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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.

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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.

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Rural savings banks go digital in Honduras

Don Lolo has been growing coffee on the slopes of El Playón in Honduras for over fifty years. Now, thanks to support from IFAD’s Rural Poor Stimulus Facility, he's using an online banking app to apply for loans, manage savings, and reach new buyers.

Tag: RURAL FINANCE

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Benin

Adapted Rural Financing Services Promotion Project

Bangladesh

Promoting Agricultural Commercialization and Enterprises Project

Armenia

Infrastructure and Rural Finance Support Programme

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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

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Rural savings banks go digital in Honduras

Maio 2022 - VIDEO
Don Lolo has been growing coffee on the slopes of El Playón in Honduras for over fifty years. Now, thanks to support from IFAD’s Rural Poor Stimulus Facility, he's using an online banking app to apply for loans, manage savings, and reach new buyers.

These numbers show that restoring drylands and preventing desertification is good for the planet – and good for us

Maio 2022 - STORY
From California to the Sahel, from the steppes of Central Asia to the Andes, drylands are some of the most productive ecosystems in the world. But they’re also some of the most fragile.

In rural Morocco, one woman’s efforts transform the lives of many

Maio 2022 - STORY
When Fatima-Zohra first arrived in her new home, a rural village in the Moroccan highlands, she discovered the local women didn’t have many job opportunities. But they were enthusiastic about the idea of going into business for themselves – and so Fatima-Zohra got to work.

Lending a hand – and finance – to young agricultural entrepreneurs in East Africa

Abril 2022 - BLOG
We know a thing or two about connecting youth with the financial services they need to start a business – but there’s always more to learn. Here, we reflect on some of our “lessons learned” as part of a recent grant programme in East Africa.

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Understanding market demand: How to use focus group discussions in the development of inclusive insurance

Fevereiro 2022
Understanding market demand is a critical step in the process of developing solutions to meet the risk management needs of rural poor people, particularly with regard to insurance.

Scaling up rural youth access to inclusive financial services for entrepreneurship and employment

Fevereiro 2022
This document is an overview of the lessons learned from a project on “Scaling up rural youth access to inclusive financial services for entrepreneurship and employment” in Kenya, Uganda, Rwanda and Burundi.

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

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

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Inclusive rural finance policy

Dezembro 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

Dezembro 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.