The Demand for Financial Services by the Rural Poor

Examining the importance of food security in demand for financial services by the poor

This policy brief summarizes lessons learned from the International Food Policy Research Institute's (IFPRI) multi-country program on rural finance and household food security. The program focused on poor people's demand for financial services in nine countries, namely Bangladesh, Cameroon, China, Egypt, Ghana, Madagascar, Malawi, Nepal, and Pakistan.

The brief questions the belief that the poor are not creditworthy and are not able to save or afford insurance. Households belonging to the lowest income quartile spent as much as 91% of their consumption budget on food in the nine countries of the IFPRI research program. The brief states that understanding the issue of food insecurity will help to satisfy poor people's demand for financial services. Conclusions include:

Institutional innovations and related changes in the legal and regulatory policy framework could extend the feasibility of sustainable finance to reach the poor;
Product innovations that respond to the food security motives of rural households can lead to higher outreach and higher impact on the poor;
Institutional innovations, such as the development of new information technologies, can help financial institutions cover their costs in reaching the poor.