From Urban to Rural: Lessons for Microfinance from Argentina

This article discusses the features and reasons behind the success of microfinance for the self-employed in urban Argentina and its failure for small farmers in rural areas. It further describes the ways in which rural microfinance organizations have tried to adapt the lessons of urban microfinance to manage the risks and control the costs of the supply of microfinance in rural areas.

The article also questions the wisdom of applying the urban microfinance technologies to the poorest rural areas of Argentina.

Finally, the article states that microfinance is unlikely to improve the access to small loans and small deposits for many of the rural poor in Argentina. It suggests that:

• Government/ donors should try to strengthen market institutions that support a stable banking system;
• Strict supervision and privatization of provincial banks may lead to increased deposits, and thereby greater loans to the rural poor;
• Interventions to decrease the cost of the use of guarantees, that the poor can offer, should be taken;
• Government should mandate the use of a national credit bureau for all borrowers, to increase the worth of a clean credit record and better repayments.