ISF Advisors and the Mastercard Foundation's Rural and Agricultural Finance Learning Lab (the Lab) — both initiatives currently housed at Global Development Incubator (GDI) — have released their latest rural and agricultural finance state of the sector report: Pathways to Prosperity. This report is a follow-up to the 2016 publication, Inflection Point: Unlocking growth in the era of farmer finance. Like that earlier report, Pathways to Prosperity identifies agenda-defining priorities that the sector must address to bridge the persistent finance gap for smallholder households and agricultural SMEs. 

In this latest report, ISF Advisors and the Lab present updated data on the size and scope of the rural agricultural finance market. Among other findings: Despite significant progress in the sector, financial service providers are still unable to meet the full USD 240 billion demand of smallholder households for agricultural and non-agricultural finance. The latest data suggests that providers are currently supplying approximately USD 70 billion. This leaves around USD 170 billion (or 70%) of the global demand for smallholder finance unmet. There is also a large gap in lending to agricultural SMEs that play a crucial role in rural economies. In sub-Saharan Africa alone, the lending gap to agricultural SMEs is around USD 100 billion annually. 

When combined, the frameworks in this report offer a number of transformative applications. At the micro-level, the rural pathways model and service provider segmentation can help determine what types of providers are best suited to serve different client segments, and shed light on the elusive impact-return tradeoff. By bringing together the frameworks into a series of integrated impact-investment theses, this research hopes to drive more efficient capital allocation and smarter subsidy that can achieve particular impact and financial returns. At the macro-level, the rural pathways model can also be a powerful tool for considering the current shape of a given rural economy and inform tough decisions about where and how to invest in rural transformation. 

In publishing Pathways to Prosperity, our hope is that this research will contribute to unlocking the benefits of financial inclusion for the 2.5 billion people who depend on agriculture for their livelihoods worldwide and support a new conversation about inclusive rural transformation.

Explore and download the report here.