The Role Public Funders Can Play in Branchless Banking

Recently, the CGAP Microfinance Blog hosted a series on the role that public funders can play to promote branchless banking. The series was launched in conjunction with a new CGAP Focus Note that highlights emerging lessons from public funders in this space. Regular readers of this blog are very familiar with the excitement around branchless banking and are probably aware that branchless banking is primarily being driven by the private sector. In fact, private investors have provided about 80% of the estimated $400 million in debt/equity investment in the sector. However, public funders are eager to use their resources to help bring branchless banking to more and more countries. Given the current momentum, is there a meaningful role that public funders can play without crowding out private investment?

The new Focus Note and series attempt to answer this question. We spoke with public funders that have already been active in this space and developed case studies to understand what role they played and why. We found that public funders can play an important and additive role in developing branchless banking services. However, they should ensure that their involvement includes one or more of the following factors:

1. Public funders should extract knowledge and learning that will benefit the entire industry. This can be done at both a macro level (investing in public goods to understand issues such as customer adoption and regulatory obstacles) as well as at a provider level (extracting learning from specific services that can be shared widely).
2. They should seek to influence the industry and specific implementations to develop products and services that are relevant for the low-income and unbanked segment.
3. Public money can kick-start development, especially in smaller or post-conflict countries where providers struggle to obtain the capital and buy-in to make major investments.

To learn more, read the Focus Note. Or, check out the blog series to learn how USAID is working with governments in the Philippines and Colombia to promote branchless banking, how UNCDF is working with the private sector to bring branchless banking to some of the most remote and challenging parts of the world and how the IFC is combining investments with technical assistance to help small companies grow.