Chapter 2 Non-formal Credit for Rural Agricultural Areas: New evidence for an old problem

The purpose of this paper is to show the complex relationship among different lenders in the agricultural sector.Formal, semi formal and informal lenders coexist, sometimes competing and at others complementing their activities to shape the financial markets for different sectors in the Peruvian economy.There is no difference in the agricultural sector, one the most affected by the lack of access to capital.This paper presents evidence of the activities of both sides, borrowers and lenders, in order to improve credit allocation and increase agricultural activity, and concludes on the need to consider the activities of crucial participants, such as semi formal lenders, in the design of an agricultural policy aimed at improving the development of the credit market relevant to this sector.The article concludes by presenting evidence suggesting the existence of a complementary relationship between formal and semi formal lenders as well as competition between both types of lenders.This conclusion suggests that in order to develop the credit market for agriculture in Peru we need to consider not only the formal sector but also others, especially the semi formal lenders.