International Funding for Financial Inclusion

19 December 2017
Funder commitments to financial inclusion reached a historic high of US$37 billion in 2016.
Over the past few decades, public funding for financial inclusion has helped build an industry that now attracts private funding, both international and local. Today, a broad range of cross-border and local funders contribute to the sector, with a wide variety of approaches, funding instruments, know-how, and return expectations. 
As financial inclusion is increasingly being considered to be an enabler for achieving broader sustainable development goals, knowing who is funding what, and where, can help funders inform their decision-making processes and adjust their efforts to meet targeted objectives. Through its research, CGAP aims to improve transparency on the funding flows for financial inclusion, based on the understanding that better information leads to better funding decisions and helps increase accountability among funders.
Our work on transparency is centered on the CGAP Cross-Border Funder Survey on financial inclusion. The survey has been conducted annually since 2008, and in partnership with MIX since 2012. It is the most comprehensive source of analysis on cross-border funding to financial inclusion. It focuses on primary sources of funding: institutions or individuals with ownership and decision-making power over funds. Data are regularly reported by more than 50 major cross-border funders, both public and private, and are complemented with data from the Symbiotics MIV Survey and CGAP estimates, where indicated.
As of December 2016, cross-border funders have committed $37 billion for financial inclusion. Sub-Saharan Africa (SSA) is driving growth in funding—commitments to this region increased by 30 percent in 2016, reaching US$3.5 billion through 611 active projects. While public funders continue to drive growth in SSA, foundations have grown the fastest over the past three years in terms of number of projects, resulting in 25 percent of all projects committed to by foundations in 2016.
International funders are increasingly targeting capacity building for financial services providers (FSPs) and financial inclusion policy and regulation. Every funder in the survey supports the development of digital financial services. Funding of loan portfolios continues to represent three-quarters of the overall funding volume in 2016, but it is no longer exclusive to FSPs and intermediaries. Mobile money operators and other digital services providers are also a focus for financial and technical assistance at the retail level. Capacity building of providers represents 7 percent of the overall funding volume. In addition, payments infrastructure has grown to be an important focus for funders and represents one-third of overall funding for financial sector infrastructure (2 percent of overall funding). Capacity building for end-clients (individuals, households, and enterprises), policy, and regulation for financial inclusion collectively account for 5 percent of overall funding. 
Strategy adaptation continues to be the major challenge for funders, especially because financial inclusion is perceived to be an enabler within the Sustainable Development Goals, and not a standalone objective. In 2016, funding flows for financial inclusion grew—one-third of commitments were made as part of broader financial-sector development projects (20 percent) and other development projects (e.g., water and sanitation, environmental protection, energy efficiency, etc.) (11 percent). Apart from supporting micro and small enterprises (1,240 projects), funders focus on improving access to finance for rural and agricultural finance (647 projects), women’s economic empowerment (223 projects), and digital finance (181 projects).
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