From Urban to Rural: Lessons for Microfinance from Argentina

The recent success of microfinance for the urban self‐employed contrasts with decades of failure on the part of public development banks for small farmers. This article describes the ways in which rural microfinance organisations have tried to adapt the lessons of urban microfinance to manage the risks and control the costs of the supply of financial services in rural areas. It then asks whether the lessons of urban microfinance are likely to apply in the poorest rural areas of Argentina. The article concludes that microfinance is unlikely to improve access to small loans and small deposits for many of the rural poor in Argentina; distances are too great, farmers too specialised, and wages too high. Improved access depends not on targeting loans by government decree but on strengthening institutions that support financial markets.