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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
Read More
Project

Armenia

Infrastructure and Rural Finance Support Programme
Read More

Related news

Ground-breaking research helps make insurance available to smallholder farmers

一月 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

五月 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

十月 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

Investing in rural people in Cambodia

一月 2018

The last 20 years have seen impressive changes in the cities and countryside. Rapid economic growth has made Cambodia one of the best performers in poverty reduction worldwide. 

LANGUAGES: English

Grant Results Sheet: CABFIN - Enhancing the CABFIN partnership’s delivery of policy guidance, capacity development and global learning to foster financial innovations and inclusive investments for agricultural and rural development

十二月 2017
The overall goal of the grant funding was to strengthen the capacity of development practitioners in developing countries to identify, design and
implement more effective interventions aimed at increasing access to rural and agricultural finance.
LANGUAGES: English

Research Series Issue 19 - Measuring Women's Empowerment in Agriculture: A Streamlined Approach

十二月 2017

The Women’s Empowerment in Agriculture Index (WEAI) can be a useful tool to measure the empowerment, agency and inclusion of women in the agriculture sector. However, computing the WEAI in its current form involves large data requirements, resulting in lengthy surveys with several questions on various dimensions and indicators within each dimension. This paper proposes a reduced version of the WEAI, or the R-WEAI, and examines two possible approaches to reduce the data requirements while ensuring comparability to the full WEAI.

LANGUAGES: English

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