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Mapping of Rural Finance Products, Delivery Models and
Linkages
SEEP Rural Finance Pre-Event WorkshopWashington D.C. – October 26, 2004
Maria Pagura, FAO Rural Finance Group
Presentation Overview
Rural Finance Demand and Supply Innovative Products and Services Mapping of Delivery Models and Linkages Moving towards Design and Choosing the
Right Mix
Demand and Supply of Rural Financial Services
Demand for Rural Finance
Agriculture production – medium and long-term loans, leasing arrangements, lines of credit, crop insurance
Agriculture based industry – investment and working capital loans, lines of credit
Non-farm enterprise and trade – investment loans, short-term working capital loans,
Household consumer finance - emergency loans, health insurance, savings, remittances, housing
Supply of Rural Finance
Informal: Moneylenders and Traders Semiformal: Village Banks, NGOs, MFIs
Cooperatives, Credit Unions, Input Suppliers, Agribusiness Companies, Marketing Companies
Formal: Agricultural State Banks, Commercial Banks, Community and Rural Banks, Postal Banks
Innovative Rural Financial Delivery Models, Linkages and Products
Innovative because they......
expand access to new segments of the rural population not traditionally served
create quality increases in terms and condition of current products already being offered
broaden the variety to offering new products and services
Innovative Rural Finance Products
Loan Products
Working capital loans Lines of credit Emergency loans Term finance loans Warehouse receipts Leasing arrangements
Savings Products
Mobile Banking – flexible savings products Improved ROSCA open access savings Certificate of Deposits
Insurance
Agriculture – indexed weather based instruments
Health Life
Other Services
Payment services Remittances
Mapping of Delivery Models
Traditional Delivery Channels
MONEYLENDERS/TRADERS CLIENTS
COMMERCIAL BANKS CLIENTS (Private and State Development)
MFOs and NGOs CLIENTS
MEMBERSHIP-BASED ORGANIZATIONS CLIENTS(Self Help Groups, Village Banks, Co-ops, Credit Unions)
Multi-Partner Delivery Channels
Private BanksState Banks Postal Banks
Insurance Cos.
MFOs
NGOs
Credit Unions
Village Banks
Agro-processors
Input Suppliers
Marketing Companies
Leasing Companies
Warehouse Operators
Supermarket Chains
Clients
Non-bankFinancial
Institutions(APEX,
InvestmentFunds)
Using Agribusiness as a Delivery Channel
ClientsTraderBank or FI
MarketingCo.
FarmerAssoc.Private
Investors
Producer Business
Models
New Delivery
Channels
Innovative Linkages and Delivery Channels
Other Business Service Models
Bank - MFI Wholesale
Models
Producer Business Models
Banks and Ag Processing Firms
Land Bank of South Africa and Cotton Processing Firms - providing credit to farmers
Commercial Banks and Ag Processing Firms in Kenya, Zambia, Mozambique – providing credit to farmers
Role of mills in facilitating finance to small and medium scale farmers.
Banks and Supermarkets
Farmers access to loans due to purchasing arrangements with supermarkets – HortiFruiti in Costa Rica
Banks use supermarkets as delivery channels for range of services, including deposit mobilization - Nedbank and PicknPay Chains in S. Africa
Banks and Inputs Suppliers
Teba Bank (S. Africa) using point of sales terminals to provide banking services through rural trader shops and MFIs
Drumnet-Pride Africa linking farmers to financial service, primarily lines of credit through the use of smart cards with input suppliers coupled with access to market information
Bank – MFI Models
New Wholesale Models
Portfolio buyouts– One time purchase of MFI portfolio
Partnerships – Bank holds loans, MFIs monitor and collect
payments
On tap Securitization – Continuous buyout of MFI portfolio
Systems based on incentives and risk sharing arrangements – default limits and guarantees
New Wholesale Models
Investment funds - debt and equity instruments for MFIs
Bank – MFI Linked Services
Banks – MFI Linkage for deposit mobilization services
Post Office Bank in S. Africa acts as payment backbone for a range of MFIs and credit unions
Other Business Service Models
Linkages and Delivery Channels
Life insurance firms using post office banks as payment facility for rural clients – S. Africa and Kenya
Social pensions paid out in rural areas through commercial bank mobile units – S. Africa
Moving towards Design and Choosing the Right Mix
The A.C.T. Principle
A nalyze and understand the key constraints and challenges of provisioning rural finance
C omprehend the different products and delivery models available
T ake the best mix of products and delivery models to effectively deal with the constraints in your area of intervention
“Creativity is thinking up new things. Innovation is doing new things.”
Theodore Levitt
Professor Emeritus,
Harvard Business School