NEN  Tuscany Retreat 2010 Rural Finance in Selected IFAD-financed Operations
IFAD’s Approach to Rural Finance: Six Guiding Principles <ul><li>support access to a variety of financial services; </li><...
Selected IFAD Experiences:  Sanadiq
Sanadiq  in Syria <ul><li>Concept </li></ul><ul><li>Sanduq  is an improved version of a savings and credit association; </...
Sanadiq  in Syria <ul><li>Achievements </li></ul><ul><li>76  sanadiq  created, with 13,500 members (45% women); </li></ul>...
Sanadiq  in Syria <ul><li>Way Forward </li></ul><ul><li>legalisation of  sanduq  as financial institution; </li></ul><ul><...
Selected IFAD Experiences: Refinancing Facilities
Refinancing Facilities <ul><li>Concept </li></ul><ul><li>MT and LT refinancing capital to a range of selected financial in...
Refinancing Facilities <ul><li>Achievements in Rural Areas </li></ul><ul><li>Armenia : 9 PFIs; loans approved USD 13.9 mil...
Refinancing Facilities <ul><li>Impact – Financial institutions are now: </li></ul><ul><li>increasing rural outreach and at...
Refinancing Facilities <ul><li>Way Forward </li></ul><ul><li>diversification of financial instruments (e.g. micro-leasing;...
Equity Financing <ul><li>Concept </li></ul><ul><li>temporary strategic investments in rural enterprises (often family-owne...
Equity Financing – Value Chain Approach
Equity Financing in Armenia <ul><li>Methodology </li></ul><ul><li>creation of an appropriate Equity Fund to channel IFAD r...
Equity Financing <ul><li>Way Forward </li></ul><ul><li>policy dialogue with Government to improve the conducive environmen...
IFAD’s Rural Finance Approach in Yemen <ul><li>Instruments </li></ul><ul><li>public-private partnership to manage the prog...
IFAD’s Rural Finance Approach in Yemen <ul><li>risk management (e.g. life insurance for borrower; weather index-based insu...
IFAD’s Rural Finance Approach in Yemen <ul><li>Key Indicators </li></ul><ul><li>three programmes valued at USD 150-200 mil...
IFAD’s Rural Finance Approach in Yemen <ul><li>Outputs </li></ul><ul><li>win-win; value addition across the supply chain; ...
QA Query <ul><li>should a PMU become a financial intermediary? </li></ul>
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Rural finance in selected IFAD-financed operations, Dr Omer Zafar and Dr Thierry Mahieux

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Rural finance in selected IFAD-financed operations, Dr Omer Zafar and Dr Thierry Mahieux

