Donors and Investors

Donors and investors commit billions of dollars each year to projects that promote financial inclusion. In 2013 alone, for example, they committed at least $31 billion to support financial inclusion. In recent decades their support was a major force in the creation of strong microfinance institutions worldwide.

Today these same donors and investors are expanding their priorities and seek opportunities to achieve broader financial inclusion of the estimated 2 billion working-age adults who remain excluded from formal financial services.

Donors – such as bilateral agencies, multilateral organizations, and foundations – typically provide financial support for economic development and poverty alleviation. Investors are public or private entities such as development finance institutions (DFIs), institutional investors, and microfinance investment vehicles (MIVs). Typically they require a financial return on their investments, but they can also aim for social or development returns depending on their mandates.


Photo Credit: Kiet Pham Tuan, 2014 CGAP Photo Contest

As a wider variety of private sector players have begun funding microfinance and financial inclusion projects, donors and public investors grapple with how they can continue to add value. How can donors use their public resources or subsidies in a way that ensures their support contributes to overall development objectives? How can investors fund financial service providers without discouraging them from raising capital in a financially sustainable way from local sources?

CGAP is rigorously exploring the answers to these questions by working closely with donor agencies and organizations around the world. Donors and investors can add significant value by catalyzing responsible market development, which begins by identifying market barriers that prevent financial systems from serving the poor.

CGAP’s current engagements with the donor and investor community primarily focus on promoting the adoption of a market development approach, which is also known as a market systems approach or M4P (Making Markets Work for the Poor). Recognizing that full financial inclusion requires self-sustaining marketplaces that do not depend on external subsidies, this approach encourages funders to shape all their investments and interventions with an eye toward catalyzing market development and ensuring the sustainability of market actors beyond the length of funding.

Through research and convening, CGAP’s work to achieve effective and responsible funding for financial inclusion focuses on:

  • Supporting their ability to play a catalytic role in financial market development;
  • Building consensus on the evolving role of funders and sharing learning on funding mechanisms;
  • Encouraging funders to improve their internal and results measurement systems to measure, learn from, and report on their achievements; and
  • Tracking funding flows into financial inclusion annually.

Resources

Contact: Barbara Scola

Publications

17 January 2017
The paper reviews how USAID, through two programs and in partnership with a series of market actors, helped change the microfinance market dynamics in the Philippines—from a specialized activity with limited outreach and highly dependent on subsidized credit, to a more inclusive and robust market-driven segment of the financial sector.
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English (27 pages)
15 December 2015
After steadily increasing in previous years, international funding of financial inclusion is estimated to have plateaued at $31 billion in 2014.
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English (4 pages) | French (5 pages) | Spanish (5 pages)

From Our Blog

Women at market, Niger
23 February 2017
Market facilitation has become a common approach to making financial markets work for the poor. This post kicks off a new series to explore how this approach can be used effectively.
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Chart: Financial Inclusion Funding
15 December 2016
What direction is funding for financial inclusion headed? The results are in from the annual CGAP and MIX Cross-Border Funder Survey.