Donor interventions

There are a wide variety of donors and they engage with the development of financial systems in wide variety of ways. It is important that each one analyses its possible actions and selects the most effective ways of working. Options may include providing funds for new product development, providing technical assistance, taking risks on promising innovations or institutions, promoting stakeholder dialogue, supporting appropriate regulation and supervision and so on. Some donors may find it more effective to leverage their resources through joint programming at country or regional level. Whatever the approach, agreeing on common goals and joint principles is vital to ensure that donor intervention does result in genuine improvement in access to financial services in rural areas and for significant numbers of poor people.

Library Resources

resource title type year resource
Peut-on parler d’une renaissance de l’APD agricole en Afrique de l’Ouest ? Brief 2016 French (fr)

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Le regain d’intérêt des bailleurs de fonds internationaux pour l’agriculture après une longue période de désaffection est sur toutes les lèvres. Le rapport « historique » de la Banque mondiale paru en 2008 sur ce thème, suivi de la crise alimentaire et de nombreux engagements des Etats africains et de leurs partenaires à investir massivement dans ce secteur ont illustré ce changement de doctrine quant à l’allocation des ressources publiques nationales et internationales. Mais qu’en est-il aujourd’hui ? Comment se traduit cette « renaissance » de l’aide agricole des pays du CAD (Comité d’aide au développement de l’OCDE) envers les pays de la CEDEAO ? Est-elle effective ? Qui sont les bailleurs qui se mobilisent à nouveau pour l’agriculture ? Quelles sont leurs approches ? Quels sont les débats qu’engendre ce nouvel agenda ? Sans prétendre faire le tour d’une question aussi complexe, nous aimerions ici fournir à nos lecteurs des repères et quelques ordres de grandeur pour mieux décrypter le monde de l’aide publique au développement (APD) consacrée à l’agriculture en Afrique de l’Ouest et ses évolutions. Cette synthèse s’inscrit dans un cycle de réflexion d’Inter-réseaux plus général sur le financement de l’agriculture, comportant d’autres publications sur des thématiques complémentaires dont un dossier de Grain de sel à venir. 

Lien vers la publication  -  French (fr)

Author Inter-réseaux
Publisher SOS Faim
Belgique
Number of Pages 8
Primary Language French (fr)
Region / Country Global, Africa
Keywords Aide publique au développement, Financement de l'agriculture
Related Resources
« Le nouveau paysage mondial du soutien à l’agriculture » : réponse à Jacques Berthelot Article 2015 French (fr)

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Jacques Berthelot a mis en ligne, début septembre, une longue analyse du dernier document de travail publié par la fondation FARM. Sa critique pose des questions légitimes, mais elle est sous-tendue par un désagréable procès d’intention : les conclusions du document correspondraient selon lui « au discours néolibéral tenu par les pays développés ». L’épithète « néolibéral » est-elle infamante ou y a-t-il erreur de diagnostic ? Nous nous en tiendrons ici aux faits et discuterons leur interprétation et quelques-unes de leurs implications.

Lien vers l'article  -  French (fr)

Analyse de l'étude de Jean-Christophe Debar et Mathilde Douillet de FARM sur "Le nouveau paysage mondial du soutien à l’agriculture" Article 2015 French (fr)

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L’économiste Jacques Berthelot a mis en ligne une longue analyse du document de travail publié en juillet 2015 par la fondation FARM et intitulé "Le nouveau paysage mondial du soutien à l’agriculture". Il y remet notamment en cause l’idée selon laquelle les subventions agricoles des pays émergents seraient supérieures à celles des pays développés, ainsi que le biais dans les résultats causé par l’utilisation de mauvais indicateurs pour mesurer le niveau de soutien. 

Lien vers l'article  -  French (fr)

Le nouveau paysage mondial du soutien à l’agriculture Paper 2015 French (fr)

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Le lancement des négociations agricoles de l’Uruguay Round sur le GATT, au milieu des années 1980, reposait sur un double constat : d’une part, les soutiens à l’agriculture étaient beaucoup plus élevés dans les pays développés que dans les pays en développement ; d’autre part, outre leur coût pour les finances publiques, ils étaient octroyés sous des formes (prix garantis, subventions aux intrants et autres dispositifs) qui déprimaient les prix mondiaux et faussaient la concurrence sur les marchés. Cependant, selon les indicateurs publiés par l’Organisation de coopération et de développement économiques (OCDE) et la Banque mondiale (BM), la situation s’est sensiblement modifiée ces dernières décennies.

