The Role of Microfinance in Rural Microenterprise Development

This paper focuses on the role of microfinance in servicing the rural microenterprise sector. It explores changing issues in agriculture and rural enterprise, and recommends measures for promoting sustainable access to microfinance in rural areas. The paper studies the specific needs and challenges of rural and women entrepreneurs with respect to financial services. It draws conclusions on factors essential for sustainable rural microfinance and identifies the roles of various stakeholders. The paper recommends measures for improving various aspects of rural enterprise and microfinance development. These include:

• Capacity building for local resource mobilization;
• Supporting initiatives to build equity driven MFIs;
• Enabling MFIs to adopt appropriate legal status;
• Improving supervision and auditing MFI federations;
• Participating in policy dialogues on agricultural development bank reforms;
• Upgrading informal financial institutions in remote areas and linking them with banks;
• Supporting networking among informal MFIs and promoting vertical linkages with banks;
• Supporting best practices sensitive to socio-cultural and policy environment;
• Establishing microfinance sector accessible to all segments of rural enterprise;
• Supporting cooperation between research funding and development agencies in rural microfinance.