Rural and Agricultural Finance: Glossary: A Review

Abstract

Agriculture provides livelihoods to many people in developing and emerging economies—especially those living in rural areas. Yet access to agricultural finance is often a hurdle. Lack of access to finance stops many farmers from adopting new technology and improving their efficiency. With demand for food expected to increase by 60 percent by 2050, and the agricultural system already under pressure to satisfy current demand, the only way to increase food production is to invest in sustainable technologies and climate-smart agriculture. These kinds of investments would enable farmers to produce more food with less of an environmental impact. Wise investments could also help keep food prices lower and promote economic health in rural areas. Yet financing the agricultural sector presents many challenges for financial institutions. Reaching remote rural areas can be expensive. Weather risks, crop concentration, and price volatility increase the credit risk for lenders, reducing their appetite to finance the sector. Risk-assessment technologies often lack precision for evaluating investment opportunities in rural areas.