The Role of Microfinance in Rural Microenterprise Development: Results of an Internet Based Discussion Forum

Syngenta Foundation for Sustainable Agriculture in Basel, Switzerland, works with rural communities in semiarid regions with the objective of improving their livelihoods through sustainable innovation in agriculture. In the context of The Economist’s Survey of Microfinance in the November 2005 issue, the foundation invited readers to help shape its strategy in support of the rural micro-enterprise sector by posting their contributions on a website set for that purpose.

To initiate the debate it posted four basic questions:

  1. How to link microfinance to rural entrepreneurs?
  2. What would it take to foster sustainable access to microfinance in the rural areas of developing countries?
  3. How can we particularly ensure access by rural women to microcredit?
  4. What other factors are constraining microenterprise in rural areas?

This paper puts together the key results from the contributions made to the discussion. In doing so it is based around the following subject areas:

  • Changing issues in agriculture, rural development and rural finance
  • Who are the real entrepreneurs, and what is their demand for financial services?
  • Women in rural enterprise
  • What would it take to foster sustainable access to microfinance in rural areas?
  • Frontier issues and recommendations

The paper concludes with the following recommendations:

  • Include among the institutions eligible for support formal, semiformal and informal financial institutions – in private, cooperative, public, community or mixed ownership
  • Place a special emphasis on support to small institutions which include people from the lower segments of the population as owners or customers
  • Support the development of appropriate legal frameworks, conducive regulation and effective (delegated) supervision of self-reliant and sustainable RMFIs
  • Provide incentives-driven schemes for upgrading institutions in terms of legal status, supervision, and outreach
  • Support the injection of equity into RMFIs for bridging, leveraging and upgrading purposes
  • Support linkages of informal and semiformal RMFIs, including SHGs in remote and marginal areas, with the banking sector and their upgrading to the level of regulated institutions as seen fit
  • Support RMFIs in establishing business associations with apex services to member institutions
  • Support the development of sustainable BDS (with particular emphasis on value-adding innovations) in private ownership or in the hands of business associations of rural entrepreneurs
  • Do not support temporary or ad-hoc solutions with no chance of institutional sustainability
  • Initiate cooperation between research funding and development agencies in RMF; provide funding for longitudinal impact studies, eg, of linkages and upgrading of RMFIs

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