En effet, le niveau du soutien à l’agriculture a diminué sensiblement dans les pays à haut revenu tandis qu’il a crû fortement, depuis une vingtaine d’années, dans les pays émergents. Ce double phénomène a conduit à une convergence de l’Estimation du soutien aux producteurs (ESP), calculée d’après les statistiques de l’OCDE pour ces deux groupes de pays, à un niveau équivalent à environ 14 % des recettes des producteurs. De plus, suite notamment à l’Accord de Marrakech en 1994, l’intervention publique en agriculture dans les pays à haut revenu a pris des formes qui génèrent moins de distorsions de marché, comme le découplage des aides directes dans l’Union européenne et aux Etats-Unis, alors que, dans le même temps, certains pays émergents, dont l’Inde et la Chine, ont eu recours à des instruments de soutien susceptibles de perturber substantiellement le commerce mondial. Selon nos estimations, les soutiens censés générer le plus de distorsions des échanges représentaient, en 2010-12, 12 % de la valeur des recettes des producteurs dans les économies émergentes (hors Inde), contre 6 % dans les pays à haut revenu.

Certes, l’ESP ne reflète pas, ou pas complètement, l’impact de certaines mesures qui contribuent à accroître les revenus agricoles, comme l’obligation d’incorporation de biocarburants dans l’essence et le gazole. Mais la prise en compte des mesures en faveur des biocarburants ne change pas fondamentalement la tendance à la baisse du soutien à l’agriculture observée dans les pays à haut revenu depuis le milieu des années 1980.

Les pays les moins avancés continuent de se distinguer par la faiblesse de l’intervention publique. En 2003, les Etats africains se sont engagés à augmenter leur dépenses dans ce secteur, mais selon la Banque mondiale, le montant de l’aide à l’agriculture, sur ce continent, reste encore très en deçà de celui octroyé dans les pays émergents et les pays à haut revenu. Un accroissement du soutien à l’agriculture dans ces pays paraît indispensable pour favoriser les investissements dans ce secteur afin d’accroître la productivité des petites exploitations, renforcer la sécurité alimentaire et réduire la pauvreté, compte tenu à la fois des effets potentiellement négatifs du changement climatique sur leur production agricole et de la libéralisation des échanges prévue notamment par les Accords de partenariat entre l’Union européenne et les pays d’Afrique, des Caraïbes et du Pacifique (ACP).

La montée en puissance des pays émergents dans les échanges mondiaux de produits agricoles leur confère une responsabilité accrue dans les efforts de régulation des politiques agricoles à l’Organisation mondiale du commerce (OMC). Le nouveau paysage mondial du soutien à l’agriculture a une dimension géopolitique, car la sécurité alimentaire conditionne la paix et la sécurité globales.

Lien vers le document de travail  -  French (fr)

Decision Tools in Rural Finance Toolkit 2010 English (en)

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Since its inception, IFAD has developed an extensive body of knowledge in rural finance, with practices at the field level analysed in numerous thematic reports, programme evaluations and mid-term reviews. It has pulled together this experience and published a manual called: Decision Tools for Rural Finance. The manual is specifically designed to support programme and project formulation and monitoring. It is hoped that it will be a useful reference tool for country portfolio managers, programme and project staff, and consultants seeking advice on technical operational issues related to rural finance.

The manual has three main sections: Section I highlights the various cross-cutting issues that are common to all IFAD rural finance programmes and form the basis of understanding rural finance. Section II examines the identification, formulation and implementation stages in the project cycle and proposes ways and means of addressing the various challenges that arise from them. Section III focuses on issues and types of interventions that are specific to each of the regions in which IFAD operates. It also underscores IFAD’s comparative advantage in implementing programmes in the particular regions.

