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Rural finance

Financial inclusion for the world’s rural poor

The vast majority of rural people do not have reliable, secure ways to save money, protect and build assets, or transfer funds. This is particularly true for vulnerable groups, such as women, youth, and displaced people.

Basic formal financial services still reach only 10 per cent of rural communities. Weak infrastructure, the limited capacity of financial service providers, and low levels of client education all contribute to this complex problem.

An engine of rural transformation

IFAD recognizes the vast potential of rural finance to improve the livelihoods of rural people.

Over the past 30 years, the development of financial systems has had an enormous impact on rural livelihoods. Ground-breaking institutions and new instruments have allowed financial services to grow and broaden their reach.

Technology has allowed clients in remote communities to access a wider range of financial products.

IFAD has worked on rural finance systems in more than 70 countries for over four decades, and has invested over US$3 billion in rural finance systems.

But there is still much to be done. In a changing global economy, amidst financial crises, volatile food and agricultural commodity prices, and the perils of climate change, inclusive rural finance remains a crucial element in rural transformation.

Managing risks and leveraging investments

There are many risks affecting smallholder farmers that discourage the private sector from investing.

Financial institutions often perceive small-scale agriculture as being too risky and are reluctant to lend money to farmers and agribusinesses. Farmers themselves are reluctant to borrow for agricultural production because of their difficulty in managing risks such as climate-related shocks and livestock disease.

Over the past ten years, IFAD has become a leader in the field of agricultural risk management (ARM). The Fund promotes a holistic approach to protect and strengthen rural economies and food production systems, at the same time as leveraging rural financing and investment in smallholder farmers.

As part of the holistic approach to ARM, insurance is a valuable financial tool for unavoidable risks that cannot be managed in other ways.

IFAD hosts the Platform for Agricultural Risk Management (PARM), a G20 initiative that brings a comprehensive risk management approach and process, where risks in agriculture are assessed, prioritized and tackled in a structured way.

PARM provides technical support to developing country governments to support them in moving away from a culture of coping with disasters towards a smart management of risk.

PARM is also home to two technical assistance initiatives focused on agricultural and climate risk insurance that support IFAD’s portfolio: INSURED (Insurance for Rural Resilience and Economic Development) and Managing Risks for Rural Development: Promoting Microinsurance Innovations (MRRD).

The power of microfinance and remittances

IFAD-supported projects increase access to financial services and loans, so that small-scale producers can invest in their businesses and increase their productivity.

As one of the leading microfinance funders worldwide, IFAD's ongoing investments in rural finance at 31 December 2017 was around US$1.14 billion. Approximately 13 per cent of our ongoing investment portfolio is dedicated to rural finance.

Remittances are a powerful instrument for fostering financial inclusion and livelihood development in rural communities. Our multi-donor Financing Facility for Remittances (FFR) aims to maximize the impact of remittances on development, and promotes migrants’ engagement in their countries of origin.

In depth

In depth

Insurance

Smallholder farmers and poor rural households are extremely vulnerable to local and global shocks. Agriculture is their main source of food and income, and this is the sector hardest hit by the climate breakdown. 

Remittances and migration

For over a century, people have been moving from rural to urban areas, and across national borders in search of better opportunities. Of the 250 million international migrants, approximately 200 million leave home to work and send remittances home to their families.

Spotlight

Spotlight

Finance as a driver of food systems transformation: A new role for Public Development Banks?

One major obstacle to realizing sustainable and inclusive food systems is a lack of sufficient and appropriate financing. Recent estimates suggest that transforming food systems to deliver healthy people, a healthy planet, and a healthy economy will require an extra US$300 – US$350 billion per year for the next decade.

