In October 2006, the Syngenta Foundation held a seminar focusing on Capital for Development. The Foundation had just completed the review of its five years in operations and concluded it needed to focus more on the drivers of rural economic growth – both on-farm and off-farmif it wanted to achieve significant impact in reducing rural poverty.

 

Business constitutes the major engine for rural economic growth and for efficiently matching urban demand-pull with rural supply. At the lower end, the microenterprise sector (small farmers, small-scale traders, artisan producers) needs access to financial services – including credit and saving products, which have been provided through the dynamic and increasingly professional microfinance sector. Above, the Small and Medium Enterprise (SME) sector is essential in both connecting urban and rural economies and small and large scale industries. It needs a very specific blend of financial instruments and business support.

 

This paper focuses on the microfinance industry and its role in servicing the rural micro-enterprise sector. It builds on the outcomes from a web-based discussion prompted by an advertisement the Foundation ran in “The Economist’s” special issue on microfinance, which Professor Hans Dieter Seibel analysed. Professor Hans Dieter Seibel is Head of the Development Research Centre, University of Cologne and is a specialist in rural microfinance. He was also Technical Adviser Rural Finance at the International Fund for Agricultural Development (IFAD) and has carried out numerous consultancies for multilateral development finance institutions, bilateral agencies and NGOs. His recent research has examined linkages between banks and microfinance institutions and on reforming agricultural development banks.