Expanding Opportunities for Rural Finance in Colombia

The purpose of this note is to provide
policy recommendations to improve access to credit of rural
populations and small agricultural producers under
financially sustainable schemes. Although the agricultural
sector remains an important source of employment,
agricultural credit is a small fraction of commercial credit
in Colombia. The share of agricultural credit in Colombia is
below levels observed in other countries in the region.
Colombian commercial banks have limited credit volume in
rural areas, concentrating their lending activities on more
profitable urban populations. General deposit warehouses and
the agricultural commodity exchange (Bolsa Mercantil de
Colombia (BMC)) provide funding for agricultural activities,
but they are underdeveloped compared to regional peers and
serve medium and large size producers. Overall use of
mobile- and internet-based payment financial products
remains low in rural Colombia. According to 2014 Findex
survey data, just two percent of adults report using mobile
banking, defined as a mobile platform for making
transactions from an account at a financial institution.
Public credit guarantee system (FAG) coverage should be
modified to incentive the use of mobile guarantees and
agricultural insurance. This will ensure that financial
institutions have only covered tail risks, providing
incentives to use mobile guarantees.