Rural Finance for Small Farmers: An Integrated Approach
This paper provides an introduction to the key elements of success in expanding microlending to rural areas. It presents a case study of World Women's Banking's (WWB) work with ADOPEM Bank in the Dominican Republic to demonstrate key steps in the expansion process. Organizations seeking to offer sustainable financial services in rural areas need to develop and implement an integrated strategy which should include designing effective risk assessment methodologies, developing strategic collaborations with value chain players and creating cost effective distribution channels. To expand responsively and sustainably into rural markets, an institution must:
- Determine optimal branch locations;
- Understand the new clientèle and how their economic activities in these markets differ;
- Design responsive financial products;
- Identify ideal loan officers;
- Employ a rigorous lending methodology suited to rural households and market dynamics.
The rural credit landscape has shifted dramatically in some regions to create a marketplace where a broad range of actors are combining efforts to mitigate agricultural risks. Although new approaches have enabled financial institutions to successfully provide services in many regions, there is huge unmet demand in rural areas.