Emerging Lessons in Agricultural Microfinance: Selected Case Studies
This paper presents case studies of promising approaches to the sustainable provision of financial services to poor rural households reliant on agriculture.
CGAP examined several agricultural lending programs that offer insights to stakeholders. The organizations in the study differ in portfolio size, ownership and age. Their lending styles also run the gamut from individual to solidarity group and village banking loans. Some institutions finance loans through savings mobilization and others via interest-bearing lines of credit from international donors. Finally, some institutions are devoted primarily to rural or agricultural lending, while others maintain a modest rural lending program as a mechanism to diversify their portfolio or enhance outreach. They, however, face similar agricultural lending challenges such as:
- Reaching rural clients efficiently and cost effectively;
- Maintaining liquidity in agriculture-dependent areas amid seasonal income cycles, economic crises and regulatory constraints;
- Mitigating covariant agricultural risk;
- Adapting loan products to meet the specialized needs of rural borrowers;
- Overcoming poor lending precedents and improving repayment culture;
- Developing technical capacity at the local level.
The paper describes how each institution responded to its challenges. Finally, it identifies lessons that microfinance providers and donors can learn from these case studies.
