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An Analysis of Microfinance Impact on Rural Agriculture Sector in Developing Countries: A Systematic Review

Silva K.N.N. and Rupasinghe P.D.S.R.


Microfinance serves as one of the best options to reduce poverty in rural low-income people in developing countries. The majority of rural poor people engage in agricultural activities in rural areas. Microfinance plays an important role in rural agriculture sectors in developing countries. The objective of this systematic review is to understand the present status of microfinance involvement in the rural agriculture sector in developing countries and analysis the impact of microfinance in the rural agriculture sector in developing countries. A total of 23 articles are identified following the PRISMA guideline to achieve the study objectives. This analysis results in there are negative and positive impacts of microfinance involvement in the rural agriculture sector. High transaction cost risk, high risk due to the uncertainty of the climate and weather patterns, and lack of collateral assets harm microfinance. The results showed that the involvement of microfinance institutions alone with the government financial entities would have a more efficient influence on the rural agriculture sector. The study concludes that the engagement of microfinance with rural agriculture can enhance the living standards of rural farmers and their livelihoods in developing countries.


KEYWORDS: Developing countries, Microfinance, Rural agriculture