Poverty Reduction and Rural Finance: From Unsustainable Programs to Sustainable Institutions with Growing Outreach to the Poor

This paper offers suggestions for making poverty reduction sustainable in the rural scenario. It also presents examples of unsustainable project interventions that have turned into sustainable institutions.

The author offers the following suggestions for sustainable poverty reduction:

• It requires well-designed, long term development measures and a prudentially regulated institutional framework;
• It must build on individual self-help and institutional self-reliance;
• The growth of outreach to the poor is contingent upon the dynamic growth of self-reliant institutions;
• It requires political will and adequate policies;
• Rural and microfinance have a crucial role to play in it;
• Only viable institutions can continually increase their outreach to the poor.

The paper lists the following seven projects that have gradually become sustainable:

• An income-generating project for marginal farmers and fishermen in Indonesia;
• The support given by donors to institutional diversity in Guatemala;
• Rural Financial Services in Armenia, Albania and Macedonia;
• The formation of self-governed cooperatives in Nepal;
• The reform of Savings and Credit Cooperatives (SACCOs) in Tanzania;
• The Center for agricultural and Rural Development (CARD) in the Philippines;
• The reform of an agricultural development bank in Thailand;
• Bank Rakyat, Indonesia.

The paper concludes by stating that donors may contribute to sustainable poverty alleviation by strengthening associations of microfinance institutions (MFIs) as well as large-scale financial intermediaries.