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How Do Market Failures Justify Interventions in Rural Credit Markets? Author(s): Timothy Besley Source: The World Bank Research Observer, Vol. 9, No. 1 (Jan., 1994), pp. 27-47 Published by: Oxford University Press Stable URL: /stable/3986548 Accessed: 01/11/2010 12:23 Your use of the JSTOR archive indicates your acceptance of JSTORs Terms and Conditions of Use, available at /page/info/about/policies/terms.jsp. JSTORs Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at /action/showPublisher?publisherCode=oup. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@. Oxford University Press is collaborating with JSTOR to digitize, preserve and extend access to The World Bank Research Observer. HOW DO MARKET FAILURES JUSTIFY INTERVENTIONS IN RURAL CREDIT MARKETS? Timothy Besley Understanding of the economic causes and consequences of market failure in credit markets has progresseda great deal in recentyears. This article draws on these developments to appraisethe case for government interventionin ruralfi- nancial marketsin developing countries and to discover whether the theoretical findings can be used to identify directivesfor policy. Before d