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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.

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 inherent 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 farmers money. An additional challenge is that farmers are reluctant to borrow and invest, because of their difficulty in managing risks such as weather shocks and livestock disease.

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.

IFAD supports the Agricultural Risk Management (ARM) approach that matches supply and demand, and leverages rural financing and investment in smallholder farmers.

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 and well-coordinated way.

PARM promotes:

  • rigorous risk assessments; and
  • a holistic, demand-driven approach for integrating agricultural risk management into national agricultural policies and investment plans.

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.


Spotlight

Financing for young farmers in the Republic of Moldova

Young women and men in rural areas of the Republic of Moldova are making good use of advantageous credit lines and other benefits offered by an IFADsupported project. 

Projects

Project

Benin

Adapted Rural Financing Services Promotion Project
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Project

Bangladesh

Promoting Agricultural Commercialization and Enterprises Project
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Project

Armenia

Infrastructure and Rural Finance Support Programme
Read More

Related news

Ground-breaking research helps make insurance available to smallholder farmers

januar 2018 - STORY
Farming is an uncertain and risky business, especially for poor smallholders in remote areas of developing countries. However, a new study shows how data gathered by satellite could help poor farmers manage their risks more effectively through index insurance.

Inclusive finance is key to ensure food security and transform the rural areas in East and Southern Africa

maj 2017 - NEWS
The International Fund for Agricultural Development (IFAD) and the Government of Uganda will bring policy makers and development practitioners together 22 -25 May in Kampala, Uganda, to discuss innovative approaches to expanding access to financial services for rural people.

Burundi to receive a US$24.9 million IFAD grant to enhance financial inclusion services in rural areas

oktober 2017 - NEWS
A total of 99,200 Burundian rural households in 17 provinces will benefit from a financial agreement signed today between the International Fund for Agricultural Development (IFAD) and Burundi. The agreement will enhance the availability of financial services in rural areas where demand currently far outstrips supply. Particular attention will be given to the most vulnerable groups, including women and young people.

Related publications

Sending Money Home: European flows and markets

juni 2015
The findings in this report are based on a series of studies and surveys commissioned by the International Fund for Agricultural Development (IFAD) and on analyses undertaken by IFAD on World Bank data. Financial contributions in support of the report were made by members of the IFAD-administered Financing Facility for Remittances, including the European Commission, the Government of Luxembourg, the Ministry of Foreign Affairs and Cooperation of Spain, the Swiss Agency for Development and Cooperation, and the United Nations Capital Development Fund. 
LANGUAGES: English, French

The use of remittances and financial inclusion

september 2015
The Use of Remittances and Financial Inclusion A report prepared by the International Fund for Agricultural Development and the World Bank Group to the G20 Global Partnership for Financial Inclusion.
LANGUAGES: English, French

Toolkit: Lines of credit

oktober 2014
The LOC is a loan to a participating financial institution (PFI) for on-lending to customers who are expected to repay their loans with interest.
LANGUAGES: English, French

Related documents

Rural Finance Policy

TAGS: RURAL FINANCE
TYPE: Policies and Strategies, Policy

Contact us

For questions please contact Michael Hamp,

Lead Technical Specialist, Inclusive Rural Financial Services.

+39 0654592807 m.hamp@ifad.org