The World Bank Group has announced the establishment of an Agriculture Finance Support Facility to support the expansion of rural finance in developing countries. The Facility is made possible by a USD 20 million grant from the Bill & Melinda Gates Foundation, through their Financial Services for the Poor program.
The global economic crisis has made access to financial services even more difficult for small farmers and rural entrepreneurs. World Bank data shows that 45 percent of smallholder farmers in India do not have a savings account, and 69 percent do not have a credit account with a formal financial institution. Data from Honduras, Nicaragua, and Peru show that nearly 40 percent of agricultural producers are credit-constrained. In Africa, less than 1 percent of farmers in Zambia and less than 2 percent of the rural population in Nigeria have access to credit from formal institutions.
The Agriculture Finance Support Facility seeks to increase access to financial services in rural areas, including savings, credit, payments and insurance services. The Facility will make grants to banks and other microfinance institutions. No further information was provided on the selection of institutions, or the amount of grants to be given.
The World Bank provides ongoing support to microfinance initiatives. In 2008, the Bank committed USD 613 million to rural finance projects alone. The International Finance Corporation (IFC), the World Bank’s private sector arm, invested over USD 514 million in Micro Small and Medium Enterprises (MSMEs) during 2008; read more in this MicroCapital Story.
The Gates Foundation contributes to microfinance initiatives through its Financial Services for the Poor program. In 2008, the Foundation gave grants totaling USD 128 million to 19 programs under this area of their Global Development Program. Grants this year include USD 1.6 million to the MIX Market, the microfinance information clearinghouse, USD 1.6 million to GlobalAgRisk, Inc., a microfinance institution specializing in rural finance, agricultural insurance and natural disaster risk, and USD 15 million to the University of Chicago to support the Chicago Consortium on Financial Services for the Poor. Read about a recent grant to FinTech Africa, a non-profit organization that manages the Africap Microfinance Fund, in this MicroCapital story.
By Jaclyn Berfond, Research Assistant
Additional Resources:
World Bank: World Bank Group Establishes Agriculture Finance Support Facility
Seattle Times: Gates Foundation gives $20 million to World Bank
Bill & Melinda Gates Foundation: International Bank for Reconstruction and Development Grant
MicroCapital Story: International Finance Corporation (IFC) Invests over $514m in Micro Small and Medium Enterprise (MSME) Initiatives During 2008
MicroCapital Story: European Investment Bank (EIB), Gates Foundation, and Dutch Development Agency to Provide Technical Assistance Grants to AfriCap Microfinance Fund and FinTech Africa
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