Strategic Alliances to Scale Up Financial Services in Rural Areas

Abstract

Firms have employed strategic alliances with other firms to effectively manage costs, overcome resource and technology constraints, and enhance competitive position. Strategic alliances can lead to productive institutional collaborations in rural financial markets, thereby expanding the array of financial products, and scaling up access of rural households and micro-businesses to financial services. Strategic alliances comprise a new theme in rural finance. The institutions in the study used strategic alliances to tap new capital resources, manage transaction costs, access banking technology and infrastructure, and acquire new skills to provide an expanding array of financial services to wider markets. The authors carefully examine the experiences of selected rural finance institutions, and their strategic allies or development partners in Guatemala, the Philippines, Ghana, and India to draw out the main findings and share lessons that may be applied in other country settings. The study addressed a number of key questions: What motivated the rural finance institution to structure its alliance or partnership with a bank, commercial, or development organization? How are gains from and costs of alliances and partnerships shared between collaborating institutions? What are the key elements that make partnerships or alliances successful, and which conditions lead to unproductive ones? Which financial products and services are best introduced through strategic alliances?