Small rural finance entities (RFEs) are simply not capable of pooling and managing correlated risk on their own and at the same time many rural poor are linked to this risk and tied to agriculture. Insurance markets are sorely lacking in most developing and emerging economies, and rarely do local insurance markets emerge to address correlated risk problems. Many of the challenges in developing financial markets to manage risk in developing countries are reviewed in this paper. Innovations in global financial markets that provide unique opportunities for RFEs to manage correlated risk and expand their ability to help rural households are reviewed in this paper. Two main innovations are: 1) the use of global futures markets; and 2) the use of index insurance contracts to shift natural disaster risk into the global markets. Recommendations are offered for blending these forms of index insurance and rural finance.