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| Title | ACCION’s Experiences with Rural Finance in Latin America and Africa |
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| Author | ACCION |
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| Content Language | English (en) |
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| Document Type | Paper |
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| Date Of Publication | 2004 |
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| Description | This paper suggests that facing stiff competition and saturation in some urban markets, urban-based microfinance institutions are increasingly finding that rural areas offer significant business opportunities. In high-competition countries, especially in Latin America, rural areas are generally characterised by lower levels of competition. Yet, as the paper also suggests, MFIs are also aware of the challenges rural areas pose in terms of costs and risks.The aim of this document is to provide a brief listing of the experiences of ACCION's affiliates and partners in rural areas and relates lessons gleaned from that experience on how urban, commercially-orientated MFIs can enter rural markets. The paper sets out a range of variables upon which it argues the success of a rural lending program depends. These variables are described and the lessons learned from the institutions in relation to these variables are discussed. The experiences of the following institutions are used: - Banco Solidario – Ecuador
- El Comercio – Paraguay
- Uganda Microfinance Union – Uganda
- Compartamos – Mexico
- Banco de Nordeste – Brazil
- Génesis – Guatemala
First, the paper highlights that MFIs must be operating in a political and economic environment conducive to microfinance in general and rural lending in particular. The MFI must have a realistic understanding of a rural portfolio's earnings structure and its relation to the institutional mission. Furthermore, the paper suggests that MFIs must account for the increased cost of serving far-flung clients with little collateral, and must be prepared to deal with human resource issues unique to rural areas. Strategies to reduce risk, such as portfolio diversification, and to attract clients with new and adjusted products are also explored. The paper also addresses strategies to make rural products viable such as standardisation of methodology, the development of technology to increase efficiency and the formation of alliances with other institutions to defer costs. |
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| Publisher | ACCION |
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| Number of Pages | 10 pp |
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| Edition | ACCION Insight |
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| Series ID | 200408 |
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| Keywords | FINANZAS RURALES, MICROFINANZAS, COBERTURA, RIESGO, MERCADOS FINANCIEROS RURALES |
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document (EN)
