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While access to credit is a key instrument to alleviate rural poverty, microfinance institutions (MFIs) are often unable to expand their agriculture lending portfolio. One of the key constraints that MFIs face is the exposure of agriculture lending to shocks such as drought, flood, or locust which can put farmers in a situation where they are unable to repay their loans. Major agriculture shocks can indeed lead to loan defaults and bank runs therefore resulting in destruction of risk capital, reduced access to liquidity, decreased lending and sometimes insolvency. Evidence shows that credit...