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Library Resources

resource title type year resource
Exploring Community-Based Financing Schemes to Finance Social Protection Paper 2020

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This resource appears in: Rural Financial Services, Insurance, Country studies, Asia and Pacific

Social protection, especially health care systems for the poor, is essential to reduce inequality.

Health-related shocks, such as death or severe sickness, can affect households’ budgets significantly and create serious household trauma, leading to higher possibilities of them falling into poverty traps. The main challenge of social protection is improving coverage to provide services to people in rural and resource-poor environments. Microfinance health-related services, such as community-based health insurance, are expected to fill the gap. However, this concept also faces many challenges, including sustainability, governance, a lack of data, and a lack of capable human resources to manage it. On the other hand, the fast development of financial technology has raised the development of the crowdfunding platform for medical services. However, this concept only finances the medical expenses of people with a serious disease whom insurance or research for new medicine or treatment do not cover.

The paper will explore new and innovative ways of financing social protection, especially to improve access to health care services for poor and marginalized communities. Taking advantage of the development of financial technology and looking at how we can address the failures of community-based forms of health insurance, it will connect the sustainable financing concept, such as hometown investment trusts (HTITs) and crowdfunding, with community-based forms of health insurance. This paper will propose two models: (1) the two-step HTIT health insurance model; and (2) the integrated HTIT health insurance model.

Author Naoyuki Yoshino, Nella Sri Hendriyetty, and Erica Paula Sioson
Publisher Asian Development Bank Institute
Number of Pages 24
Primary Language English (en)
Region / Country Global, Asia
Keywords community-based health insurance, crowdfunding, hometown investment trust fund
Related Resources
Report of the Expert Workshop on Guidelines for Micro-finance, Credit and Insurance for Small-scale Fisheries in Asia Report 2019 English (en)

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This resource appears in: Credit unions, Insurance, Microfinance institutions, Agricultural insurance, Asia and Pacific, Investment

The Expert Workshop on Guidelines for Micro-finance, Credit and Insurance for Small-scale Fisheries in Asia was held in Bangkok, Thailand in the period 7-9 May 2019. Rural finance, insurance and fisheries experts from Bangladesh, China, India, Indonesia, Japan, Philippines, Thailand, UK, Canada and the USA met to discuss ways to improve the access to financial services for small-scale fishers in Asia. The workshop aimed to discuss successful finance and insurance programmes in Asia for small-scale fishers, finalize practical guidelines in support of better access to financial services, and design a capacity building programme for increasing the provision of finance and insurance services to small-scale fisheries. The workshop was attended by 32 experts and was organized by the Asia-Pacific Rural and Agricultural Credit Association (APRACA) in close collaboration with FAO. The insurance and credit guidelines prepared will facilitate the implementation of the Voluntary Guidelines for Securing Sustainable Small-Scale Fisheries in the Context of Poverty Eradication and Food Security (SSF Guidelines), as well as contribute towards achievement of Sustainable Development Goal 14. Access to finance and insurance services will enable the small-scale fishers to invest in more responsible fishing operations and technologies, reduce overfishing, contribute to fisheries management and implement climate change adaptation measures. The micro-finance, credit and insurance guidelines for small-scale fisheries have been endorsed by APRACA members in June 2019, and implementation throughout the Asian region is promoted.

Guideline and Technical Paper  -  English (en)

Use of financial diaries to understand smallholder investment finance - a cross country analysis in Mozambique, Tanzania and Pakistan Paper 2019

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This resource appears in: Agricultural finance, Country studies, Africa, Asia and Pacific, Investment, Agricultural investment, Rural Invest

Purpose: This paper evaluates the relative importance of different sources of finance for agricultural and non-agricultural investments using unique Smallholder Financial Diaries collected by CGAP in Mozambique, Pakistan, and Tanzania at the individual and household level.

Design/methodology/approach: Following the analytical framework of variance decomposition developed in Samphantharak and Townsend (2010), this study develops a method to quantify how much each cash deficit associated to investments and expenses of interest co-move with different financing sources. 

Findings: This paper finds that self-finance, rather than formal or informal finance from external providers, is the main financing source for long-term and short -term smallholder agricultural investments. Further, the paper finds that the main source of self-finance varies depending on the economic opportunities faced by smallholders, with non-agricultural income as the dominant financing source for some, while agricultural income dominating for others.

Practical implications: These findings imply that financial inclusion policies specifically targeting smallholders and the agricultural sector would benefit from enabling the development of an ecosystem of diverse financial services that respond simultaneously to both agriculture and nonagriculture needs.

Originality/values: This paper furthers our knowledge on how smallholder households are financing their agricultural investments. Moreover, it develops a new methodology and uses it exploiting a unique data set.


