Rural finance institutions, markets and policies in Africa

Abstract

We identify three types of obstacles (missing institutions) that limit the process of financial deepening in rural financial markets. Each of these obstacles contributes to a continuing and common dilemma in developing countries-the lack of long-term finance. In Africa, as in most developing regions, there is a need to develop a more consistent strategy for improving access to term finance in agriculture and rural areas. Although some examples of term financing can be found in African agriculture, the general lack of term financing in rural areas can be linked to the lack of general policy measures to enhance the environment for long-term financing, weak effective demand for rural and agricultural investment financing, and inadequate capacity of lenders to provide longterm finance to those clientele.