Financial Inclusion of Small Rural Producers

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There is mounting empirical evidence that the responsible provision and use of formal financial services have a positive impact on household well-being and enterprise performance. At the individual level, financial inclusion benefits rural households and small producers by facilitating the safe accumulation of assets, enabling them to leverage those assets in order to invest in human and physical capital, and supporting better risk management. The positive effects at the aggregate level are associated with better allocation of scarce resources among different activities. Despite recent progress on different aspects of financial inclusion in Latin America and the Caribbean, large gaps remain, especially in rural areas, which have been historically neglected by traditional providers of financial services. This book describes how these gaps have evolved recently in five countries —Costa Rica, the Dominican Republic, El Salvador, Honduras and Mexico— that are at different stages of designing and implementing comprehensive financial inclusion strategies. Then, on the basis of a comparative analysis of the institutional architecture available, it identifies the main barriers preventing small rural producers from accessing and making effective use of the various financial services on offer, with a view to making policy recommendations for overcoming these limitations.

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Recent developments, current situation and prospects for financial inclusion among small-scale rural producers in Costa Rica

In Costa Rica, efforts to increase the supply of credit to small-scale producers in rural areas have historically gone hand in hand with the development of public banks. Rural credit boards, sponsored by the National Bank of Costa Rica since their inception, and the nationalization of banks since 1948, laid the foundations for financial inclusion. This was achieved through credit targeted on agricultural production and the opening of bank branches virtually throughout the country. The transition from an agro-export development model to a model based on exports of services and manufacturing resulted in a steady decline in lending to small-scale rural producers and thus undermined the process of financial inclusion from which they had benefited for many years with these instruments.

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