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RURAL DEVELOPMENT

Objectives

The general objective in this area is the sustained improvement of the quality of life of the low-income rural population while at the same time seeking to assure an effective and efficient contribution by the rural economy to the national development process. For that purpose, support will be given to the development of "campesino" economies and other low-income sectors in rural areas through various combinations of efforts geared to the specific circumstances of each local community.

In this context, the more specific objectives are:

To promote the rural economy by improving production and the employment situation and incomes of the rural population through:

a) an increase in the economic profitability of campesino units through increases in agricultural productivity (supported, inter alia, by technical assistance, specialized research and small-farmer credit) and improvements in the prices of inputs and outputs that will improve the terms of trade of the "campesino" units vis-a-vis the national economic system;

b) the development of new non-agricultural rural activities, such as agroindustries, support services, etc., which because of their scale may best be assisted through associative structures which will make higher levels of productivity and competitiveness possible;

c) the improvement of working, training and income conditions of rural workers; and

d) the rational occupation of new land on the agricultural frontier, taking into account the nature of the ecological systems, the possibility of economic returns, and physical and economic integration with the national market.

To promote the generation of savings and facilitate a higher level of investment in the rural area.

To strengthen the effectiveness of national and local institutions responsible for the formulation and implementation of rural development policies and projects, and to support effective participation of the population in the planning and implementation of local activities.

To help expand the access of the rural population to basic services, including, education, health care, etc.

To strengthen rural development planning as well as the adoption of measures for promoting better and more equitable integration of the rural sectors with the rest of the national economy.

Fields of Activity

Through its lending and technical assistance operations, the Bank will assist in national efforts to identify appropriate rural development solutions compatible with the specific circumstances of each period and place. Special emphasis will be placed on three complementary fields of activity:

1. Strengthening the national capacity to identify and prepare better programs and projects, including support for the formulation of policies for improving the general framework of rural development and efforts to link the analytical and research capacity of the region more productively with the search for and formulation of operational solutions.

2. Mobilizing the efforts of rural populations, which entails encouraging their participation in decision-making, organizational activities, training and rural education, social communications, including, where appropriate, the development of associative-type economic organizations that can open the way to socially and economically feasible solutions.

3. Financing programs and projects that will contribute to capitalizing and galvanizing the rural economy, and that will act on the mechanisms for the retention and reinvestment of surpluses generated in rural areas, including support for towns operating as service and marketing centers. In this regard, the Bank grants loans for:

a) Rural production projects for low-income farmers. Their purpose is to help increase the production and raise the income of small farmers by allocating resources for a single activity that deals with a specific constraint preventing or hindering development.

b) Integrated agricultural development projects. These projects are aimed at removing more than one production and/or economic infrastructure constraint. Their design envisages financing for more than one sectoral component and includes low-income farmers with a potential for expanded production among the direct beneficiaries. Projects for concurrent investment in credit, technical assistance, marketing, road building, energy and other areas are some that fit into this category.

c) Integrated rural development projects. Projects of this type address production, economic infrastructure, and social services constraints on a coordinated basis. Their design entails specification of various direct objectives and includes financing for two or more sectoral components. By their nature, these projects include as beneficiaries the rural population in marginal areas and endeavor to develop their productive potential and find the best way of incorporating them into the socioeconomic activities of the country.

d) Social infrastructure projects. These are projects that endeavor to improve the social and organization conditions of low-income rural communities, such as health, sanitation, rural education, community organization, training, etc.

Criteria

In the selection of the rural development projects to be financed by the Bank, an analysis will be made of their viability taking into account the national economic and development policies. In this context, particular attention will be given to current policies related to prices, land use and tenancy, taxation, financing, supply of inputs and other national measures which intrinsically contribute to the success of specific rural development investments.

The Bank will encourage productive solutions for the rural economy that are not limited to agricultural activities but also explore possible non-agricultural activities (agroindustrial activities, various support services for rural production, small and medium-size industry, and handicrafts) that can be established in rural areas.

In connection with low-income rural sectors, efforts will be made to ensure that support for productive activities gives preference to small units that have or can develop productive capacity (agricultural and non-agricultural) so as to promote rural economic units with a potential for capital formation either individually or through other forms of economic organization conducive to higher productivity.

In the process of transforming subsistence economies, special attention will be given to bettering the social conditions of the beneficiary rural communities, since this is both a basic social right and a prerequisite for achieving economic-productive development. In connection with this, the Bank will encourage the appropriate combination of activities for improving the productive base with those required for meeting basic needs.

The adoption of measures aimed at better use of factors of production, including the improvement of land, labor and financial markets, and the establishment of mechanisms for retaining and reinvesting local surpluses will be encouraged, on a basis of equity and with a view to stimulating the various groups to build up their capital assets and enhance their productive capacity.

Adequate distribution and use of farm land contributes to the achievement of rural development goals. Because of the essentially primary nature of rural production, the land factor plays a decisive role in the production process of rural areas. Accordingly, the Bank is concerned that, in its projects, land use and tenancy be approached on the basis of equity and enable an efficient allocation of financial resources. Specific solutions to the problems of access, use and distribution of land should harmonize with the pertinent policies and legislation of the borrowing countries.

Considering the current agricultural policy (see OP-721), the Bank will favor the establishment and consolidation of credit systems for low-income producers and endeavor to avoid the concentration of institutional credit. Emphasis will be given to increasing the efficiency of the system and reducing the overall direct and indirect costs. Special attention will be given to the strengthening of financial and technical assistance institutions, either public or non-governmental, that facilitate effective mobilization and channeling of internal and external savings towards investments and other productive uses for small producers.

Whenever global credit operations are involved, as might pertain to Bank activities described in the first three paragraphs following section 3 in "Fields of Activity," the interest rates applicable to the subloans shall be governed by the relevant policy guidelines set forth in document GN-1448-4 Rev. 2 of March 19, 1983.

