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Access to Rural Finance

World agricultural markets have grown uninterruptedly during the past 20 years. Increasing demand and supply in developing countries has created many agri-business opportunities. However, this potential has not been realized due to constraints in accessing agricultural finance, which is typically provided by informal sources.

Unleashing rural development through improving access to finance.

FAO helps tackle the constraints that limit the development of financial services for smallholder families, including women and youth, and small agri-businesses. The aim is to increase investment, lower risks and support the rural poor.

FAO assists Governments in developing tailored policies and regulatory frameworks for rural financial inclusion; promotes innovation within financial sectors to reach the rural poor; and facilitates knowledge exchange and cooperation between countries.

To do this, FAO works with governments, producer organizations, agri-businesses, and financial institutions, including the four regional Rural and Agricultural Credit Associations (RACA) that FAO helped create in the late 1970s.

Key policy messages

·       Financial resources are a key driver for rural development. Policies must address both supply and demand-side constraints in rural financial markets, given the sub-optimal situation where informal financial service providers dominate in rural areas. There are major opportunities to improve the flexibility, diversity, price, and outreach of financial products and services through formal financial institutions.

·       Polices that aim to improve access to rural and agricultural finance (credit, savings, payments, insurance and other risk-management products) should be mutually supportive across government agencies, particularly the Ministries of Finance, Agriculture, and Social Affairs, as well as central banks and financial market regulators. These policies should also synergize with initiatives within financial institutions and private agribusiness firms, to ensure public interventions have scale and are cost-effective in reducing constraints in the rural financial markets.

·       Policies must improve the access that women have to financial services. They should be culturally appropriate, take into account the socio-economic conditions that shape the financial needs of women and the constraints that prevent financial institutions from supporting their work.

·       Policies should encourage and promote ICT, product, process and partnership-level innovations that improve the delivery of demand-driven, customer-centric financial products and services and increase access for a broad spectrum of rural clients, with a particular focus on traditionally excluded segments including farming families; small- and medium-sized agribusiness enterprises; and women, youth and indigenous people.

·       Addressing access to rural finance plays a critical role in achieving many of the internationally agreed Sustainable Development Goals (SDGs) and is specifically mentioned in a number of SDG Targets (e.g. 1.4, 2.3, 5.a, 8.3 and 8.10) to be achieved by the 2030.

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