“VALUE CHAIN FINANCE - INITIATIVES IN INDIA”

The nature of laws that govern the financial sector, as well as the quality of the institutions that enforce those laws, will largely determine the shape, size and depth of the financial sector. Of particular importance are the laws and institutions that facilitate/ promote or discourage/inhibit secured lending by influencing the ease with which agricultural and other rural assets can be used as collateral. These laws need to be reviewed and amended from time to time and financial/legal literacy and credit counseling in rural areas need to be continuously provided to users in order to ensure orderly growth of rural financial markets, since these are two issues of particular concern for the development of Rural Financial Markets(RFMs) in most developing countries. The experiences also confirm that mere establishment of an appropriate enabling environment does not guarantee that people will use their assets as collateral or use them prudentially. In rural areas, peoples’ understanding of their rights to own property and utility value of property owned is not adequate for them to seize available opportunities for their socioeconomic development that their ownership makes possible. Efforts are, therefore, necessary to make them fully aware/educate potential borrowers as to the rights and responsibilities associated with property ownership, which can help them leverage their assets while understanding the risks in doing so.