Commercial banks' contribution to rural development in Romania: an overview

This paper represents a modest initial attempt to assess the involvement of the banking sector in the development of the rural sector in Romania during this country's first year as an EU member state. In theory, there should be at least two main reasons to make the rural sector an interesting proposition from the banks' perspective: the beginning of the disbursement of European funds, under the Common Agricultural Policy (CA.P.), and the remittances of Romanians working abroad, the majority of which come from the rural sector. In practice, however, this interest has failed, so far, to materialize: the banks have increased very marginally (or even decreased) their presence in the countryside. One aspect worth considering at this stage is, therefore, if the banking infrastructure has the characteristics of a public service, whether the state should sustain a (non-profit oriented) bank to supply the much needed services, until the private sector funds it worthwhile to get fully involved in activities that today are not very profitable. The paper is organized as follows: the first chapter looks at the supply of banking services, the second chapter tries to assess potential demand for such services and the final chapter draws some conclusions.