USUALLY FOR LESS THAN ONE YEAR, AND HAVE INTEREST RATES OF FROM EIGHT TO TWELVE PERCENT PER YEAR. PRODUCTION HAS INCREASED SUBSTANTIALLY WITH THE AVAILABILITY OF IMPROVED VARIETIES OF CORN, RICE AND SORGHUM, AND FERTILIZER AND PESTICIDES. MARKETING SEEMS TO BE A MAJOR WEAKNESS OF THE SMALL FARMER CREDIT PROGRAM; SMALL FARMERS IN CENTRAL AMERICA AND THE CARIBBEAN DO NOT HAVE MARKETING LEVERAGE AT HARVEST TIME. THERE ARE MORE LOANS TO SMALL FARMERS THAN TO LARGE COMMERCIAL OPERATIONS, BUT THE AMOUNT OF LOANS IS GREATER TO THE LARGE FARMERS. THE MAJOR TOPICS IN THIS REPORT INCLUDE: THE NEED FOR SMALL FARMER CREDIT, PROGRAM DESIGN FOR SMALL FARMER CREDIT, THE SITUATION IN EL SALVADOR, A CASE STUDY OF THE ABC SMALL FARMER CREDIT PROGRAM IN EL SALVADOR, AND THE IMPACT OF THE PROGRAM. THE PROGRAM IS WORKING TO ACHIEVE OBJECTIVES OF INCREASING FOOD PRODUCTION, INCREASING SMALL FARMER NET INCOME, AND INCREASING RURAL EMPLOYMENT