IDEAS home Printed from https://ideas.repec.org/p/fao/wpaper/0301.html
   My bibliography  Save this paper

Rural Finance without Markets in Ukraine, 1991-2000

Author

Listed:
  • David Sedik

Abstract

Three institutional pillars form the foundations of sustainable financial markets: The existence of a pool of profitable and diverse rural clients with the ability to service loans, well-run financial institutions which are financially self supporting and an enabling policy environment. Ukraine has not been successful in developing robust rural financial markets because it has consistently undermined these three institutional pillars through soft government-provided or government-subsidized directed credits that have had an overwhelming role in rural policies in the post- Soviet period. Instead of a pool of profitable clients, the Ukrainian countryside is dominated by unprofitable farm enterprises which employ the overwhelming majority of rural residents. Second, financial institutions serving agricultural enterprises in Ukraine have largely distributed government directed soft credit at unsustainable interest rates to financially troubled farms in order to cover losses. Third, there has been abiding opposition to policies to ensure clear property rights, enforceable contracts and transparent farm restructuring and privatization, because such policies would imply the dissolution of large scale farms which are the object of most rural policies. Instead of creating sustainable rural financial markets, Ukrainian policies were instrumental in causing a substantial accumulation of bad debt by agricultural enterprises by the end of the 1990s. Partly as a response to this problem, the Government of Ukraine privatized agricultural enterprises in a four month period in 2000 and wrote off or rescheduled much of farm debt. The government also subsequently changed its main form of financing agricultural input markets from direct state involvement to substantial credit subsidies. In these policy changes the government of Ukraine adhered to its well-established legacy of addressing the symptoms of financial problems without altering fundamental causes.

Suggested Citation

  • David Sedik, 2003. "Rural Finance without Markets in Ukraine, 1991-2000," Working Papers 03-01, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  • Handle: RePEc:fao:wpaper:0301
    as

    Download full text from publisher

    File URL: ftp://ftp.fao.org/docrep/fao/007/ae034e/ae034e00.pdf
    Download Restriction: no

    More about this item

    Keywords

    Agricultural economics; Capital market; Credit; Credit policies; Debt; Decision making; Economic indicators; Economics; Farm income; Farm results; Financial situation; Financing; Loans; Rural areas; Rural urban migration; Ukraine;

    JEL classification:

    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fao:wpaper:0301. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gustavo AnrĂ­quez). General contact details of provider: http://edirc.repec.org/data/faoooit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.