Program

Home

The Ohio State University

Rural Finance Program

The Ohio State University's Rural Finance Program was the recipient of the American Agricultural Economics Association Distinguished Policy Contribution Award (1989) for its ability to apply robust research results in successful policy-influencing activities. The Program is a recognized world leader in the analysis of rural financial markets and other finance and development topics, particularly those concerning the provision of financial services to difficult clientele (small farmers, rural and urban microenterprises, the poor, women) in developing countries and transition economies. This has been accomplished through three decades of research, publications, instruction, technical assistance, and information dissemination. The Ohio State name immediately comes up in any forum of discussion about rural or microenterprise finance.

Established in the early 1960s, program activities have involved several faculty members: [Dale Adams (Professor emeritus and founder of the Program), Claudio Gonzalez-Vega (current Program Director), Douglas H. Graham, Jerry Ladman, Donald Larson, Richard L. Meyer, and Norman Rask], research specialists [M. Baydas, L. Lapar, G. Nagarajan, S. Navajas, K. Ouattara, and M. Schreiner], and numerous graduate students. S. Ramey is the current Program Manager. Other faculty members in the Department of Agricultural, Environmental and Development Economics and elsewhere in the University make contributions to the Program when their particular expertise is required. The Program offers a specialization in Finance and Development as part of the Master's and Ph.D. programs in the Department. The program hosts visiting scholars from numerous countries. Recent long-term visitors have included Hans Dieter Siebel, Mike Lyne, Jonathan Conning, and Hege Gulli. The program established and manages the Devfinance discussion list in the Internet, with over 1200 subscribing researchers and practitioners from all over the world. Jointly with the University of Frankfurt, the program co-organized the Annual Seminar on New Development Finance for the third time in 1999. This is the premier forum for cutting-edge debate in the field.

One of the Program's most important tasks was the implementation of the Financial Resources Management (FIRM) Project, the third in a sequence of Cooperative Agreements between the Program and USAID. In addition to general research, several projects and activities covered Africa (The Gambia, Mozambique, Niger, Uganda, Swaziland, Ghana, Burkina Faso, Rwanda, Madagascar, South Africa, and Egypt), Asia (Bangladesh, Philippines, Indonesia), and Latin America (Costa Rica, Dominican Republic, Ecuador, Bolivia, El Salvador, Honduras, and Mexico). Buy-in projects from the African Bureau allowed the implementation of the Peri-Urban Economic Growth Project in Sub-Saharan Africa as well as a series of case studies on the financing of agribusinesses and on women and financial services. Several Program members have also provided assistance on finance to international agencies in transition economies (Russia, Ukraine, Romania). For all of this work, Program members are completely fluent in French, Portuguese, Arabic, and Spanish.

The FIRM Cooperative Agreement was established in 1989 to increase knowledge about the role of financial services in the rural sector of developing countries and to help improve institutional capacities for financial management. The goal of the project was to contribute to an expansion of access to financial services (both loans and facilities to deposit), at a reasonable cost, for the broadest spectrum of the population, with particular emphasis on marginal clientele (e.g., small farmers, rural and urban microenterprises, women).

Under FIRM, the Program's research agenda encompassed three main areas:

(a) analysis of informal financial markets (particularly in rural areas) and their linkages to formal financial and other markets;

(b) evaluation of the performance (outreach, sustainability, and operational cost-effectiveness) of financial institutions, particularly of those present in the rural areas of developing countries or serving small and microenterprises, and

After the completion of the FIRM Cooperative Agreement, the Rural Finance Program has continued to successfully implement applied research through a number of projects. This has included participation in the Collaborative Research Support Program (CRSP) on Broadening Access and Strengthening Input Market Systems (BASIS), implemented by CARMA (Consortium for Applied Research on Market Access). Claudio Gonzalez-Vega has been BASIS research leader for Central America. There, in collaboration with FUSADES and Salvadoran researchers from several other organizations, a team is examining the interactions among financial, labor, and land markets and the implications for rural poverty and resource conservation in El Salvador.

The BASIS/El Salvador Program includes the setting up of a panel of 620 rural households, visited in 1996, 1998 and 2000, as well as periodic surveys of clients of several rural financial organizations. The research being implemented includes studies of the institutional framework for the operation of land markets, an analysis of borrower profiles and rural lending technologies, a measurement of the degree and determinants of market integration and the dynamics of rural poverty, and an evaluation of the impact of location decisions of hillside farmers on resource conversation. With GTZ sponsorship, the program is developing tools to evaluate changes in the status of borrowers, with applications to Financiera Calpia.

Another activity of the Rural Finance Program has been participation in the Microfinance Best Practices consortium, also sponsored by AID. In this capacity, the Program has investigated the role of commercial banks in microfinance, alternative models of village banking, the weaknesses and strengths of client-owned organizations, the development of microfinancial technologies, and the measurement of the poverty of the clients of microfinance organizations. The Program also conducted an evaluation of the caisses villageoises in Mali for the Centre International de Developpement et de Recherche (CIDR) and of the PIEC Program for World Education.

Another activity of the Program was an investigation of the role and conditions for success of microfinance apex organizations, in collaboration with the Consultative Program to Assist the Poorest (CGAP) at The World Bank. Several case studies in Bangladesh, India, Benin, Mali, Bolivia, Costa Rica, Honduras, Mexico, and Paraguay offered empirical support to the conceptual analysis of this topic.

The program has examined levels and sources of the costs of rural financial intermediation and the role of learning in addressing imperfect information and reducing transactions costs. Components of successful lending technologies (signaling, screening, monitoring, and contract design and enforcement) have been identified for different microfinance organizations. Elements of the lending technology have been matched to features of target clienteles and results are tested with surveys of loan officers and clients of organizations in Bolivia, El Salvador, Mali, and Russia. Research on prominent Bolivian microfinance organizations was undertaken with support from Internationale Project Consult (IPC) of Frankfurt, the Organization for Economic Cooperation and Development (OECD) in Paris, and USAID. Also, impacts of regulatory frameworks on micro and small entrepreneurs and on their lenders have been identified in El Salvador and Russia.

For further information, contact: Rurfin@postbox.acs.ohio-state.edu