Rural Finance

Topic :

This paper aims to alert policy-makers and development practitioners to the key policy issues which arise in the context of rural finance and poverty alleviation. They are:

  • the types of finance required by the rural poor;
  • the delivery mechanisms currently in place, both formal and informal; and
  • the steps required, where appropriate, to improve both availability and accessibility of financial services.

Innovative approaches are needed to lower costs and increase access of rural financial services to the rural poor. Two key strategies suggested are savings mobilisation and linking the informal and formal sectors. Other recommended approaches need to build on the relative strengths of existing formal and informal structures; integrate the complementary roles of financial and non-financial public and non-governmental organisations in decreasing the gaps in the supply of financial services to the poor; couple credit with non financial business development activities to reduce production and market risks; and use group-based activities as a means for risk-sharing and reduced transaction costs.

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