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The theory of induced agricultural innovation suggests that there is a sustainable path for technological modernization, even for economies characterized by rapid population growth and increasing land scarcity. While some have given a quietistic interpretation to this theory, saying that market signals alone are adequate to spur the necessary agricultural growth, recent experience suggests otherwise. This article first considers the evidence on rural financial markets: how and why they tend to constrain the accumulation and investment needed for agricultural productivity growth, especially in economies in which small farms predominate. We will then consider a new generation of risk management interventions designed to alter the conditions that lead to dysfunctional rural financial markets and ultimately crowd out both the institutions and the innovations needed for sustainable technological change in agriculture.