The Rural Finance Group in FAO promotes the development of sustainable financial service providers of all kinds, e.g., cooperatives, banks, microfinance organisations, self-help groups and traders, and encourages improved outreach to small scale farmers and non-farm rural entrepreneurs.

Appropriate policies are essential to create an enabling environment for small scale farmers and rural entrepreneurs to make profitable investments and for providers of marketing and financial services to operate effectively. So policy guidelines are produced, with particular emphasis on those which promote the adoption of realistic rates of interest, the mobilisation of savings and appropriate prudential regulation and supervision. AgriBank Stat, an inventory of formal financial institutions involved in agricultural lending, is maintained with the assistance of GTZ.

A major contribution to improving the efficiency and viability of financial institutions has been made through the development of the FAO/GTZ Microbanking System. This software is currently used in over 25 countries throughout Asia, Africa and Eastern Europe. The Rural Finance Group also produces reports to provide advice and guidance to financial institutions, e.g., on better practices in agricultural lending, sources of funds for agricultural lending, safeguarding deposits, inventory credit and collateral in rural lending.

Farmers and other small scale, rural entrepreneurs need advice, if they are to make good use of available financial services and plan their financial futures better. The Rural Finance Group produces material to help extension staff and other community advisers to improve client level support and enhance people’s money management skills.

To achieve the objectives of improving rural financial services throughout the world, close links are maintained with many organisations and particularly with the Regional Agricultural Credit Associations (RACAs).

The FAO Rural Finance Group is also engaged with a number of other international agencies in developing a strategy for improving the flow of infomation on best practices in rural finance and relevant training materials to those who have most need of access to this information. The result of this partnership is the Rural Finance Learning Centre, an online reference and training centre for capacity building in rural finance.