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Topic Overview | id: 1030 Visits: 41760 Added:
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KO Overview | id:73256 Visits: 347 Added:
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31 July 2010 |
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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 | Innovations in rural and agriculture finance | | Author/ Editor | Kloeppinger-Todd, Renate ; Sharma, Manohar | | Content Language(s) | English | |
| Type of Document | Brief | | Abstract / Description | This set of 14 briefs clearly points out the importance of business realities faced by small farmers, including low education levels, the dominance of subsistence farming, and the lack of access to modern financial instruments. These conditions mean that new and innovative institutions are required to reach small farmers. Emerging communication technologies provide new opportunities for rural banking by reducing business costs and alleviating information asymmetries. New financing instruments, such as weather index-based insurance and microinsurance, also have great potential for managing the risks faced by small farmers. In addition, bundling financial services with nonfinancial services like marketing and extension services offers new opportunities for small farmers to increase their productivity and incomes. Finally, an enabling policy environment and legal framework, enforcement of rules and regulations, and a supportive rural infrastructure all contribute immensely to making sustainable access to finance a reality. | | Keywords | AGRICULTURE FINANCE; INNOVATIONS; FINANCE; FINANCIAL INSTURMENTS | | Country | PERU; MALAWI; KENYA; INDIA; GHANA | | Date of Publication/Issue | 2010 | | Download | | |
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| Publisher | International Food Policy Research Institute (IFPRI) | |
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