Author María del Puerto Soria, Emilio Hernández and Riccardo Ciacci
Publisher Food and Agriculture Organization of the United Nations (FAO), Rome, Italy; Consultative Group to Assist the Poor (CGAP), Washington D.C, United States of America; Universidad Loyola Andalucía, Seville, Spain
Number of Pages 29 pages
Primary Language English (en)
Region / Country Global, Africa, Asia
Mozambique, Tanzania and Pakistan
Keywords smallholder investment finance, financial diaries, agricultural investments, non-agricultural investments, smallholders
Related Resources
Moving from Microcredit to Livelihood Finance Report 2007

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This resource appears in: Asia and Pacific

The topic of livelihood finance has become an issue of some significance in India. It has been recognized that tiny loans as characterized by the majority of microcredit initiatives are not going to be sufficient to reduce poverty significantly. Improving or changing livelihoods is a complex process and will require more complex solutions, including more diverse financial products to meet diverse investment needs. CARE India wanted to research this and ascertain whether or not the self help group system could evolve to meet these needs. They were supported in this endeavour by the FAO Livelihood Support Programme.


CARE conducted some field research in Andhra Pradesh and this report includes a chapter outlining their main findings, including a review of people's livelihood strategies and how they respond to change, together with household financial management strategies. The following chapter attempts to analyse the whole question of livelihood finance; what it means from a demand perspective and from the supply side. The main point of taking a livelihood approach is to see things in a holistic manner and this report argues that that is how a poor household functions in terms of money, constantly juggling variable availability of cash with variable demands.

Thus ideal "livelihood finance" would enable people to conveniently deposit, withdraw, accumulate and borrow as required. With this in mind the report then examines what intermediaries and products are available in India to serve such needs. The answer is an impressive array, which then begs the question "Why do people not use these products to a greater extent?" Is the issue one of ever more supply or has more to be done to encourage people to use the services that there are? One of the core conclusions of the study is that competent advisory services are needed to complement financial services and the report reviews a variety of options for providing such advice in the Indian context, ending with the following recommendations:

  1. An assessment should be carried out of the operations, strengths and weaknesses of various forms of livelihood resource centres in India with a view to producing guidelines on how these centres can best be structured and managed.
  2. The concept of livelihood resource centres as a source of information, technical and financial advice should be encouraged and as far as possible established at district and block, mandal or cluster level.
  3. All resource centres should be provided with a range of appropriate materials which can be used to facilitate discussion about financial and technical issues relevant to the location.
  4. The concept of farmers’ clubs should be revisited and methods found to revitalise their role and create synergies with SHGs, MACS and other local associations.
  5. A concerted effort to provide useful and friendly information about financial products from banks, cooperatives and post offices should be made, with distribution of material through SHGs, farmers’ clubs, NGOs, cooperatives and resource centres.
  6. A strategy should be devised to improve the ability of village extension workers, SHG leaders and NGO personnel to explain livelihood finance and financial planning to poor households. The simplest visualising tools should be selected, tested and taught via workshops at livelihood resource centres.
  7. Bank and cooperative training institutes should review curricula to determine if changes should be made to incorporate a livelihood approach to analysing the needs of customers and how this might impact on lending decisions. In service training on working with farmers’ clubs and SHGs to help their members identify livelihood improvement opportunities and plan the use of their money should be introduced.

This report is pending publication by CARE India, and FAO as a Livelihood Support Programme working paper.

Author Heney, J.
Publisher CARE India; FAO
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Global, Asia, Southern Asia
Keywords Financial Products, Microcredit, Livelihood Finance, Advisory Service
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Credit and microfinance needs in inland capture fisheries development and conservation in Asia Paper 2007 English (en)

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This resource appears in: Asia and Pacific

Recognition of the importance of microfinance as a crucial development tool for poverty reduction has increased during the last two decades. The United Nations, in its General Assembly Resolution 52/194, passed on 18 December 1997, noted that in many countries, microcredit programmes have succeeded in generating productive selfemployment by providing access to small capital for people living in poverty as well as increased participation in the mainstream economic and political process of society. This publication provides orientation, basic considerations and general principles for those institutions and organizations that provide credit and microfinance services to the fisheries sector, particularly the small-scale fisheries sector, and for those who want to include inland fishers and inland capture fisheries as part of their client base and lending operations. The publication also reaches out to the users of credit and microfinance services and to important stakeholders, including inland fisher associations and cooperatives; fisheries and other government departments and institutions concerned with the management, conservation and use of water bodies; local government authorities; and finally, individuals and groups of inland fishers and women in inland fishing communities.

