NBR-supplied credit contributed significantly to inflation. The credit was intermediated at marginal real positive rates through 7 banks. Banks were responsible for borrower selection and repayment of the loan at maturity. Bonuses were given to the banks that lent to risky sectors, and to the borrowers if they repay at maturity. The Government intends to continue this mechanism in 1998.
Credit cooperatives serve rural household mainly in household credit.
There is a draft law for the split-up of the credit from consumer cooperatives. High interest rates and the lack of collateral seriously limit lending to agriculture. Viable financial institutions serving the agricultural sector efficiently. Phase out credit subsidies. Develop banks network serving rural areas.