Agricultural production credit clubs in Armenia: facilitating investment through market linkages, social capital, and microcredit
Hamish R. Gow
Armenia’s 1991 privatization and land redistribution process handed ownership and control of agricultural production to over 300,000 inexperienced, financially distressed, subsistence farmers operating extremely small fragmented plots, and the processing sector to similarly distressed managers. As seen elsewhere across Eastern Europe, the result was chaotic turmoil characterized by pervasive delayed payments, massive disinvestment, and rapid output declines. However, unlike elsewhere, Armenia could not rely upon the entry of FDI to correct channel incentives and revitalize its agricultural and rural financial markets. Instead, an alternative exogenous stimulus was required. This study analyzes the instrumental case of how a quasi-public third party, the USDA Market Assistance Program and Agricultural Production Credit Clubs, successfully imitated FDI-induced incentive structures through market linkages, social capital, and microcredit to establish economically sustainable marketing channels. The findings provide important insights into the design of market-linked microcredit programs.
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