The cross-cutting issues that are identified in the Decision Tools include:

  • the unique characteristics of agriculture finance;
  • the impact of financial sector reform, and potential roles for state-owned banks;
  • the role of client participation in rural finance programmes;
  • the importance of savings and remittance services;
  • identifying and overcoming factors that limit expansion of rural finance programmes into remote rural areas;
  • how to balance the provision of loan capital versus funding capacity-building and technical assistance;
  • policy issues and conduct of impact analysis.

Decision Tools is a ‘living document’, which will be updated and improved as the rural finance field evolves and as new principles and practices emerge. The manual already has some case studies in its annexes. The document can be downloaded in full or as a summary.

IFAD - Decision Tools in Rural Finance  -  English (en)

Are Public Development Institutions Crowding Out Private Investment in Microfinance? Paper 2007

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This paper suggests that the rapid growth of foreign private lending to microfinance institutions (MFIs) in the last several years has led to a surprising reversal of roles between government-owned development institutions and private lenders. Development institutions (International Financial Institutions - IFIs) are concentrating their loans in the strongest MFIs, leaving private lenders to look for opportunities among smaller, riskier borrowers. A MicroRate commissioned study of funding patterns confirmed that IFIs are not complementing private lenders; they are crowding them out of the most attractive parts of the MFI market – this report documents what was found.

The paper asks: Why are development institutions concentrating on MFIs that can attract private lenders? In discussing this, it points to the nature of IFIs. Their official mission is to go where the private sector does not yet dare to tread; to assume risks that private capital would find unacceptable. Often, IFIs have adhered to these principles. However, in recent years the risk-based division of labour between IFIs and private capital has broken down. there are powerful incentives for IFIs to maximize their microfinance exposure, and to do so by concentrating on the largest and safest borrowers. Microfinance has acquired such a positive image, that a sizeable exposure in this sector has become a sign of a IFIs commitment to development. This is reinforced by an IFI’s need to disburse its microfinance budget each year. Since IFIs are not primarily profit-driven their success is often defined by the amounts that have been lent. If a budget has been allocated to microfinance, that budget must be spent – and spending it on a few large loans to top MFIs is far quicker, cheaper, and less risky than lending to, and nurturing immature institutions.

The paper argues that by forcing private lenders out of the most lucrative segment of microfinance, IFIs are hampering the development of the very institutions on which the sector will depend in the long run. Instead, it suggests, their best role is to strengthen the overall capacity and transparency of the industry, and to act as a catalyst for private capital that would not otherwise invest in microfinance.

In light of the findings of the study, the following five recommendations are given:

  1. First make IFI funding transparent
  2. Maximize commercial participation in innovative capital markets transactions
  3. Seed the next generation of microfinance institutions
  4. Help develop mechanisms to cover foreign exchange risk
  5. Promote further private sector channels for microfinance and finance industry infrastructure
Author Abrams, J and von Stauffenberg, D
Publisher MicroRate
Number of Pages 25 pp.
Primary Language English (en)
Region / Country Global
Keywords Funding, Private Sector, Agricultural Microfinance, Investment
Related Resources
A Joint Donor Concept on Rural Development Paper 2006

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The drivers, principles, and approaches are not necessarily new, but they are important to Platform members, as they represent areas in which they have achieved consensus. These are summarised in this document (the Joint Donor Rural Concept), which is intended as a means of sharing common knowledge and promoting understanding between members and with other interested institutions and parties.

Meeting Development Challenges: Renewed Approaches to Rural Finance Paper 2005

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The key purpose of this rural finance approach paper is to provide practical guidance to World Bank staff that design and implement rural finance projects. It aims to assist staff to knowledgably choose appropriate design as well as to enable them to provide advice and guidance to their counterparts in partner countries. The primary target of the paper is task team leaders who are non-financial sector specialists working on rural development, irrigation and other programs and projects where access to finance is an issue.

This paper largely focuses around the financial institution level of rural finance sector development and aims to create awareness of the complexities of rural finance and its relevance for rural development, and to explain the principal methods and solutions that have been successful.