The document has three parts. Part 1 contains guidelines for meeting the credit and microfinance needs in inland capture fisheries development and conservation in Asia. The guidelines highlight the need to conserve and manage inland fisheries and identify opportunities for inland fisheries development, conservation and financing. With special reference to the socio-economic characteristics of inland fisheries and inland fishers, lending policies and procedures suitable for financing inland fisheries are elaborated on. These include the identification of target groups and their credit and microfinance needs, loan sizes and loan purposes, interest rates and repayment periods, documentation and collateral requirements as well as savings and insurance services. Also discussed is the role of various stakeholders in providing financial services and in managing and conserving inland fishery resources, i.e. governments, NGOs, self-help groups (SHGs), fisher associations, financial institutions and donors.

Part 2 contains reports of the proceedings and recommendations of two regional workshops, from which the guidelines evolved. The first was the Regional Workshop on Microfinance and Credit Programmes in Support of Responsible Inland Capture Fisheries Practices for Sustainable Use of Inland Fishery Resources, held in Kuala Lumpur, Malaysia, 26-30 April 2004 and organized by the Intergovernmental Organization for Marketing Information and Technical Advisory Services for Fishery Products in the Asia Pacific Region (INFOFISH) in cooperation with the Fisheries Development Authority of Malaysia (LKIM), the Department of Fisheries of Malaysia, the Agricultural Development Bank of Malaysia and FAO. The second was the Regional Workshop on Guidance for Credit and Microfinance Programmes in Support of Sustainable Use of Inland Fishery Resources and Poverty Alleviation, held in Beijing, China, 14-17 February 2006 and jointly organized by the China Society of Fisheries, the East China Sea Fisheries Research Institute, the Chinese Academy of Fishery Sciences and FAO. Both workshops were supported by the Asia Pacific Rural and Agricultural Credit Association (APRACA).

Part 3 of the document consists of case studies and success stories on: the rehabilitation of inland fisheries and on the access to and utilization of credit and microfinance services with reference to the rehabilitation and development of inland fisheries at Lake Taihu and Lake Luoma in China; management challenges of riverine fisheries along River Ganga and prospects of inland fisheries development in West Bengal and Assam in India; livelihoods at Lake Inlay in Southern Shan State in Myanmar; fishery policy reform and aquaculture development in Cambodia; and community based rehabilitation and management of fishery resources at River Kinabatangan in Sabah, Malaysia.  -  English (en)

Author Tietze, U.; V. Siar, S.; Marmulla, G.; van Anrooy, R.
Number of Pages 157 pp.
Primary Language English (en)
Region / Country Global, Asia
Keywords Microcredit Programmes, Credit Services, Microfinance Services, Fisheries Sector
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Reducing Borrower and Lender Risk Through Context Sensitive Product and Portfolio Design: The Case of ‘Integrated’ Agricultural Development in Tajikistan Paper 2007

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This resource appears in: Asia and Pacific

This paper is a case study that illustrates MEDA’s organizational approach to the development of sustainable financial services for rural households as exemplified by our experience in Tajikistan. Since 2004, MEDA has been implementing a four-year $4.5 million CIDA-funded agricultural development program that focuses on the horticulture subsector. A key component of the project is to partner with and develop the capacity of a local MFI (microfinance institution) to expand their loan portfolio from mainly urban clients to include smallholder farmers. A $1 million agricultural loan fund has been made available for this purpose, along with technical assistance and temporary operational support.

The primary technical challenges have been to accurately assess the local context, and based on the findings, assist the MFI to design appropriate products and develop a balanced portfolio to meet the needs of the borrower and lender, reducing the risk to both. Special attention has been paid to borrowers’ sources of income and agricultural cycles. The disbursement and repayment of the $1million loan portfolio has been so successful that it reached operational sustainability with almost no default within 18 months. Farmers continue to take loans, raise their incomes, and seek out additional loan products. The context-sensitive design of products and the portfolio has enabled the MFI to successfully expand into rural lending. Building on this success, the MFI has gone from a capitalization of $2 million to $6 million with increased agricultural lending to become the leader in rural finance in Tajikistan over the past three years.

Rural Financial Institutions and Agents in India: A Historical and Contemporary Comparative Analysis Paper 2007

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This resource appears in: Asia and Pacific

Late 19th century concerns with rural unrest and indebtedness in India led to a policy approach involving moneylender regulation, and replacement of moneylender finance through institutional credit provision in various forms. The emergence, growth, interaction and comparative performance of these different institutional forms - co-operatives, public-sector banks, regional rural banks, microfinance institutions and private sector commercial banks, are reviewed in relation to the financial service needs of the rural poor. Even with this long history of institutional credit provision and the dramatic expansion of the Self Help Group-Bank linkage programme since the early 1990s, very substantial proportions of the rural population are still without access to formal finance. Moreover, nationally, the share of informal finance in rural household debt has actually increased at the start of the 21st century. Against this background, measures to improve performance, both within and between different kinds of formal financial institutions and informal financial agents, are assessed; the paper concludes with a discussion of policy options for the future.

