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Financial Inclusion of Small Rural Producers

image of Financial Inclusion of Small Rural Producers

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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Financial inclusion of small-scale rural producers: Trends and challenges

Between 1980 and 2002, the number of poor in Latin America grew by almost 90 million to 225 million people, equivalent to 43.9% of the region’s population (ECLAC, 2015). Thanks to a favourable economic environment, improvements in the labour market and the effect of prioritizing social policy on combating poverty and inequality, between 2002 and 2012 poverty fell by 15.7 percentage points to a level of 28.1% (ECLAC, 2015). During the same period, most countries in the region also managed to reduce income inequality. Nonetheless, since 2012 poverty and inequality levels have both remained broadly constant (ECLAC, 2016b).

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