Helping the largest number of the poorest means reaching rural areas, which include about 70 percent of the world’s poor.(1) The most vulnerable among them are women, youth, indigenous peoples and ethnic minorities. Because we know that fewer opportunities exist for the rural poor, Oikocredit has increased its focus on this vulnerable population.
Reaching Rural Areas
Most Rural Poor Rely on Agriculture
Some form of agriculture—small-holder farming, agriculture wage labor, raising livestock—is usually the primary livelihood of the rural poor. Nearly 80 percent of rural people farm, and typically the poorest rely the most on agriculture. Reducing rural poverty therefore means helping farmers manage risk, develop and use well-functioning markets, and deal with the seasonal nature of agriculture.
Among the challenges for farmers, weather is a constant risk. Manolita Gonzalez, Regional Coordinator for Capacity Building and Social Performance Management for Oikocredit Southeast Asia, attests to that. “We can get 30 typhoons a year in the Philippines,” she says. “In addition to flooding, farmers also have to deal with drought and pests.” To address these critical problems, Oikocredit is developing a regional module for risk management in agriculture.
The Multiplier Effect
It is clear that investments in rural, agricultural economies have multiple benefits—and beneficiaries. According to an analysis on the impact of rural development commissioned by the Economic and Social Commission for Asia and the Pacific, studies in India and Bangladesh indicate that investments in rural infrastructure have been “instrumental in enabling farmers to adopt new technologies in agriculture and promoted the growth of the economy. This, in turn, not only led to increases in the productivity and income of the poor, small and marginal farmers, among others, but also resulted in providing more employment to the landless labour both in agriculture and in allied and non-farm activities.”
Researchers studying the role of government investment in agriculture in rural Africa cite the multiplier effects of growing these rural economies:
“Given the predominant role of agriculture in the economy of many developing countries, in terms of its contribution to GDP and employment, and the fact that the majority of the poor lives in rural areas and depends on agriculture for their livelihood, it is not surprising that public investment in agriculture and rural areas is one of the most important governmental instruments for promoting overall economic growth and reducing mass poverty." (2)
Outreach is a Challenge for Some Institutions
Simply getting to rural areas presents multiple challenges to microfinance organizations seeking to serve the rural poor. Diego Fernando-Concha, General Manager of Oikocredit partner PRISMA Microfinance in Peru, says, “It is cheaper to serve urban areas. Rural areas are harder to reach. The clients are isolated geographically, requiring more time and special transportation—like motorcycles—but also culturally, requiring different kinds of learning programs.” (3)
And because so many of the rural poor are women, effective programs usually include health education, financial literacy programs and other additional services.
(1) Rural Poverty Report 2011, International Fund for Agricultural Development
(2) Growth and Poverty Reduction Impacts of Public Investments in Agriculture and Rural Areas, Regional Strategic Analysis and Knowledge Support System
(3) “Progress out of Poverty Index at PRISMA Microfinance: Using the PPI to Target and Serve Rural Women", March 2011, Grameen Foundation.