Innovations in rural and agriculture finance

Most rural households lack access to reliable and affordable finance for agriculture and other livelihood activities. Many small farmers live in remote areas where retail banking is limited and production risks are high. The recent financial crisis has made the provision of credit even tighter and the need to explore innovative approaches to rural and agricultural finance even more urgent. This set of 14 briefs clearly points out the importance of business realities faced by small farmers, including low education levels, the dominance of subsistence farming, and the lack of access to modern financial instruments. These conditions mean that new and innovative institutions are required to reach small farmers. Emerging communication technologies provide new opportunities for rural banking by reducing business costs and alleviating information asymmetries. New financing instruments, such as weather index-based insurance and microinsurance, also have great potential for managing the risks faced by small farmers. In addition, bundling financial services with nonfinancial services like marketing and extension services offers new opportunities for small farmers to increase their productivity and incomes. Finally, an enabling policy environment and legal framework, enforcement of rules and regulations, and a supportive rural infrastructure all contribute immensely to making sustainable access to finance a reality. Table of Contents: •Innovations in rural and agriculture finance: Overview by Renate Kloeppinger-Todd and Manohar Sharma •Financial literacy by Monique Cohen •Community-based financial organizations: Access to Finance for the Poorest by Anne Ritchie •Rural banking in Africa: The Rabobank approach by Gerard van Empel •Rural banking: The case of rural and community banks in Ghana by Ajai Nair and Azeb Fissha •Rural leasing: An alternative to loans in financing income-producing assets by Ajai Nair •Determinants of microcredit repayment in federations of Indian self-help groups by Yanyan Liu and Klaus Deininger •M-PESA: Finding new ways to serve the unbanked in Kenya by Susie Lonie •Biometric technology in rural credit markets: The case of Malawi by Xavier Giné •Credit risk management in financing agriculture by Mark D. Wenner •New approaches for index insurance: ENSO insurance in Peru by Jerry R. Skees and Benjamin Collier •Microinsurance innovations in rural finance by Martina Wiedmaier-Pfister and Brigitte Klein •Combining extension services with agricultural credit: The experience of BASIX India by Vijay Mahajan and K. Vasumathi •Bundling development services with agricultural finance: The experience of DrumNet by Jonathan Campaigne and Tom RauschAgricultural innovations -- Developing countries, agriculture finance, Financial crisis, microinsurance, Poverty reduction, rural banking, Rural finance, Rural households, Small farmers,

Innovations in rural and agriculture finance: Overview

Everywhere in the world, small agricultural producers are entrepreneurs, traders, investors, and consumers, all rolled into one. In all these roles, small agricultural households constantly seek to use available financial instruments to improve their productivity and secure the best possible consumption and investment choices for their families. But the package of financial services available to small farmers in developing countries is severely limited, especially for those living in remote areas with no access to basic market infrastructure. When poor people have limited saving or borrowing options, their investment plans are stifled and it becomes harder for them to break out of poverty. If households have no access to insurance and are unable to accumulate small savings that enable them to pay for household and business expenses, especially during lean seasons, they are forced to limit their exposure to risk, even if high returns are expected, once again making the pathway out of poverty more arduous than necessary. Inadequate access to financial services is thus part of what is often called the “poverty trap.”agricultural producers, agriculture finance, Developing countries, households, Investment needs, Microfinance, Poverty traps, Rural finance, Small farmers,

Innovations en matière de services financiers ruraux et agricoles

La plupart des ménages ruraux n’ont pas accès à des financements fiables et abordables pour les activités agricoles et autres assurant leur subsistance. De nombreux petits exploitants vivent dans des zones reculées où les services bancaires aux particuliers sont limités et les risques de production élevés. Depuis la récente crise financière, l’octroi de crédit est soumis est encore plus restreint et le besoin de rechercher des approches innovantes de financement rural et agricole est de plus en plus pressant. Le présent ensemble de notes souligne clairement l’importance des réalités auxquelles se heurtent les petits exploitants agricoles, notamment de faibles niveaux d’instruction, la prédominance de l’agriculture de subsistance et le manque d’accès aux instruments financiers modernes. Étant donné la situation, des institutions à la fois nouvelles et novatrices sont indispensables pour atteindre les petits exploitants agricoles. L’émergence des technologies de la communication ouvre de nouvelles possibilités aux activités bancaires en milieu rural, en permettant de réduire les coûts commerciaux et les asymétries de l’information. De nouveaux instruments financiers, tels que des produits d’assurance et de micro-assurance basés sur des indices climatiques, ont également un fort potentiel de gestion des risques subis par les petits exploitants. De plus, le regroupement de services financiers avec d’autres services non financiers, tels que les services de commercialisation et de vulgarisation, offre aux petits exploitants de nouvelles possibilités d’augmenter leur productivité et leurs revenus. Enfin, la mise en place d’un environnement politique et d’un cadre juridique propices, l’application des règles et réglementations et une infrastructure rurale adaptée contribuent grandement à faire de l’accès durable à la finance une réalité.Non-PRIFPRI1; GRP4; 2020DG

Innovations in rural and agriculture finance

Most rural households lack access to reliable and affordable finance for agriculture and other livelihood activities. Many small farmers live in remote areas where retail banking is limited and production risks are high. The recent financial crisis has made the provision of credit even tighter and the need to explore innovative approaches to rural and agricultural finance even more urgent. This set of 14 briefs clearly points out the importance of business realities faced by small farmers, including low education levels, the dominance of subsistence farming, and the lack of access to modern financial instruments. Innovations in rural and agriculture finance: Overview Renate Kloeppinger-Todd and Manohar Sharma; Financial literacy Monique Cohen; Community-based financial organizations: Access to Finance for the Poorest Anne Ritchie; Rural banking in Africa: The Rabobank approach Gerard van Empel; Rural banking: The case of rural and community banks in Ghana Ajai Nair and Azeb Fissha; Rural leasing: An alternative to loans in financing income-producing assets Ajai Nair; Determinants of microcredit repayment in federations of Indian self-help groups Yanyan Liu and Klaus Deininger; M-PESA: Finding new ways to serve the unbanked in Kenya Susie Lonie; Biometric technology in rural credit markets: The case of Malawi Xavier Giné; Credit risk management in financing agriculture Mark D. Wenner; New approaches for index insurance: ENSO insurance in Peru Jerry R. Skees and Benjamin Collier; Microinsurance innovations in rural finance Martina Wiedmaier-Pfister and Brigitte Klein; Combining extension services with agricultural credit: The experience of BASIX India Vijay Mahajan and K. Vasumathi; Bundling development services with agricultural finance: The experience of DrumNet Jonathan Campaigne and Tom RauschNon-PRIFPRI1; GRP4; 2020DG