30420041122 Workshops Summary

							  Summary of Workshop
   Findings: Innovative
approaches to rural finance
provision with emphasis on
  smallholder producers


By Gerda Piprek and Gerhard Coetzee
              ECIAfrica
                         Outline

   Introduction
   Key       findings
        Rural poverty, agriculture and rural
         finance
        Rural finance needs
        Challenges facing rural finance
        Innovations and learning
   Conclusions
   Workshop        approach

29 September 2012        AFRACA Workshop        2
Rural poverty, agriculture and rural
              finance
    Majority of population in Africa rural
    Small holder farming largely
     subsistence
    However, agriculture still seen as
     ‘growth engine’
    Link between agricultural finance
     and development
    Rural finance largely inadequate
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               Rural finance needs
 Savings - agriculture, business, hh
 Insurance - credit, agric., businesses
 Transactional
 Credit
        Agriculture
        SMME
        To smooth household consumption
 Largely a focus on agric. and SMME credit
 Household approach

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        Rural Finance Challenges
    Global challenges
        Shift in development paradigms
        Shift in donor priorities
        Double standards
    Economic context
          Most weak economies, policies, SAP
          Mixed economic policies, interventionist
          Inadequate infrastructure
          Land, gender, environment
          Limited economic opportunity

29 September 2012        AFRACA Workshop              5
    Rural Finance Challenges (2)
    Financial policy, legal and regulatory
        Absent, inadequate and inappropriate
        Weak legal systems
        Tiered banking prominent
        Void of policies incentivising rural
         finance
        Supervision challenges
        Political interference

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    Rural Finance Challenges (3)
    Financial sector
        Weak in general, even where strong, rural
         finance still weak
        Shallow and narrow capital markets
        Collapse of state supported institutions left
         vacuum
        Focus on credit
        Informal finance ignored
        Commercial banks urban focused
        Direct involvement of government distort
         markets

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    Rural Finance Challenges (4)
    Rural market place and environment
        From homogeneity to heterogeneity
        High dispersion of rural population
        Income sources mixed, but largely linked to
         agriculture
        Seasonality of income
        High poverty levels, limited income
         opportunities, low literacy
        Lack of assets amongst the poor
        Higher systemic risk

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    Rural Finance Challenges (5)
    Financial institutions – exogenous
     factors
          Financier of last resort?
          Savings mobilisation inadequate
          Diversion of funds
          Culture of non-repayment
          Little standardised information on
           lenders

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    Rural Finance Challenges (6)
    Financial institutions – endogenous factors
        Inappropriate strategies, lack of vision,
         policies
        Centralised structures and decisions
        Weak or no systems
        High interest rates – strategic default
        Sustainability vs. poverty alleviation
        Lack of staff and management capacity
        Monopolistic behaviour
        Lack of sources of finance
        Interlocked contracts – side selling
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         Innovations and learning
    Economic considerations and role of
     government
        Partnerships
        Governments should assist in creating market
         access for rural communities
        Risk management systems (early warning,
         disaster management, food reserves)
        Need sustainable development policies,
         including sustainable land reform
        Legal systems cumbersome and ineffective

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    Innovations and learning (2)
    Financial policy, legal and regulatory
     environment
        Need appropriate financial policy
         framework
        Must be contextual specific
        Incentive based policies vs. controlling
        Appropriate supervision structures
        APEX institutions?

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    Innovations and learning (3)
    Financial sector level
        Self-regulatory options
        Central funds
        Credit reference bureaus
    Client centric approach
        PADME case study
        Trend to demand driven
        Microsave toolkits

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    Innovations and learning (4)
    Product innovations
        Pricing of products
        Savings related products
        Matching farmer receipts to
         repayments
        Microleasing
        Interlocked contracts
        Warehouse receipts
        Non-financial services?

29 September 2012    AFRACA Workshop   14
    Innovations and learning (5)
    Delivery systems
          Contain transaction costs
          Mobile banking
          Linkage forms
          Technology – smart cards
    Risk management
        Micro-insurance
        Guarantee schemes

29 September 2012      AFRACA Workshop   15
    Innovations and learning (6)
    Outreach and institutional forms
        Member based institutions to improve
         outreach
        Linkages between institutions
        Guarantee schemes
        Commercial bank involvement




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           Concluding statements
    Macro level
        Despite programmes, still extreme rural
         poverty, partly due to lack of
         investment in rural areas
        Focus on rural poverty
        Economic opportunity is key to rural
         finance success
        The effect of financial sector
         liberalisation
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       Concluding statements (2)
    Institutional level
        Progress with market orientated
         approach
        Linkage innovations
        Positive interest rate goals
        Not universal best practices – context
         important
        Still many challenges

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                    Whereto now?
    Major role for governments to create
     conducive policy environment
    Appropriate land reform
    Stronger legal systems
    Coordination amongst ministries
    Major role for donors as facilitators
    Focus on capacity building
    Environment, HIV/Aids
    Client focused research
    AFRACA has lobby role, and collating and
     distribution of research and best practices
     in African context
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             Workshop challenges
    Focus
    Practical strategy to improve access
          What are the three main focus areas?
          What are the objectives?
          What are the outcomes?
          What are the activities?
          How will we measure performance?


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