The Guatemala Rural Financial Inclusion Project is part of the U.S. Government’s global “Feed the Future” initiative against hunger and food insecurity. It supports improved access and utilization of financial services for rural communities, especially those in the agricultural sector. The project, implemented by the National Cooperative Business Association CLUSA International (NCBA CLUSA), improves access to and use of affordable financial products.

This project will benefit those groups traditionally excluded from the formal financial system with a particular focus on rural Indigenous communities as well as women, young people, and recipients of remittances in the departments of Huehuetenango, San Marcos, Quiche, Totonicapán, Quetzaltenango, Alta, and Baja Verapaz. The project will also partner with financial institutions headquartered in Guatemala City.

Context and Challenges

Guatemala’s financial inclusion rate is among the lowest in Latin America, with only 37% of the population owning an account. The situation is more acute in rural areas (17% account ownership) and among women, youth, and indigenous communities. These groups face multiple barriers such as lack of collateral (bank accounts, credit history), financial literacy, internet access, and smartphones. This limits their ability to access financial services, like savings and loans. Remittances are vital for many rural households, contributing significantly to GDP. In 2022, remittances totaled $18.3 billion, benefitting approximately 6.5 million Guatemalans. However, less than 12% of these funds were deposited in bank or cooperative savings accounts, and under 5% went towards personal business or agricultural investments.

This project addresses these challenges with a comprehensive strategy, focusing primarily on the agriculture sector, which employs about 30% of Guatemalans. The sector needs investment to boost smallholder farmer productivity and profitability. The approach includes offering alternative forms of collateral for those lacking land titles or credit history and enhancing financial literacy through tailored data, digital tools, and information systems designed for rural communities. Through financial education and the development of suitable financial products, the project will encourage remittance senders and recipients to save and invest productively in areas like business expansion, high-value crops, and sustainable farming practices. The project will also connect farmers to agricultural technical assistance, aligning with initiatives like Feed the Future and the Ministry of Agriculture.

Moreover, the project supports the launch of a nationwide financial education network, in partnership with public and private sectors and international cooperation, under the National Financial Inclusion Strategy (ENIF). This initiative will integrate financial education into the Ministry of Education’s National Base Curriculum, enhancing overall financial literacy.

Approach

The project is focused on three key objectives for enhanced financial inclusion:

1. Expanding Financial Products and Services: This involves collaboration with various financial institutions, including banks, credit cooperatives, FinTechs, AgriTechs, impact funds, microfinance entities, and mobile network operators. The goal is to increase both the availability and quality of financial offerings.
2. Boosting Demand and Usage Among Rural Consumers: Targeting micro, small, and medium-sized enterprises, farmers, and specific demographics like youth, women, indigenous populations, and the diaspora, the project aims to elevate the demand and utilization of financial services. This will be achieved by enhancing financial literacy and fostering trust between rural consumers and financial service providers.
3. Encouraging Investment of Remittances: The project promotes the redirection of a portion of remittances toward productive financial uses. This includes depositing in savings accounts, using them as loan guarantees, and investing in activities within the agricultural value chain. Assist 100,000 people in rural areas to adopt formal financial services and mobilize $20 million in credit for smallholder farmers.
4. Channel $100 million of remittances into savings accounts and other financial services.
5. Mobilize $35 million of remittance value into investment in the agriculture sector.

Expected Results

• Assist 100,000 people in rural areas to adopt formal financial services and mobilize $20 million in credit for smallholder farmers.
• Channel $100 million of remittances into savings accounts and other financial services.
• Mobilize $35 million of remittance value into investment in the agriculture sector.