Urban Poverty Overtaking To Rural Poverty: India Article 2007

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This resource appears in: Asia and Pacific

This study shows the major indicator of ‘Urban poverty’, how it is racing towards the rural poverty; now the days many rural people are taking interest to the cities with expectation of higher income and establishing our own businesses, indicated the migration rate which is increasing day by day and the Indian legal system is not revealing the sustain progress of work in the management of slum areas people and migration rate, which creates number of other problems to the urbanization. The people are not getting assured places, employment and any push support from the urban development authority for their livelihood. India is facing the problem of unemployment, illiteracy and migration rural to urban. These are the issues impacting to the urbanization and growth of the country. In India 70% population is living in rural areas in which 25% of the country's poor live in urban areas and 31% of the urban population is poor, moreover, there are 22% people who live below poverty line.

Author Perwinder Singh
Number of Pages 8 pp.
Primary Language English (en)
Region / Country Global
Keywords Rural Poverty
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Towards Expanding the Frontier of Microfinance Services in Nepal Paper 2007

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This resource appears in: Asia and Pacific

This study uncovered that Nepalese microfinance sector is reaching 37% of its potential market with access concentrated in accessible areas and virtually no or limited access in inaccessible hills and mountains and concluded that expansion of microfinance services to a large number of un-served and under-served micro-entrepreneurs and poor households living in remote districts is yet a challenge. While commercial microfinance service providers (MSPs) are quite successful to penetrate their services in urban and densely populated peri-urban areas, the community based MSPs have comparatively better penetration in relatively inaccessible areas. On the other hand, over 55,000 Savings and Credit Groups (SCGs) promoted by government and non-government sectors exist throughout Nepal irrespective of remoteness, but not fully used up to the potential level.

Existing service delivery cost structure is a barrier to commercial MSPs to expand their services in remote areas; while such impediment is either does not exist or are at minimum among community based MSPs. Innovation to reduce operating cost is one of the pre-requisites to expand microfinance services of existing MSPs in inaccessible hills and mountains. Further, products and service delivery methodologies deter commercial MSPs to expand their services in inaccessible hills and mountains, while the capacity and resource constraints undermine potential of community based MSPs to intensify their services in their working areas and expand their emergence and growth in more remote areas. Business linkages of commercial MSPs with large number of informal SCGs that even exist in inaccessible hills and mountains areas as well as partnership of apex institutions with community based MSPs on capacity enhancement and access to loanable fund is most effective and efficient alternatives to expand microfinance services in these areas. Such an effort will be instrumental to promoting inclusive financial services in Nepal.

Field Experiments in Rural Finance: An Example from Tamil Nadu, India Paper 2007

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This resource appears in: Asia and Pacific

Suppose you’re in charge of the rural finance portfolio at a private bank in a developing country. You’re reviewing the performance of your rural branches, and would like to consider some policy changes. Some staff members propose new products, while others suggest changing interest rates and the borrowing limit. Remembering your old economics courses, you realize that while raising the interest rate increases margins, higher interest rates can also decrease take-up and lead to more default. The effect on profits is ambiguous. You are also aware that increasing the loan to value (LTV) ratio on collateralized products could increase your portfolio size but might also have adverse effects on default. Again, it is not clear whether an increase in the LTV ratio will have a positive impact on profits. So what should you do?

Given the challenges involved in these decisions, it is perhaps not surprising that most managers choose to rely on instinct and gut feelings. Gut decisions are not made from complete ignorance. Rather they are informed by thousands of historical data points and anecdotes from the individual’s past. But this begs the question of whether people are good mental statisticians. This paper suggests that there is an infrequently used option in the analytical toolbox: randomized controlled trials (RCT), which offer greater precision. The author's argue that by spending some resources, and avoiding the traditional guess and implement strategy, an organization can dramatically improve the quality of choices it makes. However they also acknowledge that not all questions can be answered through RCTs and propose a simple three-tiered framework to help assess whether a particular problem is suitable.

The authors go on to outline the six steps of a successful RCT and then, to give a better sense of what an experiment looks like in the field, they provide details of the design and results of an experiment conducted in several rural branches of one of India’s largest private banks. The experiment was initially setup to help the bank answer the following question: "Is the bank being too cautious in setting the loan-to-value (LTV) ratio for one of its collateralized loan products - jewelry loans?" In addition to this question, they researchers were also interested in testing for the existence and prevalence of credit constraints. Much anecdotal suggests extremely high levels of credit constraints in rural areas, yet there has been relatively little academic work in the area.

