Eighty percent of global population has 20% of the world's income.... While some 800 million people ... go to bed hungry every night, the majority of them live in rural areas. Seventy percent of the poor are from rural areas (James D Wolfensohn President, The World Bank Group). Lack of basic infrastructural facilities, relative isolation from urban counterparts, urban- biased policies, political intervention and lack of formal financial institutions has resulted in the plight of rural finance. Government policies, which are more focused on problems of agriculture rather than on rural financial services are also one of the reasons. Rural Population is normally poorer than their urban counterparts. They earn their living mainly from agriculture and related activities.

They often live in areas which lack of basic infrastructural facilities and lack of integration with urban markets forces rural inhabitants to live in virtual isolation. Financial services play an important role in the development of rural areas. Technological changes often require complementary investments that increase demand for working and investment capital. Some of this demand is self-financed, some are serviced by informal sources, but others require long-term loans provided by formal institutions. Financial intermediaries provide access to loans, deposit payment and insurance schemes which can substantially accelerate the adoption of modern technologies and expand the production of food supplies, and increase farm incomes. When a reliable supply of formal finance is established, farmers can choose to invest more of their own funds knowing that their unused borrowing capacity will be available to meet future cash needs.