Low profitability and low credibility are the characteristics of farming in Korea just like other countries including the Unite States. The adverse selection as well as the adverse incentive effect results in credit rationing in farm lending. As credit rationing in farm lending causes problems in implementing the agricultural policy, the government provides beneficial farm policy loans as well the guarantee facility for the farmers.
Farm lending is divided into government's farm policy loans and agricultural cooperative mutual finance in Korea. The government has directly provided mid- and long-term farm policy loans at low interests to encourage farming while agricultural cooperatives satisfy other loan demand on the commercial basis. These kinds of farm loans are cooperating rather than competing in Korea. Therefore, this paper addresses the scale economy in agricultural cooperative mutual finance as well as the scale economy in both farm lending.
Empirical analysis of the paper evidences that there are scale economy in agricultural cooperative mutual finance. So, it is necessary that agricultural cooperatives be bigger through merging with nearby agricultural cooperatives or enhancing business cooperation with them. It is found that the scale economies in agricultural cooperative mutual finance in the mega city, small city, and rural areas are quite different. It is also found that government's farm policy loans contribute to the scale economy in agricultural cooperative's lending in the rural area while they do not contribute so much in the city area.
농업금융의 특성과 규모의 경제분석(Analysis of economies of scale in farm financing)
|Series Title; No||금융조사보고서 / 2005-15|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy
Industry and Technology < Agriculture
|Holding||한국금융연구원; KDI 국제정책대학원|