What is rural finance?

For people living in rural parts of Tanzania, rural financing could be the difference between success and failure. Tanzania has a population of around 55 million, yet of these 55 million, roughly 27 million people live well below the extreme poverty belt. Tanzania is a country that relies incredibly heavily on farming and agriculture, yet despite this, rural finance is not where it ideally needs to be. But what does rural finance mean? Well, it can mean a lot of things, but for the purpose of this document, we’ll do our best to explain it as clearly and as coherently as we possibly can.

Zoey Buza
Created By Zoey Buza
On Mar 4, 2019
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The importance of farming and agriculture

For individuals living in rural areas, farming and agriculture is literally a lifeline, as without them, they simply would not be able to make a living. For individuals living in rural parts of the world, farming and agriculture provides jobs for more than 86% of these individuals. What’s more, for developing countries with high levels of poverty, 75% of individuals living in poverty reside in rural locations.
That’s right, even though 86% of rural inhabitants work in farming and agriculture, they still live in poverty, and this is something that simply has to change. 2.1 billion individuals worldwide, living in rural locations, somehow manage to survive on the equivalent of less than $2 per day! This is where the importance of farming and agriculture really becomes apparent, because without these things, people would simply have no way of making money whatsoever. This is where rural finance is needed. In Africa and in countries such as Tanzania, farming and agriculture is considered one of the main sources of income for the economy, yet despite this, less than 1% of total commercial lending is pumped into rural communities.

The importance of rural finance

With populations increasing by the day, and with dietary preferences also shifting, the need for quality farming communities in rural locations has never been greater. By the year 2050, economic forecasters have predicted that worldwide food demands will increase by as much as 70%, which would work out at roughly $80 billion in annual investments.
Much of this will have to come from within the private sector. In developing parts of the world, far less in terms of finance and investment is offered by the banks to rural communities, which is why farming, agriculture, and other rural businesses, tend to struggle so much.
Rural finance pumped into rural businesses would provide a whole heap of advantages, not only to rural businesses and residents, but also to the economy as a whole. Just some of the ways in which rural finance would benefit rural businesses include the following:
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Increased crop yields
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Access to better farming equipment
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Access to better training
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Enhanced quality of produce
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Improved storage facilities and methods
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Increased access to various markets
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The ability to offer competitive prices
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Less waste
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Increased productivity
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Better quality of life for workers and animals alike
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