Rural Finance and Investment Insights: December 2019
As 2019 comes to an end, the RFILC editorial team would like to thank all of you for your continuous patronage all these years.
Our December issue will start by focusing on a paper produced by the Food and Agriculture Organization of the United Nations (FAO) and the Consultative Group to Assist the Poor (CGAP), titled “Use of Financial Diaries to Understand Smallholder Investment Finance.” The paper evaluates the relative importance of different sources of finance for agricultural and non-agricultural investments, using the unique dataset called the “Smallholder Financial Diaries” collected by CGAP in Mozambique, Pakistan, and Tanzania at the individual and household level. 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 had by smallholders, with non-agricultural income as the dominant financing source for some, while agricultural income being most prominent for others. 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 needs related to both agriculture and non-agriculture. This paper provides an important addition to the existing knowledge base on how smallholder households finance their agricultural investments. Moreover, it develops a new methodology for analysis and applies it to a unique and extremely valid dataset.
In a similar vein, a Toolkit has been developed by the African Development Bank and Making Finance Work for Africa Partnership specifically for African governments, to assess the viability for the global diaspora to invest financially back home, as well as determine the best approach for attracting such type of investment. The Toolkit provides a systematic guide for governments, where the findings and recommendations form the basis for robust diaspora investment strategies and shed light on what development finance institutions- as well as multilateral and bi-lateral agencies- can do to support them. It provides a comprehensive and systematic approach to data collection – ensuring relevant stakeholder engagement and information provision. It also serves as an overview of the main investment channels currently available for raising diaspora investment, with an indication of their respective opportunities, costs and benefits. The Toolkit provides an Assessment Template for analyzing the data and reviewing which investment vehicles may be of most interest. Furthermore, it provides tools to assess how the scale of cross-border digital payments is changing the remittances landscape, reducing the costs and timeframes for the stakeholders involved, while providing an opportunity for diaspora actors overseas to manage their investments remotely.
Lastly, from 24 to 26 June 2020, the Global Forum on Remittances, Investment and Development (GFRID), organized in Nairobi by IFAD in collaboration with the African Union and the World Bank Group, will examine the opportunities and challenges in the African remittance market, and the impact these flows can have on the sustainable development of migrants’ communities of origin. The GFRID will also explore how innovation and technology in the market can lower remittances’ transfer costs and promote greater financial inclusion, thereby advancing the implementation of Objective 20 of the newly adopted Global Compact for Safe, Orderly and Regular Migration and, more broadly, the achievement of the Sustainable Development Goals by 2030.
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: