The Role of Financial Institutions

Farmers, rural residents, and rural businesses historically have had limited or poor access to financial services because of specific constraints to serving rural and agricultural markets. To succeed in promoting agricultural enterprise development or, more broadly, rural development, we must address the inadequacy of financial service in these areas.

RAFI Note #3 reviews the risks and problems that financial institutions face in trying to provide rural and agricultural financial services, and highlights new approaches and mechanisms to mitigate credit risk and improve the profitability of rural lending. This issue also discusses the potential for historically urban-focused microfinance institutions (MFIs) to provide services in rural areas, including to farmer clients.