Afghanistan Rural Finance Conference - December 13 - 14, 2004
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Trends and Lessons from Global experience
Renate Kloeppinger-Todd
Rural Finance Advisor
The World Bank
Afghanistan Rural Finance Conference December 13-14, 2004
Afghanistan Rural Finance Conference - December 13 - 14, 2004 2
Presentation Outline
Regions and countries with relevant experiences
Relevant conditions
Solutions implemented
Lessons learnt
Recommendations
Afghanistan Rural Finance Conference - December 13 - 14, 2004 3
Regions and countries with relevant experiences
Caucasus Azerbaijan, Georgia, and Armenia
Eastern Europe and Central Asia Lithuania, Bosnia, Kyrgyzstan,
Tajikistan,
Africa Mauritania,
Afghanistan Rural Finance Conference - December 13 - 14, 2004 4
Relevant Conditions
Civil unrest or war
Absence of / Complete breakdown of banking system
Absence of or poor property rights
Little enforcement of laws and regulations
Loss of most external markets
Poorly maintained infrastructure
Little knowledge of market economy
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Solutions Implemented 1
Financial cooperative / credit union system developed.
Kyrgyzstan, Moldova, Georgia, Azerbaijan, Albania
Specialized institution founded
Kyrgyzstan, Lithuania, Mauritania
Linking commercial banks to village level financial associations
Moldova
Setting up MFIs that also work in rural areas
Georgia, Kyrgyzstan
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Solutions Implemented 2
Leasing Kazakhstan, Uzbekistan, Romania,
Pakistan, Uganda, Madagascar
Restructuring of State-Owned Agricultural Banks Mongolia, Tanzania
Afghanistan Rural Finance Conference - December 13 - 14, 2004 7
Lessons Learnt 1
Creating Specialized Institutions from scratch Creation of legislative framework
Significant amounts for technical assistance and capacity building
Strong, dedicated and knowledgeable management team and advisory board
Long-term vision
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Lessons Learnt 2
Financial Cooperatives / Credit Union Systems Appropriate legislative framework
Clear supervision responsibilities
Systems approach (networks of village-based CUs and second tier institution)
Significant amounts for TA and capacity building
Savings first approach until repayment is proven – then possibly credit lines for refinancing
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Lessons Learnt 3
Linking Commercial Banks to Village – Level Associations Motivated and capable commercial
banks
Capacity building for banks and the new associations
Training of accountants and book-keepers on the village level
Capacity building of borrowers
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Lessons Learnt 4
Setting up MFIs that also work in rural areas Difficult to achieve significant outreach
due to capacity constraints for small institutions
MFIs need to have a solid base before venturing away from their core business
Internal portfolio diversification between urban and rural areas reduces risks
Very close portfolio monitoring is required
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Lessons Learnt 5
Restructuring of State-owned Agricultural Banks Strong Government commitment to ring-
fence the institution and to refrain from influencing decision making
Strong external management with decision-making powers
Significant funds for management, TA and capacity building
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Recommendations 1 Creating an Enabling Environment
Appropriate legislative framework needs to come first for any chosen institutional forms
Supervision of FIs is needed, either directly by the Central Bank or by delegated authority
Property rights and land use rights in place
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Recommendations 2
Guiding principals Savings first approach where feasible
Strict insistence on loan repayments
Development of monitoring systems and follow-up capacity
Support in the form of TA, capacity building and training is MUCH more important than credit lines
No pushing out of money without considering the sustainability of the institutional arrangement
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Recommendations 3
Product Offerings Develop loan products appropriate for
specific purposes (short-term, group loans, longer-term flexible agricultural loans)
Simple and easily accessible savings products
Possibly insurance products
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Recommendations 4
Developing Service Providers Extension services
Farmers’ associations for joint purchasing and marketing
BDS with special focus on rural issues
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Recommendations 5
Creating Effective Demand Matching grants for asset creation
Offer of savings facilities to create equity
Support all along the supply chain (product development, packaging, marketing, etc.)
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Recommendations 5
THANK YOU
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