In doing so, the paper begins by providing an overview of the main issues restricting rural finance on the three levels of policy, enabling environment and institutional capacity. It also discusses the issues of appropriate subsidies and the use of grants versus credit. The meat of the paper then provides an analysis of the delivery channels and models for supporting rural finance, including special purpose institutions and products, and an overview of several cross-cutting issues. The preceding sections are illustrated throughout with useful case studies from a broad range of counties.

In the concluding section the paper pulls this discussion together and sets out a practical approach to the formulation of a country-specific rural finance strategy. The practical strategy formulation developed is broken down into the following sections:

  1. information on the key elements of the policy context, enabling environment, and financial institutions are collected and analysed, along with information on the characteristics and structure of the real sector
  2. findings from step one are then coupled with an analysis of the demand for financial services in the proposed project area
  3. conclusion of the analysis with the identification and prioritisation of intervention options

This three-step focus is intended to provide a structure that will guide task-managers and help to ensure that all important elements in the project design process are considered.

This is a call for more responsible use of funds destined for poverty alleviation Editors Note 2005

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Peter Van Dijk finds it fascinating to see that common sense and world-wide experiences for decades do not enable the micro-credit movement to advance and better help the poor of this world. Download the document below to read more.

European Microfinance Actors – Working in Developing Countries – Main Topics and Priorities Paper 2005

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This paper begins by stating that microfinance is evolving in terms of scale, professionalism, and significance within development programmes. As a consequence, an increasing number of European entities have entered the microfinance sector or have improved their existing competencies. It argues that this has led to ad hoc initiatives and topical working groups. The paper also notes that national microfinance platforms have recently appeared in several European countries and as a progression from this, the Luxembourg Round Table on Microfinance decided to try to create synergies on a European level.

To encourage such synergies, the paper suggests that it is important to know firstly, who does what, and where, in microfinance, and more importantly, who are the actors? What are their competencies and what are their perspectives on the future? This paper is a study, as well as a directory, which attempts to answer these questions – it aims to underline and analyse the aims and priorities of the main actors. Leading on from this, it also aims to promote expertise and to create linkages at a European level.

The directory lists European microfinance organisations currently active in microfinance in developing countries – it provides an overview about which organisations work where and on what topic, with the aim of facilitating the creation of synergies and cooperation. The data was complied by means of a survey.

The paper begins by setting out the scope of the survey and methodology. The bulk of the study then analyses the current situation of European microfinance actors. Within this section it starts with a look at general information about the organisations surveyed – broken down by types of organisation, human resources and regions of intervention. The second part of this section then looks various themes and topics – covering methods of intervention, areas of intervention and main topics.

Prior to concluding the paper also consider topics of the future. These include – microinsurance, remittances, new microfinance institutions financing products and linkages, social performance and client focus, and rural finance and outreach. The study then ends with conclusions and implications for the European microfinance dialogue.

The appendices to the study include a number of useful tables:

  • Organisations by topics and competencies
  • List of key studies and activities in relation to areas of intervention
  • Organisations surveyed by country of origin
  • Organisations surveyed by regions of intervention
Author Appui au Développement Autonome (ADA)
Publisher Luxembourg Round Table on Microfinance
Number of Pages 88 pp.
Primary Language English (en)
Region / Country Global, Europe, Western Europe
Keywords Microfinance Institutions
Related Resources
Project Report: Private Sector and Agriculture Development in Egypt Report 2005

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This implementation completion report from the World Bank reviews the results of a substantial private sector agricultural development project in Egypt. The development objectives were to:

  1. promote rural economic development, leading to increased income and employment in rural Egypt;
  2. strengthen financial and institutional viability of PBDAC (Principal Bank for Development and Agricultural Credit)

The main strategies were to be improving financial intermediation in rural areas, improving the availability of term investment funds and transforming PBDAC into a financially viable intermediary.

What is interesting about the report is its story of total failure. Project records suggest that the project was prematurely rushed through to allow Egypt to benefit from IDA resources and it is clear that the project was not ready for implementation when it was approved. In addition the Government and PBDAC commitment to the project was inadequate. The Government continued to consider PBDAC as a tool to support economic development in rural areas rather than see it as a viable, market-based financial intermediary. Thus PBDAC was obliged to reschedule loans to farmers when the country faced adverse external conditions and reduced growth. For its part, PBDAC was far more focused on the implementation of the credit component than with the institutional development component.