Projects

Projects

Benin

Adapted Rural Financing Services Promotion Project

Bangladesh

Promoting Agricultural Commercialization and Enterprises Project

Armenia

Infrastructure and Rural Finance Support Programme

Asset Publisher

Experts

James Marc de Sousa-Shields

Lead Regional Technical Specialist, Rural Finance, Markets and Value Chains

m.desousashields@ifad.org

Lorna Grace

Lead Regional Technical Specialist, Rural Finance, Markets and Value Chains

l.grace@ifad.org

Sauli Hurri

Senior Regional Technical Specialist, Rural Finance, Markets and Value Chains

s.hurri@ifad.org

Nadhem Mtimet

Senior Regional Technical Specialist, Rural Finance, Markets and Value Chains

n.mtimet@ifad.org

Stories and news

Stories and news

Finance as a driver of food systems transformation: A new role for Public Development Banks?

October 2021 - STORY
One major obstacle to realizing sustainable and inclusive food systems is a lack of sufficient and appropriate financing. Recent estimates suggest that transforming food systems to deliver healthy people, a healthy planet, and a healthy economy will require an extra US$300 – US$350 billion per year for the next decade.

Weathering the storm: How finance provides a lifeline for SMEs in times of crisis

August 2022 - BLOG
The impacts of the war in Ukraine, coupled with the pandemic and climate change, are threatening the survival of small and medium-sized enterprises (SMEs) the world over. Finance is a critical lifeline, but can rural agri-SMEs access it?  

Ghana: Public-private sector partnerships to drive digital and financial inclusion in rural areas

September 2022 - NEWS
IFAD announced partnerships on Tuesday to slash the cost of migrant remittances to Ghana with financial services providers Ecobank Ghana and Fidelity Bank and pan-African fintech MFS Africa, aiming to boost a vital source of income for a country grappling with the economic impact of the COVID pandemic and Ukraine war.

From biotechnologist to artisanal cheesemaker

March 2022 - STORY
Ibtissèm’s career in the pharmaceutical industry was off to a strong start, but she put it on hold when her mother fell ill. Back in her hometown in central Tunisia, she needed a new way to support herself and her mother – and then she realized that her skills would serve her well in her town’s bustling dairy industry.

Related publications

Related publications

Filling in the blanks: How to address data gaps to develop better livestock insurance for smallholder farmers

September 2022
Gathering good data can reduce the cost of livestock insurance for smallholder farmers, making coverage affordable and building their resilience. The Insurance Toolkit new brief shares lessons learned in Georgia.

Engaging smallholder farmer communities to develop index-based insurance

August 2022
This knowledge brief explores the benefits of and rationale for community engagement in index insurance initiatives, with examples from a pilot project in rural Ethiopia.

PRIME Africa

June 2022
Remittances sent by migrant workers to and within Africa were over US$85 billion in 2018, of which US$25 billion were sent by migrants residing in Europe.
Additional languages: Arabic, English, Spanish, French, Portuguese

Related documents

Related documents

Inclusive rural finance policy

December 2021 - CORPORATE
policy   policies_and_strategies  
This publication constitutes the new IFAD Inclusive Rural Finance policy, which supersedes the 2009 RFP.  

IFAD Policy on supervision and implementation support

September 2007 - CORPORATE
policy   policies_and_strategies  
Improving the quality of project implementation and achieving better results on the ground are priorities for IFAD, achieved largely through effective supervision and well-directed implementation support. In recognition of this, IFAD has made a series of efforts to examine, clarify and enhance the role of supervision and implementation support in its operations. These efforts acquired a new urgency in the context of the drive to achieve the Millennium Development Goals and the consequent changes in the international development architecture. The Paris Declaration on Aid Effectiveness emphasizes systematic support for nationally owned strategies for attaining development results, the increased use of national administration systems, and more jointly coordinated and predictable actions among aid donors. As a signatory of the Paris Declaration, IFAD is responding to the challenges of harmonization and alignment by positioning itself fully within this new development context and seeking to provide optimal support to member countries in order to reduce rural poverty. Addressing the issues of project implementation through improved supervision and implementation support is part of that response.