Collateral in Rural Loans
This paper was prepared by the Rural Finance Group of FAO in collaboration with ALIDE, following studies of the role and importance of collateral in agricultural and rural loans in ten Latin American countries. It was noted that collateral is vital for the growth of formal credit markets, particularly for smallholder farmers.
Different types of conventional collateral, e.g., third party guarantee, mortgage, pledged assets, guarantee funds, are examined in terms of their legal and economic characteristics. The scope for non-conventional collateral is also explored, e.g., solidarity groups, blocked savings, endorsement, loan graduation, interlinked transactions. The report is aimed at the staff of development finance institutions.