Regional Office for Asia and the Pacific

Hiroyuki Konuma

FAO Regional Representative for Asia-Pacific

He Changchui
Assistant Director-General and
Regional Representative for Asia and the Pacific
Delivered at the

Joint Opening of the 15th APRACA General Assembly,
49th APRACA EXCOM Meeting and the
FAO-APRACA Conference
on Innovative Rural Finance Design and Practices

Hotel Sofitel Central Plaza
Bangkok, 25 May 2005

Mr He Linxiang, Honorable APRACA Chairman;
Distinguished Ministers and Senior Officers of the Government of Thailand;
Distinguished Members of the Diplomatic Corps and International Development Agencies;
Members of the APRACA Executive Committee;
Distinguished CEOs and Officers of Rural and Microfinance Institutions and Providers;
FAO colleagues;
Ladies and gentlemen,

It is with great pleasure and honour that I welcome all delegates and guests to this FAO-APRACA Conference on Innovative Rural Finance Design and Practices and the twin APRACA meetings.

I have browsed through the list of delegates and the countries represented. I am sure that the presence and convergence of the region’s top rural and microfinance experts and practitioners will add depth to the discussions, clarity to the definition of concepts and critical debate to the delineation of issues and, above all, bring a successful result as anticipated.

The unfolding events in the last two decades in the field of rural finance witnessed the reforms of public sector banks, the emergence of non-governmental organizations as sustainable microfinance providers, the deepening of rural development thrusts of international development agencies, the strengthening of grass roots financial institutions and the refocusing on transparency and good governance.

In particular, it has also been observed in the past decade that microfinance, in particular rural microfinance, has the potential to make a major contribution towards the achievement of the United Nations Millennium Development Goals (MDGs). This has been recognized by the United Nations which has designated the year 2005 as the International Year of Micro Credit, with the objective of promoting the role of microfinance and microcredit in poverty reduction.

The Asia-Pacific region has accumulated a wide range of experience in providing microfinance to the poor. Presently, some 179 validated microfinance institutions are in action in Asia. Rural and microfinance institutions have steadily adapted to change and have adopted innovative best practices to strengthen their delivery systems. I am pleased that representatives of the stronger institutions and organizations in the region are participating in this conference. Reforms of the rural financial sector in a number of countries now lead to energized rural outreach structures. The rural poor, who are at the lowest rung of the economic ladder, are now slowly able to improve access to credit from various types of financial institutions and providers.

Large banks and government initiatives are now steadily linking with the smaller microfinance providers for a more expanded outreach. Thus, they have begun to take on the role of wholesale financing institutions, while the smaller microfinance providers act as retailers of funds to the poor. It is gratifying to see that representatives of both these groups will be working together at this conference because rural finance and microfinance are facing huge challenges. The demand for financial services from the rural masses in developing countries is enormous, and growing, as new business opportunities are opening up due to structural changes in the world economy, the gradual opening up of markets and freer trade.

The fast and sustained economic growth that several major countries in the region have been experiencing now for a number of years is in itself transforming their economies and creating new business opportunities on an almost daily basis. In such an environment, it is important that the opportunities can not only be availed of by the rich, but that the less privileged also can stake their claim to success. Financial services for the masses are therefore a precondition for an equitable, harmonious and inclusive economic growth.

Policy-makers as well as key rural financial actors have realized the need for a responsive legal and regulatory framework for MFIs and other key financial providers to increase access for the rural poor, and improve outreach. As a result of more enabling regulatory environments, several NGOs and donor-initiated projects in the region have been able to expand their mandate, evolved into a more responsive organizational structure, achieved operational efficiencies and ultimately transformed themselves and opted to join the mainstream formal financial sector.

In a few countries the microfinance industry has succeeded, or even excelled, in building an impressive outreach and portfolios, sometimes in a remarkably short period of time. In those countries, the sector has evolved into a sustainable industry that is able to attract social investors as well as commercial ones from abroad. This is, however, not yet the case in most countries of our region, where strengthening of the institutional framework and enhancing capacity building are critical and should be given priority.

Countries where the legal and regulatory framework is less favourable could review their policy with the objective to allow more private sector initiative and investment, also in the form of foreign equity investment. If we believe that microfinance is a tool for poverty alleviation and for equitable growth, then surely the private sector should be encouraged to mobilize its vast resources towards that goal.

In the field of food and agriculture, which is the main focus of FAO, this grass root level transformation is providing valuable support and impetus to meeting the universal goal of eradicating poverty and achieving food security through sustainable development.

The theme of this conference, Advancing Frontiers in Rural Finance, is timely and significant, particularly in our region where the incidence of hunger and poverty has reached alarming proportions.

The recently released State of Food Insecurity 2004 indicates that, of the close to 800 million undernourished in the developing countries today, two-thirds or over 500 million are found in our region. Isn’t it ironic to note this prevalence of poverty despite our region’s vast agricultural output: 90 percent of the world’s rice output, 60 percent of the world’s vegetable production and 63 percent of the world’s fish production. Obviously, our region has the capability to enjoy the basic requirements of nutrition and food on the table.

