Microfinance Policies and Agricultural Policies: Synergies and Divergences

This paper explores the synergies in agricultural and microfinance policy making. The authors state that a favorable environment creates opportunities for loans that are profitable for microfinance, and microfinance makes it possible for farmers to use inputs, equipment and innovations. They identify policy level themes common to agriculture and microfinance:

• Risk management and minimization;
• Informed selection of borrowers and projects with due appraisal of risks;
• Selective monitoring of agricultural borrowers.

The authors further state that the objectives and stakeholders of agricultural and microfinance policies are the same overall, and they call for the following public policy measures:

• Alliance between the MFIs and the other organizations that support agriculture;
• Strengthening of the capacities of the various stakeholders, especially farmers and their organizations, so that they can participate actively in negotiations;
• Taking private stakeholders into account in defining public policies;
• Redefining the role of the state.

Finally the authors conclude that:

• Development of synergy is in the interest of agricultural and microfinance policies;
• Microfinance loans can fund farms in both the short and the medium term;
• Family agriculture can afford the costs of microfinance with comparatively high short-term interest rates and lower rates in the medium term;
• Alliance between farmers' organizations and microfinance institutions is important for farmers to successfully negotiate on matters of policy.