Rethinking Rural Finance: A Synthesis of the 'Paving the Way Forward for Rural Finance Conference'
This paper encourages rethinking rural and agricultural finance. It summarizes the synthesis of ideas that emerged from the conference 'Paving the Way Forward for Rural Finance' held in June 2003 in Washington DC. It proposes concrete programming options.
Rural markets have remained thin after the withdrawal of donors and the slow emergence of private institutions. The authors are of the opinion that growth can be boosted across low income households if the constraints of liquidity, risks and savings are removed. The presentation recommends designing of policies and programs across a range of rural microfinance institutions (MFIs) poised to provide credit, savings, insurance and other financial services to:
- Induce the entry;
- Assure the sustainability;
- Facilitate inter-linkages.
The authors argue that programming approaches that induce the entry and evolution of competitive providers of rural financial services while removing the constraints are effective. The constraints can be addressed through:
- Mitigating risks;
- Improving information access and management;
- Diversifying products and services;
- Strengthening the legal environment;
- Enhancing value-chain financing.
The authors conclude by stating that the ideas in the presentation should lead to more effective rural MFIs. As households advance they can move to institutional lenders, leading to broad-based economic growth.
