Rural Financial Services
Of the one billion people in need of access to financial services, only about one out of ten actually has access. Most of them live in urban or semi-urban areas. Inhabitants of rural areas, particularly in remote regions with low population density, are almost entirely excluded from formal micro-finance services.
Generally recognised obstacles to rural finance include the lack of appropriate infrastructure, low investment potential and lack of economic opportunities, high credit risks of clients with limited collateral, high transaction costs because of long distances and incompatibility of traditional micro-finance products with rural enterprise and farmers’ needs. Banks and formal MFIs shy away from rural areas because of these obstacles. It is therefore notably the (semi-)informal organisations that actually service these difficult areas.
Increasingly, however, innovative approaches are being developed to reach the rural poor. There is a wealth of good experience available internationally that MicroNed members can learn from and MicroNed members themselves also have experiences and knowledge of new approaches to share that can further the development of joint expertise and the establishment of best practices.
The MicroNed member focussing most on rural finance is ICCO, with Oxfam Novib also having selected rural finance as one of the priority areas of it’s microfinance policy.
ICCO is theme coordinator for Rural Financial Services, with the task of pulling all existing knowledge and experiences together, develop new ones and distribute them. One of the activities thereto in 2007 is the implementation of an inventory of MicroNed member’s experiences with support to rural microfinance and partner’s experiences with rural microfinance, what works and what doesn’t, and what lessons can be learned, both for partners and for MicroNed members.