Rural and Agricultural Finance Institutional Infrastructure

This paper points to the needs of vibrant rural financial markets for a supportive legal and regulatory framework as well as the necessary institutions to bring that framework to life. For example, it notes that agricultural enterprises do not benefit from secured lending laws if the necessary moveable or immovable property registries do not exist, or operate ineffectively. It is the institutional infrastructure, together with the legal and regulatory framework, that enables the growth of a variety of viable financial institutions that are client oriented, mobilize deposits effectively and provide access to loans to a full range of farmers, agribusinesses, and other rural clients.

The rural and agricultural finance institutional infrastructure implements and enforces the legal and regulatory framework, and provides support and other services to the agricultural and financial sector. These institutions include both public and private institutions. Some work directly with the financial sector to support their operations and services to rural and agricultural clients. Other institutions provide services directly to rural enterprises, improving their access to finance and their bankability.

The purpose of this RAFI note is to provide an introduction to the types of institutions that comprise the supportive infrastructure for rural and agricultural finance, identification of how these institutions address various constraints to rural and agricultural finance, and the lessons learned from developing these institutions and their operations.

Different aspects of rural and agricultural infrastructure are discussed, which fall under three main headings:

  • Institutions that facilitate secured lending
  • Institutions that improve information
  • Institutions that reduce risk

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