The Sustainable Development Goals (SDGs) represent the shared aspirations of countries and development actors. Like other organizations working on development issues, CGAP needs to adapt to this new vision for the future. And it just so happened that the approval of the SDGs in September 2015 coincided with CGAP’s process to refresh our strategy. While our strategic thinking process is still ongoing, I see three clear directions for CGAP that build on the themes in the SDGs:
- Reframing the way we think about financial services as a means to an end and not an end in itself
- Exploring the links between financial and social inclusion and uncovering how these issues reinforce one another
- Integrating greater theoretical and empirical evidence on how financial services support the livelihoods of poor people
What we know (and what we don’t)
CGAP’s paper, “Achieving the Sustainable Development Goals: The Role of Financial Inclusion,” and the preceding blog series, helped to document what the evidence tells us so far and where we see potential for financial services to impact the SDGs down the line. But the process of gathering this evidence also shed light on what is not known. It pointed to what else organizations like CGAP need to do to better understand how financial services help people and societies achieve the type of inclusive development articulated in the SDGs.
We know, for example, that demonstrating the links between financial inclusion and economic growth still requires further work. We also know that there is limited evidence about the way in which financial services impact environmental issues like climate change (although many of us know of exciting experiments that help poor people access and use renewable energy sources like clean stoves). We have not yet seen the job creation effects of financial inclusion, although we know that financial inclusion sustains and creates self-employment, and helps households manage cash flows.
These unknowns require CGAP and other development actors to continue to research, experiment and document the evidence. Over time, we will continue to improve our understanding of what is achievable and the right instruments to get the most impact.
Early reflections on where CGAP is headed
While our strategic process will involve a much broader set of engagement with stakeholders and CGAP members, so far it is already pointing to several important directions:
Financial services as enabler. The SDGs did not identify financial inclusion as a stated goal but instead used it as a measure for the achievement of several other goals. This shift in how financial inclusion is viewed — as a means to an end — will be reflected in CGAP’s work on financial inclusion moving forward. What this means for CGAP operationally is that our work will seek to demonstrate and document the pathways in which financial services can enable achievement of the various SDGs. We already have work programs that explore financial services and access to education, energy and water. We anticipate that such programming will continue and will likely expand in the next five-year strategy to other important services such as health.
Social inclusion + financial inclusion = development. At the highest level, the SDGs put sustainability on equal footing to human development. Sustainability, as defined in the SDGs, is a concept that entails environmental and social concerns that can lead to more equitable societies and economies. The story is no longer only about poverty. This is something that has resonated very strongly in CGAP’s strategic thinking processes. We know that financial inclusion helps to address some dimensions of poverty but has not always been effective at addressing other deep rooted, and perhaps discriminatory, causes of poverty. We need to better understand the social dimensions that keep certain groups excluded from the financial system and from economic participation more broadly. We will begin by trying to understand what social inclusion means, which groups are excluded and why, and the interplay between financial and social inclusion.
Back to the future of livelihoods. Another important early lesson from our strategic thinking phase is the importance of linking financial services to the real economy, or in other words, livelihoods. While this may feel like a flashback to many of us who started out in microfinance, it is not. Our community made too many assumptions that were not validated by the evidence. We assumed that financial services would have life-changing effects because we assumed that financial services were being used for livelihoods investments. But over the years, as rigorous research has shown, we have come to realize that financial services are used for many different purposes and the average effect has not been one of measurable changes at the income or asset level. In order to see more meaningful changes in people’s lives, we will need to better demonstrate the pathways in which financial services can be used to improve how people make a living and accumulate wealth. For CGAP, this means more work to better understand what the poor do for livelihoods, how financial services can be used to improve these livelihoods, and how these incomes can lead to improved asset accumulation among the poor. We know the poor are mainly smallholder farmers, but there is large variance across countries. The poor also undertake many other vocations, such as day laborers, traders and migrant workers. We should be clear about how each segment of the poor derives its income and how financial services can be used to improve income-earning potential and asset accumulation.
Much more work ahead of us
The SDGs focused the world’s attention on a broad set of ambitious goals, and all of us in the development community must reflect on what they mean for our institutions. At CGAP, our strategic thinking process is giving us the opportunity to reflect on what financial inclusion can and cannot achieve. It is also helping us to better articulate our own role in helping to learn, document and crowd-in action toward effective ways that financial services enable the SDGs. We are both humbled and excited by the task ahead. Our efforts thus far have reinforced the importance of financial services as an important enabler to the types of inclusive societies we all aspire to live in.
Editor's note: Read this post in Arabic on the FinDev Gateway
Thank you, Mayada. I love your blog, especially the last sentence. If I may add, the poor's livelihoods are so vulnerable to shocks that financial services should contribute to enhancing their resilience in advance. Their vulnerability might be related to "deep rooted, and perhaps discriminatory, causes of poverty."
Thank you Kazuto. Indeed, financial services have an important role in building resilience to shocks and we are seeing this as an important dimension to our strategic thinking. It is particularly relevant as we think about the impact of climate change and conflicts on the lives of the poor and the increasing numbers of natural disasters and wars that disproportionately affect them.