The report concludes with a number of lessons learned which should make interesting reading for any donor organisation.

Author The World Bank
Publisher The World Bank
Number of Pages 27 pp.
Primary Language English (en)
Region / Country Global, Africa, Northern Africa
Egypt
Keywords Agricultural Credit Institution, Development Projects
Related Resources
Note sur l’expérience de la Banque Africaine de Développement sur le crédit agricole et la Micro-Finance Report 2005

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Cette note passe en revue les expériences du Groupe de la BAD en matière de crédit agricole, mais brosse aussi d’autres aspects concernant le crédit en général et, en particulier, ceux relatifs au crédit non agricole et à la micro-finance qui constituent des instruments privilégiés de réduction de la pauvreté. La note s’articule autour des cinq chapitres suivants : après la section 1 d’introduction, la section 2 traite de la clarification des concepts en donnant les définitions des différents types de crédit des autres formes de services financiers disponibles. La section 3 présente l’expérience de la Banque en matière de crédit agricole et non agricole ainsi que les initiatives prises dans le domaine de la micro-finance au cours des dernières années. La section 4 discute de la problématique du crédit agricole dans les pays africains dans lesquels le groupe de la Banque a souligné qu’il y a une disparité de la situation institutionnelle dans les pays membres en matière de financement rural. Par conséquent, la Banque devrait ajuster ses interventions en fonction des pays. Enfin, le document offre des recommandations, et quelques exemples de crédit rural et d’appui institutionnel opérés par le FAD.

From Project to Institution: AFD and Crédit Rural de Guinée Invest in Rural Finance for the Long Term Paper 2004

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This Donor Good Practices note sets out a case study that examines how Agence française de développement (AFD) made a long-term commitment to provide financial services to very poor, rural customers in the Republic of Guinée through a network of rural community banks.

The project required AFD and project manager IRAM (Institut de recherches et d'applications de méthodes de développement) to engage in developing a rural social fabric to support locally managed rural banks. As AFD discovered, it would have to make a tradeoff that it might not make again—it sought to establish pro-poor outreach and depth before sustainability. Achieving financial viability would consequently require a 20-year commitment, perseverance, and significant financial and institutional investment.

As of March 2004, Crédit rural de Guinée, CRG, offered savings and loan products to over 130,000 members across the country through individual rural banks. While not yet sustainable, it has a high-quality portfolio and is projected to break even in 2007, when the consolidated net income of its community banks will cover costs without subsidies for the first time.

In addition to providing a valuable service to clients, CRG today is one of Guinée’s top 20 employers and, as the largest financial institution with countrywide coverage, it is a significant force in local development.

In its discussion regarding AFD’s rural finance strategy, this short paper points to a number of areas of particular emphasis – significant investment over the long term, creation of human resource capacity, ensuring local governance, developing a supervisory model, and moving from project to institution.

Author Brusky, B and Goodwin-Groen, R
Publisher CGAP Direct Donor Information Centre
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
Keywords Rural Finance, Agricultural Investment, Outreach, Sustainability
Related Resources
Building Inclusive Financial Systems – Donor Guidelines on Good Practice in Microfinance Guideline 2004

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The authors state that these donor guidelines seek to raise donor staff awareness of good practice and improve the effectiveness of donor operations in microfinance. The lessons learned in the last 30 years of support to the sector are translated into practical operational guidance for donor staff.

This guideline argues that large-scale, sustainable microfinance can be achieved only if financial services for the poor are integrated into overall financial systems. The key to donor effectiveness is to complement, not replace, private capital and to accelerate innovative market solutions. It further notes that concessional finance has a role in building the institutional capacity of service providers and underwriting the development of experimental services (micro-level), supporting infrastructure such as ratings agencies, credit bureaus, and audit capacity (meso-level), and fostering an enabling policy environment (macro-level).

