Access to Rural Finance

Policies must address both supply and demand-side constraints in rural financial markets, given the sub-optimal situation where informal financial service providers are dominant. There are major opportunities to improve the flexibility, diversity, price, and outreach of financial products and services through formal financial institutions.

Policies 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 work in connection 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 should take into account both 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 information and communications technologies, product, process and partnership-level innovations that improve the delivery of demand-driven, customer-centric financial products and services. This in turn would 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 peoples.

Following global crises such as climate change, conflicts and pandemics, policies should aim to promote access to - and use of - a range of financial services that can assist rural dwellers in weathering the impact of the challenges, especially for the more vulnerable categories (such as informal workers, women, and youths). These financial services include cash transfer schemes that can contribute towards ensuring adequate livelihood resilience and food security of large, vulnerable segments of the rural population; as well as short- and medium-term credit for micro-, small-, and medium-sized businesses, which can assist them in facing the inevitable business disruptions caused by crises. Such a policy response underlines the importance of promoting an overall process of digitalization of financial services at the country level, both from the side of the supply as well as that of the demand for services, cannot be overstated.