Rural finance - banner

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

In rural Montenegro, women gather to share their successes

In north-eastern Montenegro, an IFAD-funded project is helping women start their own businesses and gain greater representation in their communities. Recently, many of these women gathered to share their successes and teach and learn from each other.

Tags: GENDER, RURAL FINANCE, FARMER ORGANIZATIONS

Projects

Projects

Benin

Adapted Rural Financing Services Promotion Project

Bangladesh

Promoting Agricultural Commercialization and Enterprises Project

Armenia

Infrastructure and Rural Finance Support Programme

Related news

Related news

Ahead of global climate talks, public development banks join forces to boost investments in sustainable food systems

October 2021 - NEWS
Responding to an urgent call to increase financing for the world’s poorest farmers who are hardest hit by climate change, a group of Public Development Banks (PDBs) stepped up their commitment to accelerate green investments in agriculture during today’s Finance in Common Summit.

Third round of National Call for Proposals (Morocco): Supporting remittances in times of crisis in Africa

July 2021 - NEWS
The Financing Facility for Remittances (FFR) of IFAD is pleased to announce the third round of National Calls for Proposals (Morocco) 2021: supporting remittances in times of crisis in Africa.

Second round of National Calls for Proposals (Kenya and Uganda): Supporting remittances in times of crisis in Africa

April 2021 - NEWS
The Financing Facility for Remittances of IFAD is pleased to announce the second round of National Calls for Proposals (Kenya, Uganda) 2021: supporting remittances in times of crisis in Africa.

Related stories

Related stories

In rural Montenegro, women gather to share their successes

January 2022 - STORY
In north-eastern Montenegro, an IFAD-funded project is helping women start their own businesses and gain greater representation in their communities. Recently, many of these women gathered to share their successes and teach and learn from each other.

Six reasons to focus on small-scale producers at COP26

November 2021 - STORY
IFAD believes rural economies and food systems have the potential to become more resilient, sustainable, inclusive – and productive – all at the same time. But to get there, we need to focus our attention and support on the people who make these systems work.

Why climate finance matters: Your questions answered

October 2021 - STORY
Discussions on climate finance – how much funding is needed to adapt to and mitigate climate change, and where and how it should be spent – are the heart of COP26. Naturally, it’s a complicated issue, and we get lots of questions about it. We’ve put together some answers to the ones we receive most often.

Related events

Related events

eGFRID - Remittances and investment: how migrants finance sustainable development

January 2022 - EVENT
The next eGFRID webinar, jointly hosted by IFAD and the European Commission (EC), will focus on the topic of “Remittances and investment: How migrants finance sustainable development.”

Financing for nutrition: Leveraging the pivotal role of Public Development Banks

December 2021 - EVENT
This event will focus on the catalytic and pivotal role of Public Development Banks in food and nutrition. The PDB Initiative proposed by IFAD will be presented.

What do we need for transformational adaptation in agriculture? Hear from young farmers

September 2021 - EVENT
In this consultation space for rural youth, part of the Pre-COP26 Youth Summit in Milan, we will hear directly from young farmers who are underserved by global climate finance flows.

Related publications

Related publications

Resilience in the market for international remittances during the COVID-19 crisis

December 2021
This report examines the factors that have contributed to the resilience of remittances during the pandemic.

A technical review of select de-risking schemes to promote rural and agricultural finance in sub-Saharan Africa

November 2021
This study takes stock of these experiences in an effort to contribute to building up the evidence base to help inform the future strategy and design of similar programmatic interventions.

The IFAD and Slow Food Case for Investment

November 2021
IFAD and Slow Food share a vision of supporting small-scale, diversified production and consumption mechanisms that focus on improving the marketing of local products.

Related documents

Related documents

Rural Finance Policy

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

IFAD Policy on improving access to land and tenure security

December 2008 - CORPORATE
policy   policies_and_strategies  
Secure access to productive land is critical to the millions of poor people living in rural areas and depending on agriculture, livestock or forests for their livelihood. It reduces their vulnerability to hunger and poverty; influences their capacity to invest in their productive activities and in the sustainable management of their resources; enhances their prospects for better livelihoods; and helps them develop more equitable relations with the rest of their society, thus contributing to justice, peace and sustainable development.

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.