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Savings deposits and credit activities in South Korean agricultural cooperatives 1961-1975

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  • Savings deposits and credit activities in South Korean agricultural cooperatives 1961-1975
  • Lee, T. Y.; Kim, D. H.; Adams, Dale W.; Ohio State University(Dept. of Agricultural Economics and Rural Sociology)
  • United States Agency for International Development


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Title Savings deposits and credit activities in South Korean agricultural cooperatives 1961-1975
Similar Titles
Material Type Reports
Author(English)

Lee, T. Y.; Kim, D. H.; Adams, Dale W.; Ohio State University(Dept. of Agricultural Economics and Rural Sociology)

Publisher

[Washington, D.C.]:United States Agency for International Development

Date 1977
Series Title; No Periodical, Periodical Analytic; Asian Survey/ vol. 17(no. 2)
Pages 17
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Industry and Technology < Agriculture
Holding United States Agency for International Development

Abstract

Rural cooperatives can mobilize rural voluntary savings. Such is the major conclusion of this review of South Korea's rural cooperative system in terms of its historical credit/savings achievements, financial services offered by three cooperatives (Daeson, Chojeun, and Ochang), and cooperative member attitudes regarding savings. Loans generated by the system increased four-fold from 1961-75 and were predominantly for agriculture, e.g., 75% of 1975 lending. The change in 1965, from inflexible interest rates to rates tied to inflationary pressures, had a dynamic impact on rural lending and deposits. Prior to 1965, rates on farm loans and deposits hovered, respectively, between 8-15% and 9-15%. Following 1965, rates on both deposits and loans almost doubled. In addition, the promotion of savings mobilization resulted in significant deposits in rural cooperatives. Between 1964-66, total deposits tripled because farm-households placed more of their financial assets (2% in 1961, 3% in 1974) and liquid assets (11% in 1961, 26% in 1974) in financial instruments. C Voluntary savings deposits were also mobilized much more quickly than involuntary share purchases. Since 1966, savings deposits have accounted for 66% of cooperative deposits. In all three cooperatives examined, outstanding loans and deposits have increased rapidly since 1966. Savings mobilization programs included installment savings, deposits in kind, and mutual installment deposits. Demand deposits, fixed deposits, and other deposits totalled 75%, 20%, and 5% respectively. Sample interviews to determine cooperative member's attitude toward savings revealed that half of the deposits were to increase liquidity for farm or household transactions, while the other half were for investment purposes such as education and land purchases. Deposit behavior was primarily affected by interest rates on savings or by available investments. In 1975, members placed 95% of their deposits in cooperatives, substantiating the latter's safety and convenience. In addition to the major role which cooperatives can play in mobilizing rural savings, it may be concluded from the study that the poor have a greater savings potential than previously believed; that government policies, especially interest-rate policies, affect savings mobilization; and that rational credit-savings activities can help build viable, small farmer cooperatives.