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| |  Agricultural finance is a subset of rural finance dedicated to financing agricultural related activities such as input supply, production, distribution, wholesale, processing and marketing. Financial service providers face distinct challenges when dealing with this sector. For example, the seasonal nature of production and the dependence on biological processes and natural resources leaves producers subject to events beyond their control such as droughts, floods or diseases. Land is the most widely accepted asset for use as collateral but there are often problems with title and property rights in rural areas and small loans rarely justify the costs of legal action to call in a claim on land and then liquidate it. Moveable assets such as livestock and equipment are also fairly high risk without proof of ownership and insurance cover.
Because developing countries have large rural populations, policy-makers have frequently tried to intervene in agricultural finance with policies to provide subsidised credit through a variety of channels. Such programmes often created more problems than they solved and there was a move away from supply led credit towards a market based approach relying on commercially viable financial institutions. Governments are still tempted to control interest rates, however, and intervene in other ways, so policies relating to agricultural finance remain an important issue. | |
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| | | Title | Emerging Lessons in Agricultural Microfinance | | Author/ Editor | CGAP; IFAD | | Content Language(s) | English | |
| Type of Document |  Case study | | Abstract / Description | This publication is the result of a research conducted by CGAP with funding from IFAD on emerging lessons in agricultural microfinance. Based on desk reviews, consultant site visits and stakeholder consultation, CGAP identified a shortlist of institutions actively engaged in agricultural finance that showed the potential to achieve scale and sustainability. Several case studies were selected from this shortlist and are presented in the present publication.
These case studies present promising approaches to the sustainable provision of financial services to poor rural households reliant on agriculture. The five institutions or projects highlighted in the studies are:
- Confianza, Peru;
- Bai Tushum Financial Foundation (Bai Tushum), Kyrgyzstan;
- Caja Los Andes (CLA), Bolivia;
- Equity Bank, Limited (Equity), Kenya; and
- Cooperative League of the USA (CLUSA), Mozambique.
CGAP selected these cases on the basis of the following criteria:
- the importance of agricultural lending to the overall portfolio and mission of the microfinance provider;
- the medium-term sustainability of the agricultural lending activities (and institutional ability to survive difficult years caused by weather, price movements, or government policies);
- potential for replication or scale;
- ability to serve as an illustration of a particular institutional or methodological approach to agricultural microfinance; and
- geographic distribution.
| | Keywords | AGRICULTURAL MICROFINANCE; RURAL LENDING; AGRICULTURAL LENDING | | Country | PERU; MOZAMBIQUE; KYRGYZSTAN; KENYA; BOLIVIA | | Date of Publication/Issue | 2006 | | Download | | |
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| Number of Pages | 65 pp. | |
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