While the experiment is still running and the results not yet conclusive, the authors can already point to several interesting findings. For example, the low rates of credit constraints and minimal refinancing is surprising. It seems the literature has been placing too much emphasis on credit constraints. The researchers suggest that mental accounting, a behavioral economics theory, explains such unexpected borrowing patterns. In conclusion they suggest that RCTs can be applied to many areas of rural finance and agriculture. They could be used for anything from understanding the impact of subsidized fertilizer on local market outcomes to the impact of relaxing the traditionally rigid microfinance contracts. They provide the most scientifically founded answers to many of the most difficult policy questions and should be taken very seriously in policy discussions. In the experiment described in the paper, they will not only able to inform the bank whether they can safely increase credit limits without much concern for increased default, but can also say something about the prevalence of credit constraints and the importance of mental accounting in understanding borrowing patterns.

Successful Microfinance in the Pacific: Achieving Financial Inclusion Paper 2006

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This resource appears in: Asia and Pacific

This paper states upfront that there is a ‘missing middle’ in the economies of the Forum island countries between the traditional subsistence economy, on the one hand, and the modern monetised economy on the other. It notes that in many other parts of the developing world this gap is filled by small- and micro-enterprise economic activities – the informal sector, which is often seen as a type of stepping stone.

This study argues that the reasons for the ‘missing middle’ are complex, and that microcredit is not a magic bullet capable of creating an informal sector where it is lacking in Forum island economies. Instead it points to the importance of eliminating the ‘financial exclusion’ of Forum island people – where many are denied access to any financial services, not just credit. It talks of microfinance, which is described as “the provision of a broad range of financial services such as deposits, loans, payments services, money transfers and insurance to the poor and low-income households and their micro-enterprises.” The study also argues that increased financial inclusion through the expansion of savings services (the most important, and often most neglected, of micro-financial services) brings macroeconomic benefits, as well as significant personal to households.

Innovative products offered by commercial banks in a number of Forum island countries are presented here. Low population densities and high operating costs remain a serious barrier to the viability of Grameen ‘replications’. However, it is noted that innovations in information technology that are cutting microfinance transaction costs in other regions could increase the feasibility of all modes of microfinance in the Pacific.

The study also suggests that regional initiatives are desirable to generate and share information relevant to the effort to establish sustainable microfinance processes in Forum island countries. Microfinance practitioners in the Pacific are often professionally isolated and would benefit from networking with their peers in other countries.

The paper is set out as follows:

  • Introduction – the ‘missing middle’ in Pacific Island economies
  • Definitions – from ‘microcredit’, to ‘microfinance’, and to ‘microfinancial institition’
  • Financial service needs of the poor – micro and macro aspects
  • Appropriate aims for microfinance interventions, and criteria for their success
  • Some practical findings
  • Recommendations for actions
Author Conroy, JD
Publisher Pacific Islands Forum Secretariat and UNDP Pacific Sub-Regional Centre
Number of Pages 41 pp.
Primary Language English (en)
Region / Country Global
Keywords Agricultural Microfinance, Microcredit, Savings, Networks
Related Resources
Rural Finance in Contemporary Times: Interface with Microfinance (in India) Report 2005

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This resource appears in: Asia and Pacific

In September, 2004 a colloquium was held at the Indian Institute of Management, Ahmedabad, which brought together leading bankers and microfinance practitioners to discuss the interface between rural finance and micro finance. When people talk of rural finance in India, the stereotype offered is that of a banking system that fails to reach out to the poorer clients and, when it does, fails to recover the money so disbursed. The counter-point offered is usually the magic wand of microfinance. Participants in this Colloquium set out to examine where these two worlds meet and how they could learn from each other. The discussions were organized around three themes:

  1. the legacy of the banking system,
  2. the limitations of microfinance, and
  3. an assessment of the potential.

On the issue of legacy, the message was clear that the intervention of the state in certain aspects has been undesirable. These areas were clearly identified as granting general pardon for loans, tinkering around with interest subsidies, and interfering with the commercial aspects of banking. The limitations of the microfinance institutions were in terms of their sustainability and their inability to draw commercial capital and grow rapidly. However, these limitations were partly seen as a consequence of regulatory apathy and support from the state both in terms of formulating and articulating a regulatory framework and also in terms of the central bank being reluctant to supervise the efforts. These did not help in enhancing the legitimacy of microfinance institutions.

This colloquium report is a fascinating example of policy dialogue in which key actors set out their views on the selected topic and provide critical guidance for decision-makers. Some examples: "Most of us assume that the quality of life will automatically change if only we have money. Therefore, we attribute most of the ills of the rural areas to lack of access to credit. … It is a fallacy." "We need to find mechanisms of providing an opportunity for depositors and for protecting their interests. This can be done by having depositors involved in governance." "Commercial banks need to recognise the value of providing consumption credit – a single-minded focus on production credit may be self-defeating since incorporating consumption needs appears to reduce loan default." "It is important that institutional support for micro-livelihoods be in place for financial services to have value." "The century old rural cooperative credit system is in poor shape and carries a warning for those who do not wish to learn from history."

