【正文】 ajor employer, especially for the poor and women. Improved financial markets accelerate agricultural and rural growth. Financial services assist households in maintaining food security and smoothing consumption, thereby safeguarding or enhancing labor productivity , the most important production factor of the poor. Because of agriculture’s strong forward and backward multiplier effects for the overall economy, economic growth in agriculture especially in subsectors that directly or indirectly benefit smallholders, tenants, and wage laborers is a key precondition for overall economic growth and poverty reduction. At present, most of the poor still live in rural areas. Any student of an introductory course in microeconomics or development economics learns that access to savings, credit and insurance services can have beneficial effects on households and their enterprises and therefore on economic growth, and that microfinance in particular may also contribute to more equitable growth. Access to credit, however, has an economic benefit only if and when that access generates a broadly defined economic surplus after having deducted the private and social costs of loan provision (including the opportunity costs of scarce public funds in alternative poverty reduction policies). While the evidence on the impact of credit on household welfare, agricultural technology adoption, and on agricultural sector growth is mixed4 , many practical constraints (. time and money) and methodological difficulties in estimating the impact of a policy or project with a reasonable probability of error exist Simple mon sense tells us that savers who continue to deposit money for different motives, borrowers who continue to repay their loans, and clients paying regular premiums for health and life insurance over long periods actually derive an economic benefit. CHANGING WISDOMS AND POLICY OBJECTIVES IN RURAL FINANCE Since the mid 1980s, there has been a paradigm shift in financial policy (including rural finance) from subsidized credit to financial systems development. The old paradigm of sector directed, supply led and subsidized credit has been based on faulty assumptions about the willingness and ability of poor farmers and other entrepreneurs to pay for financial services, which led to faulty policy design and implementation. The new paradigm departs not from the need, but from the demand (. willingness and ability to pay market prices) for savings, credit and insurance services by farmers and other entrepreneurs. Instead it focuses on building sustainable financial institutions and systems, and introduced the operational policy objective of financial sustainability of MFIs. The new paradigm recognizes that high transaction costs and risks that partly result from information asymmetries and moral hazard problems for both financial intermediaries and clients are some of the root causes of the gap between demand and supply. Therefore, the new paradigm places emphasis on searching for technological and institutional innovations (including suitable governance and incentive structures) to reduce the costs and risks of financial intermediation. The new paradigm recognizes the possibility of market as well as government failure (. institutional failure in general), and negates the thesis put forward by proponents of market liberalization that a “financial system which is not repressed would by itself function optimally”. The new paradigm in contrast sees financial market liberalization (. with respect to interest rate formation) as a necessary but not sufficient condition for deepening financial systems. Moreover, as the required technological and institutional innovations needed to deepen the financial system and to serve poorer segments of the population can be readily copied by forprofit financial institutions, the resulting freerider problem prevents the private sector from sufficiently investing (pared to socially optimal levels) in such innovations. In conclusion, public investment in propoor (and pro rural) financial innovation is required. This holds true not only for microfinance, but for rural finance as well. Thus, public investment in rural finance can be justified, for example, to fund (action)research and promising institutional startups as well as institutional expansion until reaching financial sustainability within reasonable time periods, and to support pilot experiments with promising new products, technology or technical assistance, such as for training of staff and transfer of best practices. Given the long gestation periods required in building sustainable institutions,