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CGAP: Looking Ahead For Financial Inclusion

After extensive external and internal consultations, the CGAP Board (ExCom) approved the next five-year strategic direction for CGAP at its annual meeting in Amsterdam. The strategic direction lays out five priority themes, desired outcomes, and activities against each priority. We're highlighting these themes in a special blog series. This is the final post.

CGAP is  a public good  and one of its key roles is to look ahead and identify both opportunities and threats to the industry of inclusive finance, and bring them to the attention of both policy makers and service providers. In doing so, CGAP is not a player in the industry but a catalyst. Its work in the field of branchless banking is one example of this catalytic effect.

CGAP has played a role in the financial inclusion field from the 1990s to 2000 when microfinance began to broaden and included savings and microinsurance; now it has evolved to include building inclusive financial systems. These financial systems run the gamut of financial services being available not just through specialist institutions but through mainstream institutions that serve entire populations. CGAP’s been able to successfully lead that agenda.

 

 
Photo credit: Prakash Hatvalne

CGAP V Strategy

Every four to five years we review our work, and draft a strategy for the next five years. The process is widely consultative, and includes about 300 individuals. Like any strategy that really works, you need some elements of change and some elements of continuity. So there are two new elements to this strategy. One is a restated emphasis on a deeper understanding of clients. Clients have always been the raison d’etre for the field but perhaps in the past we have perceived “need” to equal “demand.” The difference is that demand has purchasing power behind need.  And therefore as we evolve, we need to develop different offerings and design those carefully, while at the same time minimizing operational costs for the provider and for the consumer and remaining true to prudential principles.

The second new element of the strategy is an emphasis on smallholder farmers: there are 500 million of them around the world, who have not been served fully by financial services. The rest of our work represents continuity: branchless banking, provider ecosystems, and policy and regulation.

CGAP Governance

There aren’t many institutions - intergovernmental, or international organizations - that donor members have set up and then let go in terms of self-interest. Of course, there’s a broad self-interest that is being served: best practice, peer assessment, etc. But there is a unique realization in the case of CGAP that a vast majority of the world’s poor are not being served adequately or indeed at all in terms of their financial needs, and this requires global policy makers and the whole ecosystem of providers to come together to address this issue. Donors realized that such an ecosystem needed to be created but that they could not do it alone, so they pulled their efforts together into CGAP. That CGAP remains independent and relevant to the financial inclusion industry around the world is a tribute to the founding donors.

 

------- The author is the outgoing chair of CGAP’s ExCom, and the founder and CEO of BASIX, India.

Comments

30 May 2013 Submitted by ajit (not verified)

Well said Vijay, always good to hear your wise words in Social enterprise matters. It is true that poverty is man made and generally the cause is exclusion, the poor are not connected to relevant resources like the rich are. It is also true that single product solutions have limited outcomes. Good outcomes generally involve the proper use of multiple products and that too only after understanding the (poor) customer by first sitting in his/her shoes, or at least as close as is feasible, committing to help over a period of time, and then staying with him/her until he/she is truly on her own. One has to almost adopt this unfortunate person. Warmest regards, Ajit

30 May 2013 Submitted by Sebastian (not verified)

Hi, this is an interesting post. Thank you. There's a portion I didn't quite understand. "Of course, there’s a broad self-interest that is being served: best practice, peer assessment, etc" Could you elaborate on this?

Best,
Sebastian

31 May 2013 Submitted by Partha (not verified)

Vijay, I note the two new elements of change in the CGAP V strategy, namely, need Vs demand and focus on small farmers. The need vs demand was one of several concepts of pre-BASIX research work during early 1990s which I was part of. This, along with small farmer focus, became part of strategy in the microfinance and related services offered by BASIX to its customers. It is good to note that it has now become part of CGAP V Strategy. As we have started to work more and more in Africa, the relevance of this new strategy is all the more evident.

05 June 2013 Submitted by ascanio graziosi (not verified)

I didn't find any referenece to the document Microfinance activities and the Core Principles for Effective Banking Supervision", which has been prepared three years ago within Basel III. In my view the propsosed framework could be a good refderence in point for a country financial inclusion.

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