Paper
Reaching Hundreds of Millions of the Rural Poor: The Role of Rural & Agricultural Banks and their Reform in Asia
An argument for the reform of agricultural development banks
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17 pages
This paper presents an argument for the transformation of rural and agricultural banks into viable and sustainable financial intermediaries with wide outreach to the rural poor.It states that the new consensus on rural and microfinance identifies that:
- The poor can save, invest and repay loans;
- They need a range of microfinance services;
- Outreach can be maximized by sustainable financial institutions;
- Donors can contribute through technical and financial assistance;
- The State should provide a conducive policy and regulatory framework.
The paper examines the positive and negative aspects of agricultural development banks (AgDBs) and asks whether they should be ignored, closed or reformed.It argues in favor of reform and states that AgDBs should be transformed into self-reliant, sustainable financial intermediaries by:
- Mobilizing domestic resources;
- Providing positive real returns to depositors;
- Producing sufficient retained earnings;
- Increasing outreach and quality of services to the rural, poor population.
The paper then discusses:
- Three cases of AgDB reform;
- Steps to be taken by the donor community and the association of AgDBs in order to initiate reform;
- Key results to be met in order to meet the objective of AgDB reform.
It concludes by outlining the following framework that would facilitate a participatory planning process by AgDBs:
- Partnerships between technical and financial assistance agencies;
- Cooperation of donors with international agencies to generate the political will to perform;
- Highlighting of the AgDB issue at the Microcredit Summit.
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