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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.

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

The first woman camel farmer in North Africa: Imen’s story

Benguerdane is a small town in the desert plain of El Ouara, a region in the extreme south-east of Tunisia, just a few kilometres away from the Libyan border. The climate there is forbiddingly arid, and the main source of livelihood is raising livestock like sheep and goats.

Tags: RURAL FINANCE, LIVESTOCK AND RANGELAND, GENDER

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

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.

New investment in digital solutions will connect Latin American farmers to markets and banking services in response to COVID-19 restrictions

March 2021 - NEWS
More than 10,000 family farmers in Latin America will soon have access to digital solutions to overcome the obstacles they face in accessing markets and financing due to the consequences of the COVID-19 pandemic.

National Calls for Proposals (The Gambia, Ghana, Senegal): Supporting remittances in times of crisis in Africa

December 2020 - NEWS
The Financing Facility for Remittances (FFR) of IFAD is pleased to announce the 2020 National Calls for Proposals: Supporting Remittances in Times of Crisis in Africa.

Related publications

Related publications

IFAD Inclusive Financial Services Portfolio Stocktaking

June 2021
This Inclusive Financial Services (IFS) stocktaking exercise assesses IFAD’s capacity to deliver IFS and addresses rural poor market development needs both historically and looking forward within the context of emerging opportunities and challenges.

INSURED - Insurance for rural resilience and economic development

January 2020
INSURED is a technical assistance programme working to strengthen agricultural insurance in IFAD’s portfolio.

SAFIN Annual Progress Report 2020

April 2021
El presente informe documenta los resultados logrados gracias al trabajo de todos los asociados de la red SAFIN.

Related documents

Related documents

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.

IFAD Policy on rural enterprise

January 2004 - CORPORATE
policy   policies_and_strategies  
The reduction of poverty in the rural areas is increasingly linked to the ability of poor rural people – especially rural women and unemployed/underemployed youth - to diversify and complement their sources of income through off-farm micro and small enterprises (MSEs) (processing, trading, manufacturing and services, etc.). Nonetheless, any effort to develop sustainable MSEs in rural areas calls for a proactive strategy to reduce constraints on the entrepreneurial poor and provide them with, among other things, suitable business-related services. The purpose of the present paper is to contribute to the debate on the conditions and modalities for developing micro and small off-farm entrepreneurship among the rural poor. MSEs contribute to the achievement of IFAD’s strategic objective of reducing rural poverty by empowering the poor and strengthening their organizations, thereby increasing their access to markets and to inputs for enterprise development — financial resources, skills training and technology and raw material. The first section shows how MSEs can reduce poverty and summarizes IFAD’s achievements in this field of activity to date.

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.