At the micro-level the guideline stresses that financial sustainability is essential to reach significant numbers of poor people and to realise long-term social returns. At the meso-level the emphasis on donor support should be to extend the meso-level services to microfinance – to include it in the mainstream rather than marginalise it. Finally, at the macro-level the guideline notes that a conducive, stable macroeconomic environment and policy environment is necessary to underpin a pro-poor financial system but donors should not support the direct provision of financial services by governments.

The guideline begins by setting out the 11 key principles that were developed and endorsed by CGAP and its 28 member donors and briefly discusses “understanding the needs of poor clients”. The bulk of the document then looks at “building inclusive financial systems”, describing lessons learned and offering operational guidelines for donor support at the three levels of the financial system described above (retail financial institutions, financial industry infrastructure and policy environment). The final section of the guideline concludes by considering how to ensure donor effectiveness – “elements of effectiveness”, “comparative advantage, harmonisation, and collaboration” and “frontier issues”.

Demand studies and how not to do them Editors Note 2004

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When donors commit funds to supporting the microfinance sector in a given country, they often commission a study of the potential demand for microfinance services. Lately Jens Reinke has been a bit troubled about these studies and the funding decisions they justify. First, they often focus on credit only and neglect other financial services for the poor and second, their methodology often seems designed to overestimate potential demand - maybe to encourage rather exuberant optimism in the donor community? After doing a search for resources about microcredit demand studies he came up with this short story about pancakes, with important lessons for microfinance. If you are involved in demand studies this is essential reading.

How donors can help build pro-poor financial systems Brief 2004

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This brief outlines a framework for donors to follow when applying a financial systems approach to their activities in the field of microfinance. It emphasises the benefits of collaboration and analyses the characteristics of certain types of interventions with regard to their suitability for different types of donors. The brief is illustrated by the example of how DFID, CIDA, Sida and RNE are joining forces to fund pro-poor finance in Tanzania and ends with a set of emerging principles to improve the effectiveness of donor support for building better financial systems.

Servicios Financieros Rurales Efectivos y Sustentables para los Pobres Rurales Article 2003

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Este documento recoge testimonios y resultados de experiencias de desarrollo de servicios financieros rurales en algunos de América Latina, los cuales fueron compartidos durante el Segundo Encuentro de la Innovación y el Conocimiento para Eliminar la Pobreza Rural, realizado en Lima, Perú en Setiembre, 2003. El documento contiene la descripción breve, los resultados y el impacto de siete de estos programas y prácticas implementadas en Brasil, Nicaragua, Honduras, Venezuela, Bolivia y Republica Dominicana. El documento está divido en los siguientes siete capítulos, cada cual corresponde a una experiencia distinta:

  1. Pobreza y Desigualdad en Brasil: corresponde a una presentación de la experiencia de la sociedad cooperativista prestadora de servicios financieros para sus asociados, COOPERE
  2. Ampliando la Frontera Microfinanciera en el Pacifico Sur de Nicaragua:El Proyecto de la Región Seca del Pacifico Sur (PROSESUR) es un proyecto de desarrollo rural implementado en Nicaragua con financiamiento del FIDA, el cual contiene un componente financiero representado por el Fondo de Crédito Campesino – FONDECA.
  3. Gestión y Transparencia de Fondos a la Comunidad de Segua para la ejecución de sus proyectos por el Comité de Gerencia Comunitario-CGC: instancia idónea para transferir fondos a las comunidades. Proyecto de participación comunitaria y autogestión, implementado en Honduras.
  4. Experiencia de Fondo Rotatorio Comunitario en el Proyecto de Desarrollo de Criadores de Camélidos en el Altiplano Andino de Bolivia, Unepca.
  5. De Mitos Sociales, Financieros y Culturales a un Sistema Financiero Sostenible y Sustentable: Las Cajas Rurales en Venezuela. Sistematización de la experiencia local de PRODECOP.
  6. La Participación de las Mujeres como beneficiarias de crédito en las zonas cañeras de las provincias de Independencia y Bahoruco (Republica Dominicana)
  7. Capacitación continua y acompañamiento sistémico para la concesión de micro crédito. Reúne las experiencias y la metodología de ese mecanismo (articulo en idioma portugués)

El documento se inicia con una lista de las conclusiones extraídas de estas experiencias, así como una lista de interrogantes que representan desafíos para futuras intervenciones o investigaciones. Asimismo, también se detalla una lista de las innovaciones en el tema de la provisión de servicios financieros rurales para los más pobres.

