In Mozambique, a boost to private sector finance is a boost to rural communities

Access to finance can be life-changing for rural people. From the credit they need to grow their businesses to the insurance they need to mitigate risks and shocks, financial services are essential for small-scale farmers to drive sustainable rural development.

Yet, in an increasingly fragile global environment, these services are at risk.

More and more emerging rural entrepreneurs lack the resources they need to fulfil their ambitions. At the same time, the private-sector organizations that aim to address this, like banks and microfinance institutions, increasingly struggle to access financing in the market due to the high risk associated with rural operations.

Financial exclusion is particularly acute in Mozambique, affecting almost half its mostly rural population. Women are disproportionately impacted, despite depending more heavily than men on small businesses for their livelihoods.

Closing the funding gap to catalyse private-sector investment in rural communities can make all the difference.

Prospering with financial services

Despite high ambitions, fifty-six-year-old Alima Teófilo's lack of education meant she once struggled to find work in Nampula, one of Mozambique's leading agricultural provinces. The small pastry business she started as a way to get by barely earned enough to support her eight children.

But Alima’s prospects expanded dramatically when she received credit and financial literacy training from Futuro, a socially driven microfinance institution that is supported by IFAD. Armed with new knowledge, Alima took out a loan of 20,000 meticais (about US$313) and bought a piece of land on which she established a machamba (small-scale farm).

Today, Alima is the proud owner of a prosperous rural business. Her machamba employs three workers from the community, and she earns enough to ensure all her children have the education she never had. 

“When I do business, I earn something,” she says simply. “My children are studying, I built a house, I bought a freezer, a television.”

Bridging the investment gap

As stories like Alima's show, access to finance can have a transformative effect on rural people. That's why IFAD’s Private Sector Financing Program (PSFP) supports private-sector financial service providers like Futuro, which have a social mission to reach those who are often left behind.

Rather than competing with existing private sector institutions, the PSFP boosts those that work effectively but struggle to access finance.

To maximise its impact on rural people, PFSP takes on smaller, higher-risk investments than most financial institutions. This is made possible by IFAD’s expertise in remote rural areas, our strong network of partners and our ability to de-risk through technical assistance.

To date, nine small- and medium-sized agribusinesses and financial institutions across three continents have accessed financing through the PSFP, allowing them to reach an expected 3.3 million people.

And they are already showing results. In Nigeria, Babban Gona has benefited over 150,000 small-scale farmers practicing sustainable agriculture. In Madagascar, SOAFIARY has supported over 1,000 farmers, around a third of whom are women.

Catalysing change

In Mozambique, IFAD provided a loan of US$2 million to Futuro through the PFSP. This is catalysing investments in rural businesses like Alima’s and expanding financial services to a planned 21,000 rural people and small businesses, most of them women or woman-owned.

Rural entrepreneurs that receive funds can also access financial and business skills training – and because the loan is enabling Futuro to further expand its digital platforms, they can do so without making the journey to the office in Nampula city.

For Alima and others like her, the benefits are already tangible: a farm, a home, a television – and eight children with the chance of a bright future through education.

Fecha de publicación: 03 abril 2024