This report contains much of interest not only for people in India but for all policy makers with an interest in the problems of and prospects for improving rural financial services. It is also an excellent example of the way in which policy dialogue can be conducted, in the interests of improving the policy framework to enable mainstream banks and microfinance institutions meet the challenging demand for financial services in rural areas.

Author Srinivasan, R; Sriram, M.S.
Publisher Indian Institute of Management
Number of Pages 32 pp.
Primary Language English (en)
Region / Country Global, Asia, Southern Asia
Keywords Policy Dialogue, Financial Services, Cooperative, Livelihoods, Agricultural Credit
Related Resources
Community-Driven Development and Scaling-Up of Microfinance Services: Case Studies from Nepal and India Paper 2004

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This resource appears in: Asia and Pacific

This discussion paper from the International Food Policy Research Institute takes a close look at two important microfinance programmes, that of the Nirdhan Utthan Bank Limited (NUBL) in Nepal and the Self-Help Group (SHG)-Bank linkage program of the National Agricultural Bank for Agriculture and Rural Development (NABARD) in India. Both these institutions have a common basis in local community groups, and both are seeking to expand their operations. The paper concisely explores the progress of their scaling-up efforts. It will be of interest to managers of microfinance institutions (MFIs) as well as policy-makers in both non-governmental organisations and in governments who are gearing a part of their economic policy toward encouraging banks to lend to the rural poor.

Both NUBL and NABARD groups use self-regulation, including peer selection, peer monitoring, and peer enforcement of contracts, as ways of gaining access to services not otherwise available to them. Loan products are closely driven by client preferences, as shown by strong demand to join the program, high repayment rates, and very low dropout rates. Moreover, the process of organising clients into groups has a significant empowering effect, giving voice, and attendant bargaining power, to an impoverished class. The author identifies standardisation of rules of conduct and basic service delivery mechanism, and, in the case of NUBL, standardisation of financial products themselves, as essential to swift replication in both India and Nepal. There are, however, significant differences between the NUBL groups and the NABARD groups: in Nepal, NUBL decided to provide financial services directly as there was a low density of pre-existing commercial banking services, while in India, NABARD adopted a “linkage” model connecting groups of women to pre-existing commercial banks, recognising that India’s commercial banking density is very high, with 99% of the population within five kilometres of a bank branch. NABARD is a government-led initiative, while NUBL was conceived as an alternative to state intervention. However, whether tied explicitly to government or not, both models benefit heavily from government financial policies which required banks to invest certain amounts in rural “priority sectors”. If this mandatory investment is removed, the basis of both the NUBL and NABARD groups will be seriously shaken, so it cannot be said that the two systems are independent of government measures.

Scaling-up services has been difficult in Nepal because of the difficulty of reaching the more remote regions, with similar problems in northeastern India. Not only that, but the ongoing Maoist insurgency in Nepal limits NUBL’s expansion and is explicitly directed against, at least in part, repayment of loans by the rural poor. A more supportive environment in India has enabled unprecedented expansion for the NABARD-supported groups. The author suggests that group federations, collections of self-help groups, be developed, so that they can become self-financing and self-regulating. Such federations have already been proven successful in other parts of India and could provide the means to free these groups from dependence on government subsidies both explicit and hidden.

Author Sharma, M.P.
Publisher IFPRI
Number of Pages 50 pp.
Primary Language English (en)
Region / Country Global, Asia, Southern Asia
Nepal, India
Keywords Agricultural Microfinance, Self Help Groups, Solidarity Groups
Related Resources
Is the promise being fulfilled?...Microfinance in the Philippines: status, issues and challenges Brief 2004

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This resource appears in: Asia and Pacific

In the Philippines, microfinance promises to provide and improve access to financing for small farmers, fisher folks and microentrepreneurs and is seen to be gradually replacing the government’s previous directed credit programs as a major source of financing for the poor, or so asserts the author of this policy note. Statistics included in the policy note demonstrate that the microfinance sector is growing thanks to new entrants such as rural banks and medium- and small-sized MFIs. These institutions are providing the competition that is moving MFIs to be more client-focused, providing appropriate services to a greater number of poor households/microenterprises in a sustainable manner.

Recommendations are given on the following issues identified as needing to be addressed and monitored if microfinance is to remain vibrant and responsive:

  • The threat of policy reversal (using well-targeted subsidies e.g., output-based assistance)
  • Emerging credit pollution (establishment of a credit information bureau)
  • Need for appropriate regulation and supervision (risk-based supervision)
  • Effective regulation of credit cooperatives / credit unions (capacity building for government authorities)
  • Use of performance standards (to increase the capacity of MFIs to access commercial sources of capital)
  • Building the capacity of microfinance institutions (to expand the outreach of MFIs down- and up-market)

The author asserts that if the government can effectively stay its course and continue the market orientation of financial and credit policies, and with the help of donors and other stakeholders, build specific capacities of government authorities and MFIs, the future of microfinance fulfilling its promises is bright.