Financial Services for the Rural Poor Brief 2003

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This Brief sets out to distinguish between the terminology of microfinance, rural finance and agricultural finance. The common ground is found in need to ensure the provision of financial services for the rural poor. The Brief goes on to examine the constraints which make financial servies difficult to provide in rural areas and the challenges that donors face in supporting the development of such services.

Donors have traditionally equated rural finance with agricultural credit, seeing it as an input to achieve agricultural production targets or other project objectives. This supply driven approach has been largely discredited but donors are frustrated by the lack of alternative models, with the result that agricultural finance is virtually ignored in many agencies.

This Donor brief makes a number of suggestions of how donors can improve their contribution to rural financial service provision, e.g. building staff capacity, determining the appropriate role for subsidies, influencing governments, helping to reform existing institutions, promoting technical innovations and funding innovations in delivery mechanisms or products.

Lessons Learned in Rural Finance: The Experience of the Inter-American Development Bank Paper 2002

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The Inter-American Development Bank has been one of the major actors in funding rural finance projects over the last four decades in Latin America and the Caribbean. The legacy of the Bank is mixed. Some of the early interventions have been somewhat unsatisfactory. Some of the newer, more recent interventions show promise. This paper attempts to document the flows, chart the changes in thinking, extract lessons, and make recommendations on how to improve project design and monitoring. The focus is not on the impact of access to financial services on individual beneficiaries but more on the efficiency and sustainability of financial services delivery and the transformation of rural financial markets. After a hiatus of a decade or so, rural finance is receiving more attention. This paper will help policy makers, practitioners, academics, and consultants to better understand the history and types of interventions that the IDB has made in the past. The hope is that new operations will benefit from the lessons of the past and build on existing strengths. As we move into an era of increased market integration and globalization, the importance of well-functioning financial markets cannot be overemphasized. This paper shows how rural financing in Latin America and the Caribbean might be improved in the coming years. (Publisher's Abstract)

Author Wenner, M.
Publisher Inter-American Development Bank
Number of Pages 65 pp.
Primary Language English (en)
Region / Country Global
Keywords Rural Finance, Financial Markets, Financial Intermediation
Related Resources
A multilateral donor triumphs over disbursement pressure: the story of microfinance at Banco do Nordeste in Brazil Case Study 2002

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The CrediAmigo microfinance program mounted by Brazil’s Banco do Nordeste (BN) shows how an international financial institution like the World Bank can be a useful catalyst in the development of microfinance retail capacity. The World Bank’s patient, phased support to BN as it designed, launched, and nurtured CrediAmigo goes against the common perception that multilateral banks always focus on large near-term disbursements to the detriment of longer-term capacity building. Progress so far suggests some important lessons for multilateral donors in microfinance:

  1. Outcomes may be better when large lending follows, rather than precedes, the development of proven retail capacity.
  2. Freedom from dogmatic presuppositions (for instance, “large state-owned banks can never do good microfinance”) allows an opportunistic approach that is more likely to yield results.
  3. After proper pilot work, a bank with a large pre-existing branch network can roll out microfinance much more rapidly than a new microfinance-only institution.
  4. Generalist donor staff working on microfinance activities should get a basic grounding in the elements of sustainable microfinance, preferably through training or, at a minimum, close work with specialists.
  5. Donors can be effective with a limited technical role - setting benchmarks consistent with international best practice, and putting the client institution in contact with top microfinance practitioners.
  6. When setbacks occur along the way but the client’s institutional commitment to the program’s objectives is strong, keeping the focus on the commitment can prevent overreaction to the setback.

This is an excellent case study of sensible donor intervention which enabled a bank to introduce profitable micro financial services into its portfolio. Connecting them to advisers, arranging study tours for senior managers, supporting loan officer training and information system development, and other similar measures exemplify the kind of help they were given.

