NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, November 29, 2005

Prime Minister Meles Zenawi has said rural finance was playing a critical role in the improvement of agricultural productivity, through the provision of credit for small holder farmers.

In his opening address at a Worldwide Congress on Agricultural and Rural Finance here at the UN Conference Centre yesterday, Prime Minister Meles said, currently more than 2.5 million farmers, accounting for 25 percent of the total smallholder agriculture obtain credit annually for the purchase of inputs, mainly fertilizers.

The bulk of this credit, Prime Minister Meles said, was being provided by the commercial banks with the intervention of state governments to underwrite the loans.

Meles said micro finance institutions (MFIs) are actively engaged and cooperatives are beginning to provide loan services and they would in the future play the dominant role in the credit market, enabling the government to withdraw from its current practice of underwriting loans.

“In effect, the MFIs, possibly some of them graduating into rural banks, will in due course take over a market initially created through the intervention of government,” he said.

“There is evidence that the rural financial institutions are operationally and financially sustainable even if they charge relatively low lending interest rates,” he said. “They have proved that the rural poor can save and are bankable.” He cited studies as having indicated that the delivery of rural financial services increased income, and social services of households and helped to empower women.

Meles expressed belief that governments should create a regulatory environment that was specifically designed to create an enabling environment for financial services to the poor.

“I also believe governments have to promote linkages and facilitate co-ordination between financial services to the poor and the other aspects of fighting poverty.

Governments should take micro-credit institutions as vital partners and foster close cooperation with them,” he noted.

“My government has over the years tried to foster such a partnership with micro-credit institutions contributing to the successes achieved in the area.”

The micro credit summit, which started in 1997, launched its global campaign (Micro Credit Summit Campaign) to reach 100 million of the world’s poorest families, especially the women of those families, with credit for self-employment and other business services by the year 2005, Meles recalled.

“The campaign has met its objectives, thus making a significant contribution for the achievement of the Millenium Development Goals (MDGs),” he said.

According to Meles, the timing of this world congress added extra dimension to its importance as it coincided with the UN declaration of 2005 as “the year of micro credit”.

Limited access to financial and non-financial services in rural Africa was one of the critical bottlenecks affecting production, productivity, processing and marketing.

The congress brought together highly experienced financial practitioners from Africa, Asia, Europe, Latin America, Middle East and others.
Relevant Links
East Africa
Sustainable Development
Food, Agriculture and Rural Issues
Ethiopia

The congress will be addressing a number of critical issues including expanded access to micro-credit on the part of the very poor and women as well as linkages between micro-credit and other aspects of fighting poverty.

The congress is organized by CICA, AFRACA, APRACA, NENARACA, and ALIDE.