Rural Finances


Rural Finance challenges
Most governments in the developing world focus on creating policies that support financial inclusiveness. A big gap however exists between the provision of finance for the poor and promoting microfinance that is supportive of rural finance. designed to promote wealth for the marginalized. Governments, particularly in Africa have made numerous efforts to create policies that integrate financial inclusiveness, but such efforts lack a framework of implementation to support government visions.

VACID Africa is an outcome of the efforts to address the value chain activities that integrate wealth creation and financial intermediation. We have noted that many efforts by development partners and governments to push for inclusive financial intermediation end up throwing good money to poverty alleviation programmes using a vehicle that has proved to impoverish all the more- a model of microfinance that lends for the sake of lending and not creating avenues for wealth formation.

The marginalized communities in both urban and rural areas need measures for livelihood enhancement that is not necessarily finance. Finance happens to be only one of the nodes for livelihoods enhancement. Indeed, when the focus remains money alone, the outcome is that both the money and the will of the people; to participate with their government, in activities that seek to empower them, are lost to the financial intermediaries who report profits against the biting poverty that communities continue to witness at the bottom of the pyramid.

Addressing Rural Finance Challenges
Grassroots communities love being involved in developing instruments that support their creativity, a core element in our value chain linked programmes. We acknowledge that there is inadequacy of appropriate credit services, poor understanding of savings and credit perspectives to support sustainable wealth creation, poor linkage to agricultural production, marketing, and processing, and lack of a regulatory framework to integrate sustainable microfinance at both formal and informal levels. The situation gets worse as the cost of basic inputs and services rise, a matter easily attributed to lack of economies of scale noticeable from the grassroots operational dynamics.

VACID Africa believes that creating collectives around what people do and supporting innovation through locally available service support centers such as a knowledge and innovation centered telecentres will drive both poverty and hopelessness away. There is need to meet rural financial services challenges by promoting initiatives that focus on the creation of a savings and investment culture among rural folks. This benefits a great deal when coupled with the strengthening of viable legal institutions for financial services delivery to the poor, promoting the use of modern cooperative models that augment input and service delivery; marketing, investment in agro-processing and diversified investment portfolio.

Our association with the Kenyan success case of Githunguri Dairy Farmers Cooperative Society and the formation and proliferation of Kikama Dairy Farmers Federation proves that smallholder cooperatives can build on existing common interest economic groups to promote investment and value addition. The offshoot benefit of this is wealth creation through investment achieved from exploiting value chain activities and regeneration of more wealth for communities by consistently investing small quantifies by larger numbers of people in value addition investments and knowledge services.

While so many constraints challenge the practice of sustainable microfinance, there is a way of achieving a difference by creating innovative microfinance initiatives that promote access to low cost access to financial services. To achieve his there is need to:
1. Create a favorable policy environment
2. Strengthen the legal and regulatory framework
3. Build the capacity of rural financial institutions to deliver demand-driven integrated financial services in rural areas.

|To realize the foregoing, a segmented focus to rural development needs to identify solutions driven approaches to microfinance at the Micro, Meso and Macro levels as follows:
1. At micro level there is need to identify approaches to promote:
• Performance based funding
• Financial sustainability through investment of locally generated funds thereby creating microfinance that is affordable and is,
• Demand driven
2. At the meso level, there is need to create:
• Performance based contracts with the institutional players promoting access to financial services while observing
• Strict financial performance monitoring using cost effective tools. The sector should be supported through effective
• Capacity building programmes which are not created based on heuristics but rather on clear
• Research and Development
3. At the macro level, there should be an institutional framework that monitors what is happening at the grassroots and then undertakes the necessary
• Lobbying and advocacy so that the needs of the poor are addressed by all actors.

VACID Africa while not engaged with the implementation of microfinance is keen to partner with rural financial services actors with a view tot creating an integrated approach so that capacity building, technology and product innovation are all brought together for maximum impact. Our strategy driven models will help any community undertake microfinance and to link with a suitable partner in the link to the financial sector. It is for this that we partner with Angel and impact financial intermediators supported through the model shown on our homepage

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