Author S. N. Schonberger y R. P. Christen
Publisher CGAP Secretariat y el Banco Interamericano de Desarrollo (BID)
Number of Pages 12 pp.
Primary Language English (en)
Region / Country Global, Americas, South America
Brazil
Keywords Banking, Microfinance Institutions
Related Resources
Rural Finance Strategy Paper 2001

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This document builds on Bank efforts over the past year to define a strategy to carry out the mandates of the Eighth Replenishment related to the development of rural financial markets. The 1994 Agreement for the Eighth Replenishment of the IDB's capital specifically calls for a commitment to reduce poverty and social exclusion through a "wide range of activities ...[including] rural development, job creation, particularly through the microenterprise and business sectors... [and] actions to boost the production capacity of small farmers."

The rural finance strategy is the result of an extensive process of background research and external and internal consultation. Civil society organizations, academics, the governments of the region, and institutions active in rural finance reviewed the profile and annotated outlines for the strategy and provided comments. The document was also the subject of consultations with an interdepartmental rural finance strategy group, chaired by SDS/MIC and consisting of representatives from each of the three regional departments, the Multilateral Investment Fund, various central department divisions, and the Office of the Presidency. A paper on the lessons learned in IDB rural lending operations was also prepared to support this strategy.

Author Wenner, M.
Publisher Inter-American Development Bank
Number of Pages 49 pp.
Primary Language English (en)
Region / Country Global
Keywords Rural Financial Policy, Regulation, Banking
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Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention Guideline 2001

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Donor agencies have long recognized the important contribution that small enterprises (SEs) can make to poverty reduction, employment and private sector development. SEs, especially microenterprises, offer both a safety valve for the survival of surplus workers unable to find steady wage employment and an opportunity for the entrepreneurial poor to raise their incomes. SEs, especially SMEs, also offer a vehicle for acquiring and applying skills to raise productivity and private sector growth, providing better wage-earning opportunities for the poor while raising national income. For these reasons, donors as well as national governments have attempted to promote the SE sector through support for financial and non-financial services appropriate for SEs.

After several years of efforts to build a consensus on principles for selecting and supporting intermediaries in micro and small enterprise finance, the Committee of Donor Agencies for Small Enterprise Development (see Annex III for membership) turned its attention to Business Development Services (BDS)—the wide array of non-financial services critical to the entry, survival, productivity, competitiveness, and growth of SEs. The Guiding Principles presented here grew out of efforts of the donor community to assess the generally unsatisfactory performance of past interventions in BDS, review current innovations and good practices, and develop a more effective strategy for BDS as one instrument of private sector development.

William F. Steel and Leila M. Webster (World Bank Group) Co-Chairs Committee of Donor Agencies for Small Enterprise Development

Author Committee of Donor Agencies for Small Enterprise Development
Publisher The World Bank
Number of Pages 15 pp.
Primary Language English (en)
Region / Country Global
Keywords Business Development Services, Subsidies, Donors
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A framework for World Bank Group support for development of micro, small enterprise and rural finance in Sub-Saharan Africa Paper 1998

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The framework presented in this report explores how the resources of the Bank Group as a whole can actively help Sub-Saharan Africa to foster private sector growth, strengthen the institutional underpinnings for product and financial markets, and facilitate the entrepreneurial eforts of the poor to earn sustainable livelihoods. The Bank's strategy is to increase access to financial services by small enterprises and low-income households by addressing three principal areas:

  1. Fundamental issues - the policy, legal, and regulatory frameworks that allow innovative financial institutions and instruments to develop;
  2. institution building - exposure to and training in best practices that banks and microfinance institutions need to expand their outreach and develop sustainable operations, along with performance-based support for capacity building; and
  3. innovative approaches - leasing, lending, and other products that the Bank can use to increase access to financial services.

While common principles apply to developing financial systems that serve the majority of African populations and businesses that lack access to banking services, this strategy differentiates between the financial and development needs of microenterprises, small and medium-scale enterprises, and rural households.

Developing Markets for Business Development Services (BDS) - Inter-agency information exchange Website English (en)

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visit the bds site (EN)  -  English (en)

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