Browsing by Subject "Agricultural Development Bank (Panama)"
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Item Financial policies and management in the growth of agricultural development banks(Texas Tech University, 1982-12) Pomareda, Carlos FMany Agricultural Development Banks (ADBs) face a problem of insufficient financial intermediation capacity. This emerges from their institutional design, specialization in lending at low interest rates, reliance on low cost funds from International Financial Agencies and government subsidies, large operating costs and low loan recovery. Risks and low productivity of agriculture worsen the problem of loan recovery. A multiperiod programming model was applied to the ADB of Panama to evaluate alternative policies and changes in strategy. The model was for a 10-year planning horizon and it was structured by 2 98 equations and 513 columns. It included disaggregation in the assets and liabilities, particularly in the loan portfolio; resource constraints and leverage requirements; intertemporal linkages through the maturity structure of assets and liabilities and a measure of risk in the loan portfolio. The following were the main conclusions: Risk aversion in management of the bank funds could provide higher loan recovery and a more stable growth. Credit insurance provides important direct benefits through higher loan recovery and reduced administration costs. Servicing small farmers, although more costly (on a per dollar loaned basis), does not affect significantly the bank's growth, because small loans have larger average recovery, and shorter maturity than large loans. High cost of borrowed funds and elimination of government subsidies would lead to failure of ADBs, unless they raise interest rates on loans, improve loan recovery and perform multiple functions. Diversification in the sources of funds, with appropriate interas rate spreads, may be the best way for ADBs to grow and keep up with the financial environment of the years ahead.