ABSTRACT
Many government-sponsored credit programs in low-income countries fail to reach a large number of poor people in rural areas on a sustained basis because of the costs and risks associated with making small loans. Contract credit in the Dominican Republic offers growers a package of loans and services at low financial and transaction costs compared to alternative sources. The system reaches large numbers of small- and medium-sized farmers and it is durable. A number of agribusiness firms in the Dominican Republic sign contracts with small farmers to ensure that these firms will receive an adequate supply of various kinds of products. The credit delivery procedures for both lender and borrower were exceedingly simple. Some people have been concerned that credit arrangements linked to land tenancy or to the purchase or sale of products, inputs, or labor might result in borrowers being exploited by lenders.
