Through a newly established network of private financial intermediaries, the World Bank’s Rural Finance Expansion Project increased the availability of financing for rural SMEs in areas where Mexico‘s commercial banks have been unable to reach local producers.
Limited access to finance is a bottleneck to growth and poverty reduction in Mexico.
This project helped establish and/or improve the credit, risk and management capacity of more than 255 small intermediaries located in rural areas.
After four years of implementation, 173,981 productive loans (average loan size: US$1,850) were granted to 139,253 local producers and SMEs, 76% of which are located in rural areas of the poorest states in southern Mexico, 83% were granted to women and 22% to people living in communities classified as marginalized or highly marginalized by the National Population Council (Conapo).
Thus, rural SMEs benefited from improved access to financing and increased economic activity.
Rural SMEs
According to the World Bank, the financing helped intermediaries reach more clients and grow their activities in rural areas with low levels of non-performing loans.
The World Bank’s version is that lending through intermediaries, and thus leveraging their distribution networks, not only helped increase the reach of Financiera Nacional de Desarrollo Agropecuario, Rural, Forestal, y Pesquero (FND) in a difficult market segment, but also served to promote inclusion, job creation and support the supply of private sector rural finance in Mexico’s poorest states, while making them self-sufficient over time.
This experience can now be transferred to other countries where rural finance is limited and/or has proven difficult to scale up.
In the words of the World Bank, this program has helped create a path to effective recovery, as well as support a longer-term development agenda in the area of financial sector development.
The World Bank has supported Mexico’s efforts to deepen financial inclusion and expand access to finance, which has been a critical bottleneck to growth and poverty reduction.
