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Role of Government in Rural and Agri-Finance: Transitioning to private sector involvement

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The long-term growth and development of agricultural markets depends on access to a range and volume of capital which, over time, naturally eclipses governments’ ability to provide that capital directly. As private capital markets and financial service providers become involved in the agricultural finance market, the challenge for governments becomes how to appropriately create, incentivize and regulate space for the private sector. As countries move to higher levels of agricultural productivity, more mature agricultural markets, more sophisticated banking systems, and larger farm sizes, the commercial business case for financial service provision emerges. However, this process can take decades and often remains incomplete with some market segments requiring on-going subsidy to attract financial services. 

What becomes clear from this work is that transitioning from government-led agricultural finance to the involvement of private sector financial service providers is difficult. This transition typically happens over decades as macro, meso, and micro enablers are put in place and refined. However, experiences from across the world reveal lessons learned about what actions governments can take, how those actions should be coordinated across levels, which institutions should be tasked with implementing government initiatives, and the role that strong commercial incentives play in activating private sector financial service providers.

Document Information

Document Type Brief
Year of Publication 2020
Publisher ISF Advisors
Number of Pages 18
Region / Country Africa, Americas, Asia / Mexico, Turkey, Uganda
Primary Language English (en)
Keywords Agricultural Finance, Public-Private Partnership
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