A world where poor people, especially women, can capture opportunities and build resilience through financial services
Financial Inclusion in a Changing World
Letter from the CEO
Our world is changing on multiple fronts. Poverty is deepening in developing countries as COVID-19-related economic lockdowns and social distancing severely limit the ability of many poor people to work and earn a decent living. The microfinance institutions that are an integral part of the financial inclusion ecosystem and vital to economic recovery are under pressure. At the same time, the pace of digital disruption is accelerating worldwide as more and more people are connected to global communities, deepening existing divides and opening up new ones.
For CGAP, these changes have underlined the importance of adaptation. We need flexibility in the face of the multiple forces at play and a framework that enables us to embrace new challenges as they emerge, mitigate the risks, and identify opportunities. We know from past experience that massive shocks—natural disasters, wars, pandemics, or technological innovation—impact poor people in severely disproportionate ways, amplifying existing inequalities for years to come. Though the full scale of current changes has yet to unfold, we know that the scars from the global pandemic for many low-income communities will be deep and lasting. But we also know that change opens up the space for new ideas and approaches to emerge. The challenge for the financial inclusion community is to seize this opportunity to tackle old problems in innovative ways and build a more resilient future.…
CGAP was already in a period of transition in strategic thinking before the pandemic hit. The transition was driven by several factors. The most important was our need to more clearly articulate how financial inclusion, and CGAP’s work specifically, translates into improvements in poor people’s lives. In seeking to answer the question, “Financial inclusion for what purpose?” we had decided to pivot from the access and usage paradigm that has defined the past decade of the financial inclusion movement and orient ourselves toward a new framework, one that focuses on what financial services can do to help poor people meet their basic needs across three dimensions: income generation, essential services, and resilience. This pivot has placed us in a much better position to respond to the current crisis and to answer important questions about how our work can deliver the services that are relevant to the needs of poor people.
The strategic pivot was also timely in that it elevates our focus on women. Our vision now makes clear that we are working toward a world where poor people, especially women, are empowered to capture opportunities and build resilience through financial services. It was timely in that women are disproportionately affected by the pandemic: most women in paid work are employed in the informal sector, around 95 percent in Asia and 89 percent in Sub-Saharan Africa. The insecurity and lack of social protection that characterize their informal, temporary labor have put millions of women and their families at extreme risk as they lose income in the COVID-19 crisis. By embedding a gender lens throughout our work and extracting insights on how solutions specifically meet the needs of women, CGAP is prioritizing addressing these imbalances.
Over the past year, CGAP has been adapting its work program to respond to both the evolution in our strategic thinking and the fast-changing world. Our new framework provided us the flexibility to evaluate where we can add unique value to the financial inclusion community by drawing on our expertise and role as a convener generating knowledge as a public good in three core areas: financial services, technology, and poor people. We applied these skills in responding to the COVID-19 crisis by supporting the microfinance sector, enhancing digital government-to-person payments, deepening our understanding of the impact on poor customers, and acting as a knowledge-sharing platform. We are applying them in tackling new topics as we begin to explore the role of finance in supporting digitally enabled livelihoods for gig and platform workers, farmers, and micro and small enterprises.
By embracing change and playing to our strengths, CGAP has not only been at the forefront of how to mitigate the negative impact of recent developments, we also are exploring what opportunities lie ahead in building more resilient economies for the benefit of poor people.
Greta Bull
CEO, CGAP
How CGAP is Adapting
We have shifted our strategic approach from the access and usage paradigm that has defined financial inclusion for the past decade to focus on the role of financial services in helping poor people meet their basic needs
The development community long has recognized that the empowerment of women is essential for poverty reduction. Yet little progress has been made in financial inclusion
In developing countries, the gender gap for financial account ownership has remained stubbornly persistent since 2011 at 9 percentage points. The reasons are complex, often interwoven with greater social exclusion for women than men and driven by social norms — the social and cultural barriers that contribute to habitual exclusion. To address these issues, CGAP is embedding a gender lens throughout its projects.
