Rural Finance

 

Over the last 30 years, IDEAS has been actively involved in Rural Finance. IDEAS consultants developed the first MFI in Nicaragua with a commitment to lend the majority of its portfolio in rural areas (PRESTANIC). The IDEAS Executive Director, Dr. Garber, managed this MFI during its early years while training a Nicaraguan team to take over. He founded the lending arm of WCCN, which is a Microfinance Investment Vehicle (MIV) to direct capital to MFIs and cooperatives, largely in rural areas. Dr. Garber also helped develop MicroVest, another MIV that also lends in multiple countries. The team has decades of experience in working in rural finance on three continents as consultants, trainers and evaluators. Recently, IDEAS developed, with other organizations, an innovative pilot of linking rural finance, its microfranchise and entrepreneurial education (www.tecap.info).

While the fundamentals of development finance and approaches in microfinance apply to rural finance, there are particular issues and characteristics that must be understood and taken into account in order to address rural, and in particular agricultural, finance. The training of IDEAS provides the participants with a broad understanding of the key issues in rural finance. It analyzes the key operational constraints and then discusses strategies and approaches for addressing these in a sustainable way. It includes policy issues, risk mitigation strategies, and service provision approaches of primarily financial institutions and also some of non-financial business service providers. It helps the participant see how to intervene along the value chain.

Approximately 80% of the world’s poor live in rural areas and many of the least developed countries rely on rural and agricultural commodities for their livelihoods and income generation. Rural finance can be an effective catalyst in supporting rural development. Much progress has been made in microfinance, banking services, and technologies but rural and agrarian populations largely have not gotten the same attention as their urban counterparts despite efforts by some governments and NGOs. An analysis of the good and bad lessons from case studies is the foundation for developing sound, innovative strategies and institutions that facilitate financial flows to help people and communities build their assets. To achieve the goal of improving the range of financial services that are available to rural populations, there is an imperative need for the type of training.

IDEAS has worked with the Food and Agricultural Organization (FAO) of the United Nations and University of Bergamo in Italy to develop a ten module, introductory course in rural finance, providing an understanding of problems of rural people accessing the financial services and examining the innovative methodologies and systems that have worked in development of services like helping people build their financial assets, facilitate transactions, solve cash flow problems, and manage risk. The sustainable provision of credit and general financial services to farmers and rural inhabitants in developing countries has proved to be a difficult task. There is a demand for such services. In this course, the participants learn to analyze the products and delivery mechanisms to serve the rural inhabitants. See www.ruralfinance.org.

IDEAS and FAO jointly offered the first training program for practitioners in Rural Finance in Microfinance Development Institute at Southern New Hampshire University in 2004. Then the course was repeated at the Boulder Institute in 2005. IDEAS also offered the course in January-February 2006 at the University of Limpopo in South Africa. In coordination with FAO, the University of Bergamo has taken responsibility for developing five modules, while IDEAS has developed the other five modules. IDEAS developed a prototype of a web based course.