8/7/2019 1151415593146_Day_1_A_of_RF__1

1/23

Rural and AgriculturalFinance

Day 1: Block 1

What and Why of Rural Finance?

8/7/2019 1151415593146_Day_1_A_of_RF__1

2/23

Self Introduction 7 Questions

1. Name, institution, and current job title.2. What activity are you working on now

that is related to Rural and AgriculturalFinance (RAF)?

3. What was your previous experience inrural areas and agricultural finance?

4. Other than your job, are there otherreasons that you interested in rural andagricultural finance?

5. Is there a specific experience relatingto RAF that you could share with uslater in the course?

8/7/2019 1151415593146_Day_1_A_of_RF__1

3/23

8/7/2019 1151415593146_Day_1_A_of_RF__1

4/23

Sub-Saharan Africa less than U$1 a day

Middle East & North Africa less than $2 & $1 a day

Source: World Bank Estimates

70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas

MDG Challenge Rural Development

8/7/2019 1151415593146_Day_1_A_of_RF__1

5/23

8/7/2019 1151415593146_Day_1_A_of_RF__1

6/23

The Many Faces of Poverty

Poverty is more than lack of income

Poverty is inequality

Poverty is not static

Poverty is vulnerability

Poverty is lack of infrastructure

Poverty is lack of capacity

The poor are often exploited, their ability to make

choices and to participate in normal activities insociety is limited

Poverty is lack of human rights

8/7/2019 1151415593146_Day_1_A_of_RF__1

7/23

Faces of Rural Poverty

70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas 70% of the Extreme Poverty is in Rural Areas

8/7/2019 1151415593146_Day_1_A_of_RF__1

8/23

There are Many Reasons forPoverty

DroughtWar &conflicts

8/7/2019 1151415593146_Day_1_A_of_RF__1

9/23

Lacking Infrastructure

and Capacity

8/7/2019 1151415593146_Day_1_A_of_RF__1

10/23

Producing, But Lacking Scale

What other reasons are people poor?

8/7/2019 1151415593146_Day_1_A_of_RF__1

11/23

Rural and Agricultural Financeand HIV-AIDS

> 40 million people are living with HIV/AIDSwith 60% in sub-Saharan Africa 15,000 new infections each day

Socially and financially affected 40 million AIDS is not only a huge health and social

issue, it is an economic one! Affected households use financial services asone way to protect and build assets

8/7/2019 1151415593146_Day_1_A_of_RF__1

12/23

8/7/2019 1151415593146_Day_1_A_of_RF__1

13/23

Useful Definitions for Rural andAgricultural Finance (RAF)

Agricultural finance: A field of work in which people aim to improvethe access of the agriculture industry, including farmers and all relatedenterprises, to efficient, sustainable financial services.

Rural finance: A field of work in which people aim to improve theaccess of rural communities to efficient, sustainable financial services.

Microfinance : Financial services for lower-income households andmicro and small enterprises; a diverse range of financial institutionsoffers microfinance services, including specialized microfinanceinstitutions (MFIs), commercial banks, and NGOs.

Value chain : The series of transactions necessary to bring a productfrom inputs to the final market, involving a process of adding value atevery stage.

Financial institution : An entity regulated or not that specializes inthe provision of financial services

Financial intermediary : A financial institution that collects, deposits,and lends these deposits.

8/7/2019 1151415593146_Day_1_A_of_RF__1

14/23

Beyond Agricultural Credit: RURAL FINANCE IN PERSPECTIVE

Financial Services

Financial Services

Rural Finance

Agricultural Finance

Microfinance

Agricultural Credit

8/7/2019 1151415593146_Day_1_A_of_RF__1

15/23

8/7/2019 1151415593146_Day_1_A_of_RF__1

16/23

The Role of Rural Finance inDevelopment

Rural Finance has been:

Politically manipulated to gain votes Seen as a way to deliver subsidies - welfare

transfer system (e.g. cheap credit for fertilizer)

BUT RURAL FINANCE IS

A multi-purpose tool to facilitate ruraldevelopment

8/7/2019 1151415593146_Day_1_A_of_RF__1

17/23

Majority of poor live in rural areas

Improved financial marketsaccelerate agricultural and rural

growth contributing topoverty reduction

Rural Finance and PovertyAlleviation

In most countries, economic growth in agriculture - is akey precondition for overall economic growth andpoverty reduction (because it directly or indirectly benefitssmallholders, tenants and wage labourers)

8/7/2019 1151415593146_Day_1_A_of_RF__1

18/23

Rural Finance and PovertyAlleviation cont.

Rural Finance can provide access to savings, lending,financing to the poor hence increasing the opportunitiesto the poor and contributing to poverty reduction

In many developing countries , therural production and distribution isstill a leading economic sector ,the main exporter, and the majoremployer, especially for the poorand women

8/7/2019 1151415593146_Day_1_A_of_RF__1

19/23

Rural Finance Investing for aBetter Future

8/7/2019 1151415593146_Day_1_A_of_RF__1

20/23

Rural Finance Is Key to a BrightFuture

Informal Semi-Formal

8/7/2019 1151415593146_Day_1_A_of_RF__1

21/23

Formal Trader Finance

RF ... a catalyst for buildingcapacity

8/7/2019 1151415593146_Day_1_A_of_RF__1

22/23

Interventions to ImproveRural Livelihoods

3. Policy & programdecision support

2. Marketing systemdevelopment

1. Human & institutional

capacity building

Improve rural incomesthrough market-oriented,

profitable and resiliententerprises

Disruptions offormer

livelihoods

Supportsystems

collapseWeak local

governmentcapacity

4. Financial services

8/7/2019 1151415593146_Day_1_A_of_RF__1

23/23

Facilitating Capital Flows for RuralInvestment and Development

Borrowing

Saving

Saving Up

Saving Down