Rural finance remains very challenging and in developing countries it is generally weak, despite the efforts of donors, governments and private investors to improve it. However, important lessons are emerging from these experiences that provide useful guidelines on how to expand and make more effective the provision of rural financial services.
This report examines these lessons about rural finance. It identifies the recent advances, current debates, major gaps, challenges and opportunities that confront efforts to expand and strengthen it. This review, conducted between June and November 2004, was commissioned by the Ford Foundation’s Affinity Group on Development Finance (AGDF)’s Rural Finance Committee. It is based on the latest literature available and on discussions with various donors, practitioners and researchers active in this field.
Throughout this review, the term ‘rural finance’ refers to the provision of financial services to a heterogeneous rural farm and non-farm population at all income levels. It includes a variety of formal, informal and semi-formal institutional arrangements and diverse types of products and services including loans, deposits, insurance and remittances. Rural finance includes both agricultural finance and rural microfinance, and is a sub-sector of the larger financial sector