In the process of promoting the transformation of marginal and subsistence activities and attaining sectoral and regional development objectives, consideration may need to be given to the provision of various forms of income transfer over the time period necessary to attain increased productivity and eventual economic viability.

As a necessary complement to productive activities, the Bank will support the development of agricultural marketing systems for low-income farmers. It will support the establishment of collection systems in which various buyers participate as well as arrangements for ensuring compensating minimum prices for certain products. These arrangements should also be designed to protect low-income farmers from undue price fluctuations without constituting a disincentive to production. The Bank will support technical assistance efforts for small farmer-marketing as an extension of market and price information services.

The Bank recognizes that protection of the environment and conservation of the resource base are essential to sustainable rural development. Thus, the Bank will assign a high priority to measures for protecting the natural resource endowment and the environment within which "campesino" communities are located, by promoting a better understanding and a rational utilization of ecological systems. Proposed projects should include environmental measures that preserve the quality of air, water and soil and human health in projects that are economically and socially beneficial. The Bank also view environmental improvement and natural resource management projects per se, including research projects as desirable and appropriate components of its rural development strategy.

The Bank will endeavor to ensure that the technology used in rural development projects is appropriate to the regional and local socioeconomic conditions.

Efforts will be made to coordinate rural and urban development operations so as to promote the improvement and equipping of rural population centers with productive and social infrastructure for the support of rural activities so that these centers may perform important functions for the location of non-agricultural activities, marketing and processing of rural products, and miscellaneous support services for the production process and for the people living in their areas of influence.

Basic Guidelines

PROJECTS. The projects should give due consideration to the nature and dynamics of the socioeconomic processes into which they are introduced and which they are intended to influence. The projects should demonstrate consistency with the characteristics of the existing situation, the problems faced, the objectives pursued and the measures proposed for achieving them.

Efforts will be made to coordinate projects and match them with other development activities in terms of priorities, functional complementarity, inter-agency coordination, and proper spatial integration. Where appropriate, other related activities, whether new investment or rehabilitation projects, that help ensure fuller use of specific sectoral investments, will be encouraged.

Likewise, efforts will be made to ensure that the projects include a proper balance between fast-acting, quick-yielding activities for the rehabilitation and improvement of existing systems and investments for the construction of new works or systems of slower impact over time.

For investments in specific areas, the Bank will encourage the use of an integrated approach even though such investments may be carried out through various complementary projects.

The Bank will endeavor to ensure that multisectoral projects include only those relevant and essential components that can induce subsequent development. Evidence of the compatibility of the components in a given project will be required in order to verify their technical and institutional relevance and to justify the inclusion and sizing of each one. Past and ongoing experience with integrated projects concerning cost, timing, coordination, and other problems and complexities will be taken into account.

Efforts will be made to ensure that the projects include a suitable institutional framework for their execution, avoid duplication, and use the available institutional capacity in each country. Whenever inter-agency coordination becomes essential to the execution of given projects, the Bank will endeavor to ensure that the projects include inter-agency coordination from the preinvestment phase onward.

The Bank considers it of the utmost importance for the beneficiaries to be actively involved in a project throughout its life and for the project to be compatible with the sociocultural characteristics of the beneficiary population.

Whenever relevant, the Bank will encourage the transfer of the results and experience of a given project to other areas where conditions are conducive to the promotion of similar efforts. For this purpose, such components as distribution of reports and training of leaders and technical personnel from other areas can be considered for inclusion in the project.

The design of integrated projects should have the necessary flexibility for periodic readjustments based on an adequate follow-up and evaluation system.

TECHNICAL COOPERATION. The Bank supports the development of rural development plans that ensure an appropriate framework and favorable conditions for specific projects, as well as mechanisms for the allocation of the necessary financial, technological and managerial resources.

The Bank will give special emphasis to technical cooperation for the preparation of rural development projects and endeavor to improve methods of project preparation and the mechanisms recommended for execution and follow-up.

Support will be given to efforts that complement agriculture-oriented activities with production and service activities in villages, towns and small urban centers.

In the area of institutional strengthening, the Bank will provide government and non-government rural development agencies with assistance. It will give attention to improving their capability for planning or conducting activities for "campesinos" and small-scale producers, allocating and channeling financial resources, adapting and transferring appropriate technology, and improving systems and mechanisms for project execution, operation, follow-up and evaluation.

In the area of training programs, the Bank will assist in training beneficiaries and technical personnel in the identification, preparation and conduct of rural development projects, particularly in the selection of technology, administration of family or associative-type production units, spatial integration and multisectoral coordination.

In the area of rural development research, including crop and livestock research, the Bank will also assist in studying alternatives for increasing the income and employment of low-income sectors, studies of rural-urban relationships, research on production systems for small-scale units, and other non-traditional solutions for dealing with the circumstances that hinder rural transformation.

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Prevailing Reference Document: GP-108-3, August 1984.

* The operational policies of the Inter-American Development Bank are intended to provide operational guidance to staff in assisting the Bank's borrowing member countries. Over the course of the Bank's more than 40 years of operations, the approach to developing operational policies has taken various forms, ranging from the preparation of detailed guidelines to broad statements of principle and intent. Many policies have not been updated since they were originally issued, and a few reflect emphases and approaches of earlier years which have been superseded by specific mandates of the Bank's Governors, the most recent being the Eighth Replenishment mandates of 1994.

In accordance with the Bank's information disclosure policy, the Bank is making all of its operational policies available to the public through the Public Information Center. Users please note that the Bank's operational policies are under a process of continuous review. This review process includes preparation of best practice papers summarizing experience at the Bank and other similar institutions, and sector strategy papers.

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