Knowledge Bank

This paper summarizes key findings of our study of the rural financial markets in Asia. Policy makers in the region have actively intervened in these markets in the past three decades, first to support the Green Revolution and, more recently, to reduce poverty. Massive amounts of subsidized funds have been channeled to targeted clients, but many policies were also implemented that discriminated against agriculture. There has been a recent shift to more rural-friendly policies and a market approach to financial market development. The authors argue that the result of these negative policies and interventions is a fragile financial system in many Asia countries characterized by limited outreach and sustainability.