Funders Meet in Burkina Faso to Discuss Rural Finance

June 3, 2010    

Members of 15 leading funder agencies, including IFAD, Terrafina, UNCDF, CIDA, Lux Dev, and AFD, among others working in francophone Africa, joined representatives from CGAP in Ouagadougou this April to discuss rural finance and what funders can do to support access to financial services in rural areas, which remains a challenge in Sub-Saharan Africa.

Currently, only 1 in 5 households in the region have access to financial services and about two-thirds of the population lives in rural areas. Alexia Latortue, CGAP’s deputy and acting CEO opened the workshop with the following challenges “To arrive at new solutions to the age-old question of rural finance there is a need to be much more specific the demand for rural finance and agricultural finance. What makes this area different from “regular” microfinance? To what extent can microfinance respond to the multiple needs for finance in rural area? What alliances must microfinance stakeholders make with other actors present in rural areas?”

During the two-day meeting, funders shared with their peers and with practitioners their experiences working in rural areas. They underscored that many challenges of rural finance are similar—if not more acute—than those of microfinance more generally. However, some issues were also specific to rural finance, including the quality of physical infrastructure, the availability of skilled human resources, and the need to have a better understanding of the rural context in order to design appropriate risk mitigation tools and products for financing agriculture.

The meeting was also an opportunity for funders to identify ways to tackle these challenges, and participants identified nine priorities to advance rural finance in their region:

1. Forging more alliances/partnerships, for example between suppliers and financial institutions, government and private sector interventions, etc.
2. Advocacy and lobbying with governments to ensure a positive policy environment, and remove policy bias against rural areas, among other measures.
3. Support for innovation and product development
4. Support for research on the demand side, to better understand the specifics of different market segments
5. Developing innovative mechanisms for risk management
6. Strengthening human resources for agricultural finance
7. Providing medium to long-term funding
8. Investing in technology, both management information systems and delivery technologies
9. Working on value chain analysis

For more information, contact Estelle Lahaye, microfinance analyst for CGAP.