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Michael Hamp Senior Rural Finance Adviser – IFAD
(International Fund for Agricultural
Development)
Italy
Africa Finance & Investment Forum -AFIF2012
Financial Inclusion through SMEs & Cooperatives, Rabobank Headquarters – Utrecht, NL, 17-19 June 2012
Michael Hamp Senior Rural Finance Advisor
Sustainable Approaches to Financial Deepening and Rural Outreach
Overview:
Financial access in rural areas
Rural microfinance -Terminology
Rural Finance as part of IFAD’s operations
IFAD’s Rural Finance Policy - key principles
Partner financial service providers
33 years experience in rural microfinance
a) focusing on agricultural lending challenges
b) focusing on IFAD’s competencies
Sustainable outreach and deepening – country cases
Emerging lessons in rural microfinance
Discussion
• 2.7 billion people around the world have no access to formal financial services
• Over 90% of people in rural areas lack access to financial services
Financial access in rural areas
Terminology
• Rural finance: Financial
services used in rural
areas by people of all
income levels
• Agricultural finance:
Financing agriculture-
related activities, from
production to the market
• Microfinance: Financial
services for poor and low-
income people
FINANCIAL MARKET
MICRO FINANCE
RURAL FINANCE
AGRICULTURAL
FINANCE
Rural Finance as Part of IFAD’s Operations
Programme Management Department
Policy and Technical Advisory Division
Financial Assets, Markets and Enterprises - FAME - Unit
Rural Finance
Core Business
Rural Economic Development
(VCD, Private Sector)
Rural Finance Special Facilities
(FFR and WRMF)
Economic & Financial Analysis
IFAD’s Rural Finance Policy
- key principles
• Support access to a wide variety of financial
services, including savings, credit, insurance,
leasing, remittances and payment systems
• Promote a wide range of financial institutions,
models and delivery channels
• Support demand-driven, market-based
approaches in collaboration with the private sector
• Develop and support long-term strategies
focusing on sustainability and poverty outreach
• Promote an enabling environment for rural
finance
Partner Financial Service Providers
Public, Private,
Cooperative
Banks
Non-Bank
Financial
Institutions
NGOs
MFIs
Community
Based
Financial
Organizations
Slide courtesy CGAP
FORMAL INFORMAL
33 Years Experience in Rural Microfinance
Facing the challenges of
financing small-scale
agriculture
30 m borrowers
from IFAD assisted MFIs
US$ 200 average loan size
15 m voluntary savers
US$ 127 average savings
women account for 83% (24 m pax)
• Operating a self-sustaining
rural MFI
• High information &
transaction costs
• Private sector approaches
crowded-out by subsidized
& targeted lending
• Dispersed populations
• Poor infrastructure
• Seasonality of agricultural
activities
• Few collateral assets
• Risks of farming (price,
production, …)
33 Years Experience in Rural Microfinance
a) focusing on agricultural lending challenges
• Taking banking services to the people via ICT
applications
• building loan analysis & repayment schedules on
revenue flows from all farm, labour and business
activities, incl. remittances
• using specific methodologies for micro-level index
insurance applications
• securing loans by contractual agribusiness
payments (VCF), WRS, etc.
• Overcoming poor lending practices and improving
repayment culture
• Developing technical capacity at the local level
33 Years Experience in Rural Microfinance b)
focusing on IFAD’s competencies
• Banking beyond branches
• Replicating Targeting Ultra Poor
• Managing price risks (commodity exchange, warehouse
receipt system)
• Enhancing the value chain financing methodology
• Promoting & consolidating decentralized
community-based financial systems & linkages • Flexible disbursement & repayment schedules (seasonality)
• R&D in weather and yield index insurance (WRMF) and
productive use of payment services and rural remittances
(FFR)
Sustainable Outreach and Deepening
Ethiopia
Ghana
Sierra Leone
The Gambia
• RUFIP targets > 6 m households through RUSACCOs
• RAFIP supports formal rural community banks and
ARB Apex Bank and credit union association
• RFCIP supports community banks and Financial
Services Associations (FSAs)
• RFCIP supports some 80 semi formal Village-based
Savings and Credit Associations (VISACAs) of
130,000 members
Emerging Lessons in Rural Microfinance
• Member-based MFIs can facilitate rural outreach and financial deepening:
“Cooperative financial institutions and mutuals are often well positioned and
effective in providing financial services for agriculture, and other financial
institutions can draw valuable lessons from their experiences.”
Johannesburg Findings
Johannesburg 1-3 April, 2009
Agricultural Finance in Africa