IFAD Rural Finance Policy

The development goal of IFAD is to reduce poverty among the rural poor through sustainable improvements in household food security and income. To contribute to this goal, it seeks to provide improved financial and related non-financial services in rural areas. However, a number of challenges exist in rural finance:

• Encouraging stakeholders' participation in project planning and implementation;
• Building a rural financial infrastructure in accordance with the potential of the area, cultural environment and requirements of the clients;
• Enhancing institutional sustainability with outreach to the rural poor;
• Promoting a conducive policy and regulatory environment.

The paper gives the following recommendations for IFAD:

• Creating a network of rural and research microfinance institutions: This may present IFAD with an opportunity to cooperate with CGAP and other donors;
• Use of resources: Resources may be used either for direct assistance to institutional enhancement or for external liquidity as an indirect contribution;
• Provision of liquidity: Liquidity to be provided only to regulated and properly supervised financial institutions;
• New forms of cooperation with private sector may be explored;
• Implementation to be closely monitored.