Funding Landscape

Over the past few decades, public funding has helped build microfinance institutions that now attract private funding, both international and local. Today, with better understanding of the financial services needs of the poor, there has been a shift in the focus of public and private funders from microcredit to the broader concept of financial inclusion. As of December 2013, their commitments to financial inclusion totaled at least $31 billion. Each contribute toward this vision with their own strategy, funding instruments, know-how, and return expectations.

Public funders (multilateral and bilateral donors and development finance institutions) regard financial inclusion as a tool to achieve development goals, such as poverty reduction, economic and social development. Most private funders are driven by a mix of social and financial objectives. Foundations are supporting financial inclusion to address global poverty. In contrast, for private investors (retail and institutional), financial services for the poor present an opportunity to diversify their investment portfolios while doing good. Impact investing has emerged in the past few years as a new investment category to generate social and environmental impact alongside a financial return. Private investors often invest through intermediaries and their growing interest in microfinance has led to the emergence of over 100 intermediaries, such as microfinance investment vehicles (MIVs), holding companies, and peer-to-peer lending platforms.

Financial services providers also rely on local funding sources to finance their activities. In countries where they can offer savings services, client deposits can be a major funding source. Other local funding sources include loans from local commercial banks and private investors, funds raised in the local capital markets, and government loans and grants, often channeled through local wholesale financial institutions known as apexes.

But with the success of crowding in of private capital, donors and public investors grapple with how they can continue to add value. Many funders are also seeing the limits to supply-side interventions that do not always translate into broader market-level impact. Countries around the world are at very different levels of development necessitating the need to be responsive and adaptive to a variety of country specific conditions. In some nascent markets, supporting the creation of new entrants into the financial system may be an appropriate funding strategy to demonstrate the commercial viability of serving poor market segments. In more developed markets, country priorities often shift and increasingly include a need to focus on advancing regulations to adapt to new technologies or helping to support innovative business models or delivery channels.

There is a growing understanding and awareness that more needs to be done to ensure that funders can catalyze systemic change that serves the needs of the poor and benefits the entire market system and not just the funders’ investee purpose. Transparency around who is funding what, where and on what terms can help funders identify gaps and learn from what works and what doesn’t. Through its research, CGAP aims to increase information on cross-border funding for financial inclusion, building on the premise that better information leads to better funding decisions and helps increase accountability among funders.

Knowing who is funding what, and where, can help funders see the gaps, and it helps improve accountability. Since 2008, CGAP has conducted an annual survey international funding for financial inclusion. This survey is the most comprehensive source of analysis on this topic and records data from more than 60 funders, both public and private. Now conducted in partnership with MIX, the survey is complemented with data from the Symbiotics MIV Survey.

Topic Contact: Matthew Soursourian, Estelle Lahaye

Recommended Reading:


19 December 2017
The 2017 CGAP Cross-Border Funder Survey sheds light on key trends and development in international funding for financial inclusion. It shows that funder commitments to financial inclusion reached a historic high of US$37 billion in 2016.
Download PDF: 
English (4 pages)
19 June 2017
The future for poor people and financial inclusion is difficult to predict. In what ways will financial services influence inequality and economic participation for poor people by 2025?
Download PDF: 
English (32 pages)

From Our Blog

02 January 2018
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Funder commitments to financial inclusion reached a historic high of $37 billion in 2016. See what else the latest CGAP funder survey reveals.
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.