Lack of capital and limited access to institutional credit are often assumed to be the main constraints which rural people face in their efforts to increase their production and to improve their living standards. This leads to the inclusion in many development projects of special funds from which loans or agricultural inputs may be given to the target population. Such funds may be called "revolving funds" or "community development funds" and may be administered in a variety of ways. Over the years experience has shown that the results of these initiatives are far from satisfactory. In fact use of the term "beneficiaries" and repeated failure to recover loans actually damages prospects for the sustainable development of viable rural financial intermediation.

How development projects can promote sustainable and viable financial services
This report documents experiences from projects executed by FAO in Fouta Djallon in Guinea between 1990 and 1993. It emphasises that direct credit operations managed by projects should be an exception and not the rule and that every effort must be made to provide support to institutions who can provide lasting financial services. The report also brings out the importance of providing farmer training in addition to credit and, if a project is involved in credit activities, of following strict banking principles.

To order or download this report please go to our publications page.

Community funds and investment in food production
This leaflet was prepared in 1997 to provide guidance to the FAO Special Programme for Food Security on appropriate interventions in financial service provision. It is available in English, French and Spanish. The leaflet outlines key actions to be considered at community level, including lending procedures, and at national level in terms of policy and legal framework. Contact the SPFS for copies.

Forthcoming
Further leaflets giving guidance on how to handle the issue of finance for farmers in development projects are under production and will be available shortly.