Rural finance for food security for the poor : implications for research and policy

These income fluctuations translate into consumption fluctuations if households cannot fall back on savings or access to credit. This study examines the potential for improving household food security by providing access to financial services, and then discusses the findings" implications for policy and institutional design. Based on an extensive literature review, Chapter 2 develops a conceptual framework at the household and institutional level that describes three pathways through which improved access to financial markets can improve household food security. (1) Credit or savings could be used to provide capital for financing inputs, labor, and equipment for income generation. (2) Access to credit and insurance services can increase the capacity to bear risks so that households can invest in more risky but also more profitable activities instead of holding liquid asset portfolios as precautionary savings against future shortfalls. (3) Financial services could help stabilize consumption of food and other essential goods during the period just before the next harvest and other times of hardship. The institutional and macro level constraints to these innovations are also discussed. Chapter 3 reviews the empirical evidence on savings and credit behavior of the poor, as it relates to the conceptualized linkages between access to financial services and household food security. Important traits of successful policy and program design for the development of rural financial institutions are identified in Chapter 4. Examples of institutional innovation, mainly from Asian and African countries, are included. The concluding chapter discusses policies that can facilitate the formation of sustainable financial institutions for the poor and suggests future research questions. Includes references.