RURAL FINANCE

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The objective of the Rural Finance Project is to enhance the policy framework governing the rural financial sector, in order to provide more efficient and active credit support to rural areas. The project will: (a) provide investment and seasonal production credit to support private agricultural/rural investments to increase production, incomes, and employment; (b) induce financial institutions to attend the credit needs of the rural areas more efficiently, and to facilitate better access to commercial, saving, and rural banks in rurals areas; and (c) enhance the access of rural borrowers to formal credit sources. The project will provide a second stage of support to the Agricultural Loan Fund (ALF) rediscounting facility. Enhancing the operations of financial institutions in rural areas will be achieved through further liberalization of banking policies concerning opening new branches in rural areas, adjusting the current limit on maximum shareholding by single investors in a distressed rural bank to enable the mobilization of the additional required capital, and inducing banks in good standing to invest in rural banks with an equity deficiency. Enhancing farmer access to formal credit sources will be carried out through the strengthening of two existing insurance/guarantee institutions; training of cooperative staff; and designing and implementing pilot/experimental projects to develop new and efficient credit delivery systems and technical assistance to rural areas.