However, the farm sector's compensation is generally not complete, and benefits received are concentrated on better-off farmers who buy more controlled inputs. Furthermore, the input supply system must also be subsidized to compensate for reduced input prices. Temporary subsidization of the experimental use of inputs may be justified within projects that introduce new techniques to farmers. The primary purpose of a country's financial institutions should be to mobilize and to allocate private indigenous financial resources. Interest-rate controls prevent financial institutions from doing this efficiently.
Savers respond to higher real interest rates by increasing deposits in financial institutions.
Further, farmers are willing to pay interest rates charged in unregulated markets when profitable investments are available and credit and repayment are scheduled conveniently. However, controls that artificially hold interest rates down discourage saving and lead to credit rationing which often excludes small borrowers that some programs were intended to help. Furthermore, regulated rates are sometimes below the rate of inflation. Negative real interest rates contribute to the decapitalization of financial institutions. Therefore, interest rates should be set according to the market demand for funds, so that as much resources will be mobilized as the economy's borrowers are willing to pay for.