Why did the People’s Development Bank of Mozambique fail? Lessons from successful government development banks from Asia and Africa

Despite many decades of experimentation with supplier-led approaches to credit in many developing countries, limited success has been achieved in terms of improving access to credit for smallholder farmers. In the case of Mozambique, previous attempts by government to improve access to credit for farmers were not successful and the government is looking for more effective strategies. The purpose of this study is to examine experiences in other developing countries in Africa and Asia. The study is a multiple case studies selected from Zimbabwe, Thailand and Indonesia. The data collection method comprised a combination of primary collected through in-depth interviews with key informants and secondary sources. The data analysis techniques consisted of searching for themes regarding successful strategies in terms of dealing with costs and risks of lending to agriculture. Lessons from these cases were drawn to shed light on what the most effective intervention strategy for the Government of Mozambique could entail if it is to succeed to improve access to credit for smallholder farmers. The study concludes that an alternative strategy by the government to improve access to credit for smallholder farmers includes the re-establishment of a public rural bank. The study recommends that rural financial institutions should adopt a demand-driven approach, and the fundos do fomento (special development funds) need to be reformed.