Remittances
The funds sent home by migrant workers are a lifeline for rural families, helping to build resilience and support sustainable development
Almost one in three people in developing economies are excluded from formal financial services, with rural people disproportionately affected. They lack reliable and secure ways to save money, protect and build their assets, or make and receive payments. This makes it harder for them to improve their farms, grow their enterprises or have a cushion in difficult times. This is particularly true for vulnerable groups, such as women, youth and displaced people.
Rural smallholder producers and micro, small and medium enterprises (MSMEs) are the engines of rural jobs and markets. They support food security and provide essential services. Their growth is crucial for rural development, but this is hampered by the barriers they face in accessing financial services.
This lack of access to rural finance is due to weak financial and physical infrastructure, limited capacity of financial service providers in rural areas and low understanding of how to use financial services. Farmers and rural businesses are often hesitant to borrow because of their difficulty in managing risks, including climate-related shocks.
Financial institutions often perceive small-scale farmers and agri-enterprises as being too risky to lend to. Moreover, while the non-credit financial needs of small-scale producers and rural MSMEs are typically low, the transaction costs are high, making this a less attractive market for financial service providers.
With access to inclusive financial solutions, rural people can improve their livelihoods and resilience. This is essential in the fight against poverty and to build sustainable food systems.
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 and their client base to grow. These include blended finance instruments that mitigate risk by combining public and private capital.
But there is still much to be done. In a changing and volatile global economy, inclusive rural finance is a crucial element for rural transformation.
IFAD-supported projects increase access to financial services and loans. With this, small-scale producers and rural entrepreneurs can invest in their businesses and increase their productivity.
IFAD is one of the leading inclusive rural finance funders worldwide, with nearly one billion dollars in ongoing investments.
We work with the private sector to provide rural financial services. With digital tools and mobile apps even people in remote communities can manage their finances easily. In Honduras, the rural customers of 66 banks can save and plan for the future through apps and financial education supported by IFAD.
We support rural people to establish informal savings and credit groups. Through these, they save collectively and take out small loans to invest in their households and economic activities.
IFAD hosts the Platform for Agricultural Risk Management. This supports governments as they move away from coping with disasters towards managing risks better.
Remittances are a powerful instrument for fostering rural financial inclusion and livelihood development. Our Financing Facility for Remittances enables rural families to take advantage of the funds sent home and migrants to invest in their communities of origin.
IFAD hosts the Smallholder and Agri-SME Finance and Investment Network. This is a global community of providers, seekers and enablers of finance for agriculture SMEs. We also lead the Public Development Banks Platform for Green and Inclusive Food Systems. Here, over 130 public development banks exchange knowledge and collaborate to deliver investments for food systems transformation and climate action.
Lead Regional Technical Specialist, Rural Finance (Asia and the Pacific)
[email protected]Lead Regional Technical Specialist, Rural Finance (East and Southern Africa)
[email protected]Lead Regional Technical Specialist, Rural Finance (Near East, North Africa and Europe)
[email protected]Regional Technical Specialist, Rural Finance (West and Central Africa)
[email protected]Lead Regional Technical Specialist, Rural Finance (West and Central Africa)
[email protected]