Microfinance Focus, April 30, 2012: Accion a microfinance organization has released a report providing the financial industry with important recommendations for creating and improving services to rural residents in Latin America.  This study is based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru and provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and micro entrepreneurs.

The study try to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.

The study findings were as follows: working capital credit and savings are the best known and most used formal financial services. However, while 80 per cent of respondents say they know about these products, only 40 per cent use them.

Debit cards, consumer credit and life insurance are rarely used. Relatively few people save in financial form. Surpluses are used primarily for investment. Many respondents consider that storing idle or “non-working” funds is a poor use of their money.

One in two consumers saves in monetary form, and among those who save, there is diversity in the purpose and use of savings.  Some maintain a “static” savings amount as a reserve or back-up fund (e.g., for health emergencies), while others seek to grow their savings over time.

The most significant barriers to formal savings are lack of convenience in operating savings accounts, bank fees and the perception that amounts are too small to deposit. Although rural residents were not well aware of the potential value of insurance, 70 per cent had experienced a shock event in the past three years.

Rural residents often get financial-services information through media such as speakers in the main square, mobile ads in moto-taxis, and leaflets.  Key community individuals, such as shop owners, and social, economic and religious gatherings (fairs and parish meetings), are also sources of information exchange.

Elisabeth Rhyne, managing director of the Center for Financial Inclusion at Accion, said, “The results from this study will prove a valuable tool in designing and marketing appropriate financial products that meet the specific needs of rural residents.  The findings can assist in the creation or improvement of products such as new savings models, debit cards, cashless payments or insurance products.”

“Ultimately,” Rhyne added, “the lessons gleaned from this research will help any microfinance institution wishing to better serve the hardworking farmers and microentrepreneurs in rural Latin America.  We believe they also hold insights that are relevant to other rural clients worldwide.”

The research was supported by the Inter-American Development Bank and based on survey interviews with people living in rural areas within reach of selected microfinance institution branches.  It targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers.  The study describes the rural population according to socio economic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management.  Financial education and awareness and use of formal financial services are discussed.

Accion is a global nonprofit that works at building a financially inclusive world with access to economic opportunity for all, by giving people the financial tools they need to improve their lives.