Utilization of Structural Equations on the Assessment of the Role of the Agricultural Bank in Economic Development in Sudan

43 Pages Posted: 11 May 2012 Last revised: 9 Jan 2015

See all articles by Issam A.W. Mohamed

Issam A.W. Mohamed

Al-Neelain University - Department of Economics

Date Written: May 11, 2012

Abstract

The Agricultural Bank of Sudan ABS is considered as the main supplier for agriculture financing. However, in the past ten years there were continuous decrease in finance volumes for the agricultural sector of the country which was reflected in diminishing productivity of food and cash crops. The launching of Agricultural Renaissance AR (Nahda Zeraaiya) and Green Resurrection GR (Nafra Zeraaiya) programs did not succeed in increasing neither productivity nor food security in the country. Nevertheless, more resources were channeled to those programs rather than supporting the ABS. Therefore, the current paper first conceptualizes the best statistical method to use and then analyzes agricultural productivity in Sudan on macro-level. Structural Simultaneous Model was chosen and utilized in the ensuing analysis. The main conclusions reached were that resources represented great importance with the produced values of R2, coefficient of determination and r the partial correlation rate. Those results supported the hypothesis that increasing the allocated resources for the Agricultural Sudan Bank will better help for an efficient financing and hence productivity. That is rater better than funneling precious resources to the presumed programs of AR and GR. Moreover, the scarcity of resources allocated to ABS encouraged its administration to allocated available financing to short and medium term loans, conceivably to achieve quick and higher returns rather than the presumed function of the ABS in supporting agriculture in the country. Additional, taxation represented an economic hindrance for farmers which minimize their productive activities or stop them all together. It is recommended in the conclusions that the Ministry of Finance should revert the role of ABS from the commercial function to its original role as a financier of the agricultural sector. Thus, it has to redirect resources from AR and GR to the ABS or cancel altogether those inefficient programs. Considering the current country's economic situation, exogenous loans, supports and donations should all be mobilized and allocated through the Ministry of Finance to the ABS. Such an act requires rebuilding new financing policy for the bank that includes an umbrella for long-term financing and less profit generation goals.

Keywords: Sudan, Agricultural Productivity, Agricultural Bank of Sudan, Macroeconomic Structure, Simultaneous Equations, Taxation, Finance

JEL Classification: A00, A10, A11, A12, C2, C20, C29, D4, D40, D46, E6, E60, E61, E62, E63, E64, E69, N5, N50, N57

Suggested Citation

Mohamed, Issam A.W., Utilization of Structural Equations on the Assessment of the Role of the Agricultural Bank in Economic Development in Sudan (May 11, 2012). Available at SSRN: https://ssrn.com/abstract=2056400 or http://dx.doi.org/10.2139/ssrn.2056400

Issam A.W. Mohamed (Contact Author)

Al-Neelain University - Department of Economics ( email )

P.O. Box 12910-11111
Khartoum, Khartoum 11111
Sudan
249122548254 (Phone)

HOME PAGE: http://works.bepress.com/issamawmohamed/

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