Author Llanto, Gilberto M.
Publisher Philippine Institute for Development Studies
Primary Language English (en)
Region / Country Global, Asia, South-eastern Asia
Keywords Agricultural Policies, Microfinance Institutions
Related Resources
Rural finance and micro finance development in transition countries in South-east and East Asia Paper 2003

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This resource appears in: Asia and Pacific

Micro-finance is an emerging important financial sub-sector in Asian transition countries. Its role is to improve financial access of the poor and small economic players and thus help them to build assets, thereby contributing to poverty alleviation. This paper, which was presented to the "Workshop on rural finance and credit infrastructure in China" in Paris in October, 2003, provides an overview of rural finance and micro-finance development in five countries of South-East and East Asia, viz. Cambodia, Lao PDR, Myanmar, Vietnam and Mongolia, and focuses on the institutional evolution and the inter-relation between policies and institutions.

The authors note the diversity of formal and semi-formal financial institutions — agricultural banks, micro-finance banks, micro-finance NGOs, financial co-operatives and other indigenous financial systems - that are present in these countries. It is particularly interesting to note the importance of the agricultural banks in almost all the countries reviewed and a major part of their operation is to serve small farmers and micro entrepreneurs, even though microfinance as a methodology has not necessarily been built into their systems. The paper also appraises the newer microfinance banks, particularly ACLEDA Bank in Cambodia and Xac Bank in Mongolia, and describes the characteristics that exemplify their rapid growth.

Following their review of rural and micro finance development in each country, the writers conclude that any monolithic view that expects a single type of micro-finance institution to dominate rural financial markets is incorrect. They believe that existing formal and semi-formal financial institutions should be reformed to overcome the constraints deriving from their old models of delivering financial products, and emerging, innovative NGOs need to progress a lot before they can be integrated into the formal financial sector. Their policy recommendations are:

  • Reform the agricultural banks because their extensive branch networks are an invaluable socio-economic infrastructure for rural finance but they do need managerial autonomy from the political system.
  • Adopt a market-based policy framework because this is a basic requirement for developing an efficient rural financial system. They site Cambodia as an example of appropriate policies leading to rapid expansion of services.
  • Develop the retail capacities of micro-finance institutions.
  • Improve the legal and regulatory framework for micro finance both in terms of removing restrictions and improving the regulatory capacities of the monetary authorities to understand the risk profiles of micro finance.
  • Improvement the governance of indigenous financial systems so that they have the potential to link with the formal sector in the future.
  • Increase savings mobilization and ensure that the deposits are properly safeguarded.
Author Fukui, R.; Llanto, G.
Number of Pages 17 pp.
Primary Language English (en)
Region / Country Global, Asia, Eastern Asia, South-eastern Asia
Keywords Financial Sector, Agricultural Microfinance, Agricultural Development Banks
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Microfinance in Laos: A Case for Women's Banking Paper 1999

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This report was written in 1999 and it describes how the Government of The Lao PDR, a communist country, took bold steps towards a market economy in the '90s, creating a policy environment conducive to the emergence of a demand-driven system of microfinance. The authors argue that such a system should be based on the cultural traditions of Laos where community solidarity is strong and women play a crucial role in managing money. It is women who are in charge of cash crop production and market sales. Women are the family bankers, holding the family purse, doing the saving and repaying any loans. There is a widespread cultural pattern in Laos that money can be entrusted to women, not men.

The author's suggest that an evolving Laotian system of microfinance might comprise the following components:

  1. A microfinance section in the central bank to provide an appropriate policy, legal and supervisory framework;
  2. Commercial banks as microfinance wholesalers and retailers - to be reformed through five strategies:
    • an incentive strategy: converting branches or sub-branches into profit centers which mobilize their own resources and provide credit at their own risk;
    • a sound banking strategy: geared to institutional viability and sustainable financial services;
    • a linkage strategy: linking banks with non-formal financial institutions/financial SHGs;
    • an outreach strategy: extending the banking services to increasing numbers of women and men, including the poor; and
    • a transformation strategy: transforming branches or sub-branches branches or sub-branches into autonomous financial institutions owned and managed by local people;
  3. A network of semiformal, and eventually formal, women's village banks for both women and men; and
  4. Savings and credit associations functioning as informal self-help banks of microbusinesswomen.

Based on deeply entrenched cultural traditions, women have the potential of becoming the microfinance bankers of Laos, building viable institutions with sustainable financial services, for all segments of the population, including women and the poor.

