Agricultural finance and institutional reforms in transition economies

Agricultural producers' access to external financial resources has been severely constrained during transition, adversely affecting production, farm restructuring and investment. Their constrained access results from a combination of factors stemming from costly and imperfect information in rural financial markets as well as a series of transition specific problems that have magnified these problems. Credit access however has recently begun to improve for selected producers with increased profitability and the emergence of institutional innovations in the delivery of financial resources. This paper initially assesses the institutional reforms that have occurred within the banking sector and then discusses a series of transition specific factors that have magnified the problems of rural financial market incompleteness. The potential roles of governments in solving these issues, and actual observed interventions by Central and Eastern European governments through credit subsidies, loan guarantees and training programmes, are the discussed. Finally, a range of financial market innovations which have solved some of these credit market problems are discussed and implications for government policies drawn.