With nearly 800 million below the poverty line in the Asia-Pacific region, we are home to two-thirds of the world’s poor. And the majority of these poor are small and marginal farmers.

Although the region as a whole may be producing enough food, it is the lack of sufficient purchasing power that causes food insecurity for those at the bottom end. Rural finance, through microfinance mechanisms, is an important tool to mobilize and allocate resources to those who need them to enhance their production capacity or to diversify into more profitable crops and value-added market opportunities.

I am in particular interested to note the efforts of the organizers to solicit the participation from more women in this conference to highlight women’s decisive roles in rural household finance and important role in food security. Women’s contribution to rural and microfinance should be very seriously considered in designing relevant rural finance programmes.

As the region tries to grasp the enormity of the effects of poverty, the massive and debilitating 26 December 2004 earthquake and the consequent coastal floods have severely compounded the misery of several Asian countries around the Indian Ocean, in terms of death and injury, livelihood disruption and unemployment, loss of assets and outward migration. The world is still trying to assess the immensity and long-lasting impact of this natural disaster on local populations and their livelihoods.

FAO has embarked rapidly on a programme of assisting the countries affected by the tsunami in emergency relief operations and recovery, rehabilitation and reconstruction. In addition to technical assistance projects financed from FAO’s own TCP funds and donor-supported Trust Funds, FAO also organized five regional workshops to review the impact, develop cooperative networks and map future intervention strategies. One of these, a regional workshop on Designing Disaster-related Rural Finance Strategies, with special emphasis on the rehabilitation of fisheries and aquaculture, was organized jointly with APRACA.

Let me turn to the pledges made by the heads of governments at the World Food Summit 1996 and the Millennium Summit 2000 to halve the numbers of hungry and poor by the year 2015. We may recall the review in June 2002 of the situation of food security at the World Food Summit: five years later. Current trends show that with a business-as-usual approach, the targets will not be met, necessitating much greater effort than from the outset. Retail-level rural financial services deploying microfinance methodologies, combined with wholesale financing support from the larger institutions through their respective microfinance linkages to the small and marginal farmers, will be a major element in bridging the resource gap. FAO supports these initiatives through policy advice to governments and through capacity building at the institutional level.

The role of APRACA in strengthening rural and microfinance institutions is laudable and FAO, on its part, supports its initiatives. FAO and APRACA have had a long period of collaboration. As you may recall, APRACA was established by FAO in 1977 as an association to cater for the needs of financial institutions in the field of rural and agricultural finance and development. It is gratifying to note that the membership of APRACA is not only growing but nowadays also becoming more diversified with a gradually increasing representation from private sector financial intermediaries. This private sector interest, in APRACA and in rural and microfinance in general, is much welcomed by FAO as it will help to mobilize resources towards poverty alleviation and food security.

As APRACA is now nearing the 28th anniversary of its foundation, I wish to compliment APRACA which has proven to be a sustainable association of rural finance providers. I look forward to even closer collaboration between FAO and APRACA in this regard.

The experiences to be shared in this conference by international development agencies and financial institutions will hopefully illustrate the need to get the balance right between outreach to the masses and institutional sustainability. We have to exploit this opportunity to ensure that our target group comes out of this better off. Providing direct financial support is an integral part of helping people help themselves, and of rehabilitation and rebuilding the livelihoods of those that are marginalized or affected by unfortunate natural and man-made events in their lives.

I therefore look forward to a meaningful debate and extensive discussions on the relevant rural financial innovations that you will share among yourselves during this conference. Your presence today is a testimony to your governments’ and institutions’ keen interest in expanding the growing wealth of information in the region and sharing of knowledge on this topic. I hope that the information to be generated and the recommendations to be offered by this conference will keep our interest and commitment alive to the cause of poverty eradication and for food security in the Asia region. With APRACA on our side, I must assure you of FAO’s unabated commitment in this task.

As we move towards a hunger-free world, FAO and APRACA stress the need for a shared vision of a sustainable approach to rural financial systems development, and we need to agree on a “blueprint” for what we are attempting to build and how we are going to realize this vision.

I cannot mention APRACA without mentioning as well the Bank for Agriculture and Agricultural Cooperatives, the BAAC. We all know that BAAC has since the inception of APRACA played a major role in APRACA’s development and that it has contributed much more than its fair share in the growing process. Today I would like to thank and acknowledge BAAC for having played that role and for its contributions that have made APRACA into the viable association of rural finance institutions that it is today. I would also like to express my appreciation to BAAC for agreeing to host this conference as well.

The output of this conference will be helpful in forging a regional rural finance strategy and programme framework for sustainable development and for long-term financial rehabilitation of our rural populations in the region.

I am confident that the collective wisdom and expertise of this conference shall provide a firm impetus to the above objective. I wish you well in your endeavours and I am looking forward to a very successful conference.

Thank you and good morning.