Paper
Structuring Credit to Manage Real Risks
Has too much credit been handed out in the past and how can this be remedied in future?
11 pages
Considers the question of whether too much credit has been issued through development programming and yet not contributed to rural poverty alleviation. Outlines the complexity of the issue in the following aspects:
- Credit does not necessarily respond to the causes of poverty and deprivation;
- An excess of credit creates debt crises, citing an American example;
- Excessive credit is difficult to manage; pressures to extract money leads to the decline and possible collapse of the credit lending culture;
- Analysis of development projects, especially their size, in the aftermath of donors backing away from rural credit programmes;
- Banking ecology, including banker's problems and losses associated with debt crises, lead to reduced confidence in financial markets;
- Sustainability and information required to manage risk.
In conclusion, the author stresses risk analysis and financial measures to manage risk.
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