Author Seibel, H.D.; Kunkel, C.R.
Publisher University of Cologne Development Research Center
Number of Pages 30 pp.
Primary Language English (en)
Region / Country Global, Asia, South-eastern Asia
Keywords Informal Finance, Agricultural Microfinance, Financial System
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Bangladesh - Rural finance Report 1996

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The rural sector is central to Bangladesh's development strategy and agriculture has a pivotal role in rural growth. This study finds that small and marginal farmers, a majority of the fanning population of Bangladesh, and other small entrepreneurs in rural areas are generally unable to access appropriate financial services. . They possess too few assets to be of interest to banks, but have too much income to qualify as "poorest of the poor", the target of most NGOs and member-based institutions such as Grameen Bank. For broad based development, it is crucial to substantively include this potentially dynamic section of the rural economy in the growth process.

According to this report, rural financial markets in Bangladesh are fragmented and inadequate. Reform of the formal banking sector is essential as it is central to the financial system by virtue of its ability to mobilize resources with appropriate prudential oversight, economies of scale and ability to pool risks. Most important is to remove political interference in bank operations, which have often led to loan write-offs and interest remissions. The authors suggest: strengthening the management capabilities of the Bangladesh Bank, the lifting of interest rate ceilings on agricultural credit and replacing refinance facility for the agricultural banks by a re-discount window as for other banks. As an integral component of the process of financial intermediation, savings mobilization must be given high priority.

In terms of the legal environment, the report suggests implementing changes in laws to permit a wider range of collateral security and repossession. They also propose the introduction of regulatory and supervisory provisions for loans secured by accounts receivable and chattel paper; improving public registries; and promoting credit bureaus to improve the information and signalling systems for all types of loans.

With regard to the NGO sector, the report suggests integrating them with commercial financial markets is vital, e.g. encouraging large NGOs to become banks, encouraging banks to “wholesale” funds to established NGOs and use smaller NGOs as brokers or to mobilise self-help savings groups, channelling grant assistance for training and capacity building through support and network NGOs, etc.

Rural Credit: An Assessment of Sources and Types Available in Bangladesh Document 1996

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This resource appears in: Asia and Pacific

This paper is based on a study sponsored by DFID-Post Harvest Fisheries Project and carried out in 1996. Its objective was to identify and record the sources of credit for the rural poor in Bangladesh. Institutions that provide facilities other than credit have also been mentioned in the paper. The paper discusses the policies, programmes, performance, strengths and weaknesses of four types of credit institutions in Bangladesh, i.e., banks, semi-Government organizations, Government organizations and Non-Government organizations.

Author Hannan, M.
Publisher Post-Harvest Fisheries Project, Bangladesh. Department for International Development.
Number of Pages 67 pp.
Primary Language English (en)
Region / Country Global, Asia, Southern Asia
Keywords Rural Finance, Financial Institutions, Agricultural Credit, Banking
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Transformation and diversification of the rural economy in Asia Paper

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This resource appears in: Asia and Pacific

his paper seeks to analyse the transformation and diversification of the rural economy in Asia, focusing on the implications for income and employment opportunities for rural communities. Rural non-farm employment is a sizeable component of rural employment, tends to concentrate in services, and over time has grown more quickly than agricultural employment. Non-farm income accounts for a significant share of rural household incomes.

The indirect contribution of agriculture to GDP is sizeable in relation to its direct contribution; in a growing economy, the ratio of indirect to direct contribution rises over time. Rurally based agroprocessing (typically export-oriented) will be a prominent feature of the non-farm economy in some areas and agricultural value chains. Overall the impact of agricultural growth on non-agricultural sectors is mixed; it is likely, though, that such impact is conditional on other factors, such as location. Spatial development involves the formation of an urban hierarchy with a metropolitan centre linked to intermediate cities, rural towns and villages. For rural areas, proximity to towns and cities boosts non-agricultural activity as well as farming of products that specifically cater to urban demand. In exceptional cases, expansion of the rural non-farm sector will be pioneered by manufacturing, thereby following the pattern of rural industrial clusters in East Asia. On the whole, though, the main pathway for rural non-farm growth in developing Asia is still expansion in non-tradeables (i.e. services).

Strategic directions for rural non-farm development include: (i) widening the outreach of formal rural finance entails integration of some of the features of informal finance; (ii) investment evaluation of agricultural development projects should consider second-order interactions between farm and non-farm activities in both rural and urban areas; and (iii) strengthening urban-rural connectivity involves a comprehensive attempt to influence the location and technology choice over time of both urban and rural enterprises.

This paper suggests a role for a cluster-based industrial policy to further support the rapid expansion of rural non-farm employment. In some areas, this will be composed of rural industries; services will nonetheless continue to comprise the bulk of the rural non-farm economy, drawing its impetus primarily from interaction with existing or emerging urban centres.

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