The multilateral development institution will use the funds to establish the Agriculture Finance Support Facility, which will provide grants to bank and non-bank institutions for activities designed to increase access in rural areas to financial services such as savings, credit, payments, and insurance. Even before the financial crisis, most of the more than one billion smallholder farmers worldwide, and many of the rural entrepreneurs of the developing world, had little or no access to financial services. While financial cooperatives and cooperative banks are a major provider of financial services in rural areas in developed countries, they have not emerged as significant service providers in most developing countries.
In India, for instance, where rural banking outreach is relatively robust, 45 percent of smallholder farmers do not have a savings account and 69 percent do not have a credit account with a formal financial institution. Similarly, in Honduras, Nicaragua, and Peru, nearly 40 percent of the agricultural producers are credit-constrained, and the level of access is even lower in Africa, where fewer than than 1 percent of farmers in Zambia and 2 percent of the rural population in Nigeria have access to credit from formal institutions.
"Having access to safe and reliable financial services such as savings, credit, and insurance allows poor farmers to safeguard cash, which they often receive only once a year during harvest," said Carlos Cuevas, Gates Foundation deputy director of financial services for the poor. "In this way, they can better provide for their families, prepare for emergencies, and build long term financial security."