ACCION's Experiences with Rural Finance in Latin America and Africa

This paper describes the experience of ACCION's affiliates and partners in providing microfinance in rural areas. It defines rural microfinance as financial services provided to the economically active rural poor, including small scale producers, store and business proprietors, as well as those involved in farming, animal husbandry, and other agricultural concerns.

The paper provides the rural finance experience of the following institutions:

• Banco Solidario - Ecuador;
• El Comercio - Paraguay;
• Uganda Microfinance Union - Uganda;
• Compartamos - Mexico;
• Banco do Nordeste - Brazil;
• Genesis - Guatemala.

The paper presents important lessons learned from the experience of these MFIs:

• Success of rural financial intermediation is heavily dependent on the socio-economic, as well as legal, regulatory and supervisory environments;
• Clarity in mission, with due focus on profitability, is important for success;
• Effective decentralization helps to adequately serve a widely dispersed clientele;
• Innovative collateral substitute improve rural microfinance portfolio;
• Good product mix and a well diversified portfolio are essential.

The minimum requirements for a MFI to expand into rural areas include:

• A clear vision and commitment to rural expansion at the board and management levels;
• Thorough market research;
• Sufficient human capacity and financial resources dedicated to rural expansion;
• Adequate technology and infrastructure.