  1. 1. NEN Tuscany Retreat 2010 Rural Finance in Selected IFAD-financed Operations
  2. 2. IFAD’s Approach to Rural Finance: Six Guiding Principles <ul><li>support access to a variety of financial services; </li></ul><ul><li>promote a range of financial institutions and modalities; </li></ul><ul><li>support demand-driven and innovative approaches; </li></ul><ul><li>encourage market-based approaches; </li></ul><ul><li>focus on sustainability and poverty outreach; </li></ul><ul><li>promote an enabling environment for rural finance. </li></ul><ul><li>* in compliance with microfinance best practices </li></ul>
  3. 3. Selected IFAD Experiences: Sanadiq
  4. 4. Sanadiq in Syria <ul><li>Concept </li></ul><ul><li>Sanduq is an improved version of a savings and credit association; </li></ul><ul><li>four operational pillars: self-reliance; autonomy; sustainability; outreach to the poor. </li></ul>
  5. 5. Sanadiq in Syria <ul><li>Achievements </li></ul><ul><li>76 sanadiq created, with 13,500 members (45% women); </li></ul><ul><li>22,000 loans extended, amounting to USD 17 million; </li></ul><ul><li>loans are short-term with maximum 1 year duration; </li></ul><ul><li>sanadiq enable the operation of micro-businesses; </li></ul><ul><li>scaling up: now operating in all Syria projects, with similar model in Sudan, Somaliland, Yemen and other regions. </li></ul>
  6. 6. Sanadiq in Syria <ul><li>Way Forward </li></ul><ul><li>legalisation of sanduq as financial institution; </li></ul><ul><li>creation of Apex institution for financial and other services; </li></ul><ul><li>linkages for refinancing from financial institutions; </li></ul><ul><li>innovative forms of capitalisation. </li></ul>
  7. 7. Selected IFAD Experiences: Refinancing Facilities
  8. 8. Refinancing Facilities <ul><li>Concept </li></ul><ul><li>MT and LT refinancing capital to a range of selected financial institutions for onlending to farmers and small agribusinesses; </li></ul><ul><li>provision of capacity building services to financial institutions and their clients; </li></ul><ul><li>refinancing facilities financially sustainable for all stakeholders. </li></ul>
  9. 9. Refinancing Facilities <ul><li>Achievements in Rural Areas </li></ul><ul><li>Armenia : 9 PFIs; loans approved USD 13.9 million; </li></ul><ul><li>Moldova : 9 PFIs; loans approved USD 22.6 million; </li></ul><ul><li>Macedonia : 7 PFIs; loans approved USD 11.6 million; </li></ul><ul><li>Bosnia & Herz .: 13 PFIs; loans approved USD 20.8 million; </li></ul><ul><li>PFIs leverage IFAD funds with their own resources; </li></ul><ul><li>near-perfect repayment rates (PAR 30 days). </li></ul>
  10. 10. Refinancing Facilities <ul><li>Impact – Financial institutions are now: </li></ul><ul><li>increasing rural outreach and attracting new clients/resources; </li></ul><ul><li>adapting financial products/services to rural/agricultural demand; </li></ul><ul><li>investing their own funds and leveraging additional funds; </li></ul><ul><li>introducing innovative collateral requirements (e.g. forward contracts). </li></ul>
  11. 11. Refinancing Facilities <ul><li>Way Forward </li></ul><ul><li>diversification of financial instruments (e.g. micro-leasing; equity financing); already operational in some countries; </li></ul><ul><li>technical assistance to mobilise deposits and savings (as an exit strategy). </li></ul>
  12. 12. Equity Financing <ul><li>Concept </li></ul><ul><li>temporary strategic investments in rural enterprises (often family-owned) with growth potential and job creation; </li></ul><ul><li>combined with non-financial advisory services (managerial, technical, market access); </li></ul><ul><li>the foundation is the value chain approach. </li></ul>
  13. 13. Equity Financing – Value Chain Approach
  14. 14. Equity Financing in Armenia <ul><li>Methodology </li></ul><ul><li>creation of an appropriate Equity Fund to channel IFAD resources; </li></ul><ul><li>ongoing investments in rural enterprises through equity participation combined with optional debt financing; </li></ul><ul><li>pre-defined exit strategy based on enterprise sustainability at nominal value. </li></ul>
  15. 15. Equity Financing <ul><li>Way Forward </li></ul><ul><li>policy dialogue with Government to improve the conducive environment for rural investments; </li></ul><ul><li>access to stock exchange to source private or institutional strategic investors; </li></ul><ul><li>equity participation in microfinance institutions to expand rural operations. </li></ul>
  16. 16. IFAD’s Rural Finance Approach in Yemen <ul><li>Instruments </li></ul><ul><li>public-private partnership to manage the programme, invest IFAD/cofinancier funds, and introduce corporate social responsibility; </li></ul><ul><li>equity participation in pro-poor microfinance institution(s); </li></ul><ul><li>venture capital and equity investments in SMEs; </li></ul><ul><li>leveraging resources and services from commercial banks. </li></ul>
  17. 17. IFAD’s Rural Finance Approach in Yemen <ul><li>risk management (e.g. life insurance for borrower; weather index-based insurance for activity; credit insurance for lenders); </li></ul><ul><li>value chain approach as the foundation (PA forward contracts); </li></ul><ul><li>dialogue with Government on improving the policy framework for rural investment. </li></ul>
  18. 18. IFAD’s Rural Finance Approach in Yemen <ul><li>Key Indicators </li></ul><ul><li>three programmes valued at USD 150-200 million cofinanced with a number of strategic partners; </li></ul><ul><li>focus on economic opportunities within selected value chains (initially coffee, honey, horticulture, fish products, natural stone, ornamental flowers). </li></ul>
  19. 19. IFAD’s Rural Finance Approach in Yemen <ul><li>Outputs </li></ul><ul><li>win-win; value addition across the supply chain; on-farm, off-farm and non-farm business profitability; equitable profit distribution; </li></ul><ul><li>rural job creation; </li></ul><ul><li>rural economic growth and sustained poverty reduction; </li></ul><ul><li>strengthened financial institutions with improved rural outreach. </li></ul>
  20. 20. QA Query <ul><li>should a PMU become a financial intermediary? </li></ul>

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