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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

Solutions to hunger exist. What we are lacking is finance

The latest State of Food Security and Nutrition in the World Report confirms that we have the means to end hunger, but are missing the money and the political will to do so. We explore the issues, solutions and what IFAD is doing to better finance food security and nutrition.

Projects

Projects

Benin

Adapted Rural Financing Services Promotion Project

Bangladesh

Promoting Agricultural Commercialization and Enterprises Project

Armenia

Infrastructure and Rural Finance Support Programme

Experts

Asset Publisher

James Marc de Sousa-Shields

Lead Regional Technical Specialist, Rural Finance, Markets and Value Chains

[email protected]

Nadhem Mtimet

Senior Regional Technical Specialist, Rural Finance, Markets and Value Chains

[email protected]

Lorna Grace

Lead Regional Technical Specialist, Rural Finance, Markets and Value Chains

[email protected]

Sauli Hurri

Lead Global Technical Specialist (East and Southern Africa), Rural Institutions

[email protected]

Stories and news

Stories and news

IFAD President at G7: Bigger and smarter investments in small-scale agriculture are key to build a prosperous Africa

September 2024 - NEWS

"Our first line of action against climate change, hunger and poverty is prosperous rural communities. Investing in small-scale farmers and rural entrepreneurs is the most effective way to unlock the immense potential of Africa’s agriculture and food systems for all," said Alvaro Lario, President IFAD heading to the G7 Agriculture Ministers meeting starting in Syracuse tomorrow.

Climate finance isn't working for Indigenous Peoples. This must change

August 2024 - BLOG

Indigenous climate activist Helen Biangalen-Magata weighs in on the urgent need to rethink how development finance supports communities like hers.

IFAD issues a EUR 100 million sustainable bond to Bank Al Maghrib, jointly amplifying action for rural development

July 2024 - NEWS

IFAD and the Bank Al Maghrib have agreed to jointly take action in increasing funding to rural development.

Solutions to hunger exist. What we are lacking is finance

July 2024 - STORY

The latest State of Food Security and Nutrition in the World Report confirms that we have the means to end hunger, but are missing the money and the political will to do so. We explore the issues, solutions and what IFAD is doing to better finance food security and nutrition.

Related publications

Related publications

SAFIN Annual Progress Report 2023

May 2024

The SAFIN Annual Progress Report 2023 captures the network’s achievements in fostering collaboration with the agricultural finance ecosystem, sharing market intelligence, advocating for small businesses and farmers, and building regional partnerships.

Enhancing Rural Finance Design and Implementation: Lessons from IFAD’s Operations in Egypt

April 2024

This report examines the complexities of inclusive rural finance in Egypt, highlighting challenges and opportunities, and offering innovative solutions.

INSURED results 2018-2023

October 2023

This brief shares the results and lessons learned from the first phase of the Insurance for Rural Resilience and Economic Development (INSURED) programme.

Related documents

Related documents

Inclusive rural finance policy

December 2021 - CORPORATE
policies_and_strategies   policy  

This publication constitutes the new IFAD Inclusive Rural Finance policy, which supersedes the 2009 RFP. 

 

IFAD Policy on improving access to land and tenure security

December 2008 - CORPORATE
policies_and_strategies   policy  

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.