Rural and Agricultural Finance: Emerging Practices from Peruvian Financial Institutions

The formal financial system in Peru provides very limited rural and agricultural finance (RAF) services and most financial institutions focus uniquely on serving urban clients. If financial institutions lend to agriculture at all, it is primarily to large agro-processors or input suppliers, rather than to farmers directly. Only 3.2% of all formal loans are for agriculture, for a total amount of US$388.8 million. Even microfinance providers, which are more inclined to serve the needs of the rural poor, focus on the urban areas of Peru. Given the Peruvian microfinance industry’s 20% growth last year, microfinance providers are likely to continue to focus on unserved urban markets, which are easier to serve than rural markets.