Financing Rural Finance Institutions in Mexico

In Mexico, as in most developing countries, financing rural enterprise remains a significant development challenge, regardless of whether it is on or off-farm enterprise in low or high-income markets. Relatively high transaction costs, volatile agricultural commodity markets and poor infrastructure contribute to the development of inefficient rural financial systems to the detriment of all business activity, but particularly low income, small and micro-enterprises. However, unlike many developing countries, Mexico has relatively deep and sophisticated financial markets, strong savings instincts, and a plethora of financial institutions operating in rural and semi-rural areas. Commercial banks are present in most rural centers (i.e., those under 25,000 in population), although few actually lend to small and micro rural enterprises. Cooperatives, non-bank financial institutions and other rural financial institutions (RFIs) abound in all but the remotest rural areas.