This publication reviews experiences with agricultural credit programmes in the last decades and the shift from directed credit towards a new approach based on rural financial system development. It sets out the special market environment of the agricultural sector in developing countries and the unique features of agricultural finance. These particular conditions still require special government attention but in a different manner from that followed under the directed credit approach.

The objective of this study was to identify unique features of the agricultural sector and the rural economy that present challenges for expanding the frontier of formal finance; to look at how these affect the provision of sustainable financial services and, thus, determine the key elements of a strategy for successful agricultural lending. Although no simple blueprint exists for successful rural financial institutions serving agriculture, some recent interesting experiences derived from case studies and the new microfinance developments suggest "better practices" that are presented as part of the strategy.

This toolkit is designed as a guidebook and training resource for agricultural lending institutions around the globe. It is not country or institution specific but rather highlights the common principles of sound agricultural lending practices. It is intended for use by trainers or as self-study material for loan officers. The practical approach of the toolkit is enhanced by the use of an imaginary institution to illustrate important steps of the loan cycle and loan portfolio management and the client perspective is represented by an imaginary farm household.

An edited version of this toolkit is available as a study guide in the Rural Finance Learning Centre. Go to...

This document describes the different sources of funds which financial institutions use to make loans: government budget funds, donor funds, central bank credit lines, interbank loans, savings, debt and money market instruments and equity. It gives an overview of the current liability composition of rural financial institutions world wide and recent trends and shifts, together with a qualitative analysis of the advantages and disadvantages of each source of funds from the financial institution's point of view. Based on this analysis recommendations are made regarding the most appropriate combination of funds to secure financial sustainability and independence whilst fulfilling the general goal of providing the necessary inputs for agricultural investments.

Contract farming has been in existence for many years as a means of organizing the commercial agricultural production of both large-scale and small-scale farmers. Interest in it continues to expand, particularly in countries that previously followed a central planning policy and in those countries that have liberalized marketing through the closing down of marketing boards. This guide describes in detail the general modus operandi, internal functions and monitoring mechanisms of contract farming. It aims is to provide advice to managers of existing contract farming companies on how to improve their operations, to companies that are considering starting such ventures on the preconditions and management actions necessary for success and also to government officials seeking to promote new contract farming operations or monitor existing operations.

This report was prepared by the Rural Finance Group in collaboration with ALIDE, following studies of the role and importance of collateral in agricultural and rural loans in ten Latin American countries. It was noted that collateral is vital for the growth of formal credit markets, particularly for smallholder farmers. Different types of conventional collateral, e.g., third party guarantee, mortgage, pledged assets, guarantee funds, are examined in terms of their legal and economic characteristics. The scope for non-conventional collateral is also explored, e.g., solidarity groups, blocked savings, endorsement, loan graduation, interlinked transactions. The report is aimed at the staff of development finance institutions.