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The Inter-American Development Bank (IADB) and Mexico’s Financiera Rural have signed an agreement for a US$675,000 grant from the IADB’s Multilateral Investment Fund for a project to strengthen financial services institutions that serve small and medium-sized farmers in Mexico.

The project, which will be carried out by Financiera Rural, will support the design of a model that applies the best practices of microfinance to meet the particular needs of small farmers.

The model, which will draw from successful experiences of Mexican and foreign rural financial institutions with outstanding rural credit programmes, will cover aspects such as financial and business administration; staff selection and incentives; credit technologies; risk management; loan portfolio supervision and controls; and handling of environmental and social issues.

The resulting model will be applied by a group of rural financial institutions such as credit unions. Another group of 10 service agencies will receive training to spread the model among other rural financial institutions.

The MIF, an autonomous fund administered by the IADB, expects this project will help deepen Mexico’s rural financial system and benefit thousands of small and medium-sized farmers who will gain access to better financial services, including rural credit.

In 2003 the IADB approved a US$300mn loan to Mexico to support the reform that established Financiera Rural as a state-owned second tier lender for rural credit agencies. Financiera Rural will contribute around US$500,000 to the project.