June 2017

In this Issue

From the Editor

Dear RFILC members,

In this month’s newsletter, we would like to bring to your attention some important news related to specific topics of the rural and agriculture finance domains, such as digital finance, climate finance and Islamic finance. Firstly, the World Bank discussion paper on “Making Climate Finance Work in Agriculture” presents innovative ways to make use of climate finance to improve and increase access to finance for smallholder farmers and small and medium enterprises (SMEs) in the agriculture sector, while delivering positive climate outcomes, increased resilience and reduced emissions intensity. The report recommends using climate finance to address key constraints in the agriculture finance landscape, such as inadequate enabling environments, insufficient capacity to manage agricultural risks and high transaction costs. It aims to do so by using climate finance as a catalyst to unlock additional sources of public and private sector capital, to strengthen the links between financial institutions, smallholder farmers and SMEs, and to build the capacity of both lenders and borrowers. The report provides recommendations on how climate finance can be used to accelerate climate-smart investments in the agriculture sector: i) by designing innovative mechanisms and adapting others to leverage additional sources of both  public and private capital that can be directed toward climate-smart investments in agriculture; ii) by identifying key entry points for directing climate finance into agriculture and linking financial institutions, smallholders and agricultural SMEs iii) by providing the necessary technical assistance to build the capacities of everyone involved in the financial ecosystem, including both lenders and borrowers.

Secondly, the paper titled Digital Finance: new times, new challenges, new opportunities”, recently published by the Inter-American Development Bank, takes into consideration the latest developments in the financial services industry and discusses how they might affect the ability of SMEs and individuals to access financing. The conclusion it reaches is that the transformative developments in the financial services industry will most likely improve and expand access of firms and individuals to finance, as well as increase formalization and financial inclusion. Some hurdles and risks that may hamper and/or delay the process are identified, such as: the reaction of the industry incumbents, the lack of appropriate and timely regulation, the lack of access to good-quality and affordable digital connectivity (broadband access), and the unforeseen and seriously disruptive changes that might come from the payments space. To confront these risks, the public sector must define a set of proper and timely responses. The strategy for public interventions must be defined based on a deep understanding of the forces that are driving the change.

Finally, Making Finance Work for Africa (MFW4A), CMS and the Islamic Finance Council will host a webinar on “Islamic Finance: legal and regulatory framework and corresponding challenges in Africa”, which is going to take place on June 20th, 2017 at 1:00 pm CET (Rome time). This webinar will shed light on the emerging industry of Islamic Finance from a legal and regulatory perspective, with a focus on the grounding principles of Islamic laws, namely the Shariah, the harmonization between the Islamic law principles and the existing legal framework, and the enabling environment that accommodates and facilitates the development of the industry. To join the webinar, click here.

With best regards,

The RFILC editorial team

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The Rural Finance and Investment Learning Centre is a part of the CABFIN Partnership Project which aims to promote and facilitate capacity building in rural finance. The concerns of rural finance are to ensure that people living in rural areas have access to financial services such as deposit and money transfer facilities, insurance and loan products. Effective use of these services can help to improve livelihoods and reduce rural poverty. The following CABFIN Partners have provided financial support to the RFILC: