Areas of Interventions
Green and Rural Finance
This methodology includes a specific attitude to agricultural finance. Agricultural lending is one of the most important, and at the same time critical, areas of microfinance. A large part of those excluded from the traditional financial circuit are in rural areas and, since rural finance is perceived as risky, there are few targeted services and products in place.
When considering agricultural credit, there are structural difficulties particularly affecting smallholder farmers, such as:
- Exposure to external risks – especially climate risks and price fluctuation – that may affect the activity to be financed;
- Difficulty in using land property as collateral, as the title is often not available;
- High management costs, because of distances to be made in order to meet all the farmer clients and especially the training and qualifications of loan officers in agriculture and rural economy;
- Need for longer repayment terms for financial products with financial products targeting agricultural activities (in order to adapt to the cyclical or seasonal nature of agricultural activities).
Our TA and training on risk management are mainly focused on risk reduction in rural contexts, which means stabilizing agricultural production in order to make smallholder farmers able to absorb fluctuations and hence able to repay the loans. Our approach to risk management is multidimensional: the risk mitigation integrates clients’ financial risk assessment with other endogenous financial and non-financial components affecting production risk, such as climate change and environment.