The inclusion of rural people in financial markets has long been a
social objective pursued in developing countries around the world.
Indeed, microfinance’s pioneering work was first targeted at rural
areas. This Brief begins by discussing microfinance’s impacts in rural
areas, presenting evidence on rural poverty as well as on microfinance’s
positive effects on consumption and investment in education. We then
describe the evolution of rural microfinance in Latin America, before
presenting some key Latin American experiences that aim to increase
rural peoples’ access, not only to credit, but to a range of financial
services and products. We provide a view on adaptations to credit
technology used in urban areas for application in rural finance, and
emphasise the importance of risk management in order to expand outreach.
The Brief concludes with lessons learned from the region.
Rural areas need financial services for all types of economic
activities, and these services should encompass more than credit. Latin
America has shown that this is possible, in part with proper risk
Economies of scale and scope achieved by larger MFIs allow for better
diversification of risk so that agricultural lending can be amplified.
This likely indicates that prioritising growth and the diversification
of these institutions should be an important task for governments and
donors providing support for the sector.
Jaramillo, M. ELLA Policy Brief: Expanding Microfinance in Latin America&#8217;s Rural Areas. ELLA, Practical Action Consulting, Lima, Peru (2013)