Platform Work
In Kenya, CGAP’s interviews with over 30 youth working in the gig economy revealed that platforms have significant potential to generate decent livelihoods for young people, including women. Financial services need to be developed to address the specific requirements of this nascent economy. We are expanding this work into South Africa and Nigeria to generate insights into new opportunities for young women.
In Myanmar, Bangladesh, and Pakistan, CGAP is examining how users leverage social networking platforms, such as Facebook and WhatsApp, to market and sell their goods. Early results indicate digitally enabled opportunities allow women to build their businesses, although there are still many barriers to overcome.
“I employ 25 local women in my workshop. We all work together as a family, and I dream of creating a bigger impact with plans like ecotourism in my village so I can employ more women who are until now marginalized and in poverty and help make their lives better.”
—Thiri Winn Muang, founder of Mori Burma, an organic fabric and clothing business in Myanmar that sells via social media
Social Norms
In southern Turkey, CGAP interviewed 90 refugee men and women and surfaced four key social norms that restrict women’s economic participation: no right to financial privacy from her husband; no right to own assets in her name; no right to hold a formal savings account; no right to own a large business, overlain by no bank account to access credit or other services. CGAP is testing these social norms in Egypt to understand whether they offer a useful framework for addressing the 17 percentage point gender gap in financial inclusion in the Middle East and North Africa, the largest in the world.
FinEquity
FinEquity is the community of practice convened by CGAP as a trusted resource and global knowledge-sharing platform on women’s financial inclusion. The community has 1,500 global members in 60 countries, hosting dynamic discussions that foster member-to-member learning. Its Data & Measurement Working Group has mapped women’s economic empowerment frameworks. The Social Norms Working Group is reviewing how social norms frameworks can be applied to financial inclusion programming and funder initiatives. And the Technology Working Group is focusing on digital solutions for addressing low levels of women’s financial literacy.
“I employ 25 local women in my workshop. We all work together as a family, and I dream of creating a bigger impact with plans like ecotourism in my village so I can employ more women who are until now marginalized and in poverty and help make their lives better.”
—Thiri Winn Muang, founder of Mori Burma, an organic fabric and clothing business in Myanmar that sells via social media
Meeting the Challenge of COVID-19
When the global pandemic hit, CGAP identified three areas where we could make a unique contribution
CGAP is focusing on coordinating the response of the microfinance sector, improving digital delivery of government-to-person (G2P) social assistance payments, and deepening the financial inclusion community’s understanding of how the pandemic is affecting the most vulnerable people in society. These responses play to our core strengths. We also use our robust communications platforms on CGAP.org and FinDev Gateway to share knowledge and resources on responding effectively to the crisis.
Microfinance Sector
CGAP’s early warning that COVID-19 could pose serious risks to many microfinance institutions (MFIs) and their clients helped galvanize support among investors and funders for the sector. To help ground their responses, CGAP launched a series of surveys to capture how the crisis is affecting MFIs worldwide. With nearly 337 MFIs participating so far, the survey is providing critical insights as the only global MFI dataset available on the evolving crisis. As cited by The Economist, the survey showed that by April two-thirds of MFIs had slashed lending, the majority by more than half compared to normal levels, and the future of roughly one quarter of MFIs was heavily dependent on investor willingness to extend or refinance maturing debt. Meanwhile portfolio quality was deteriorating rapidly, though equity cushions broadly look sufficient to assuage solvency concerns for the time being.
CGAP also has published a framework for regulatory action that identifies six key steps to be taken at the regulatory and policy level to identify and assess crisis responses for MFIs.
G2P Payments
The COVID-19 crisis is testing the effectiveness of G2P payment delivery. Lebanon had to call in its army to deliver social assistance payments in cash. Countries that have made sound infrastructure investments like India, Pakistan, and Kenya are performing better, while in other countries, like Peru and the Philippines, the crisis has created political impetus to reshape and modernize G2P delivery. CGAP has provided input to nine countries on major G2P reforms that would give customers greater choice over providers, improving customer access. We also have provided guidance on how to open financial accounts rapidly, through electronic know-your-customer processes, for example, to speed up the delivery of social assistance while upholding financial regulations that combat money laundering or financing of terrorism.
Impact on Livelihoods
In developing economies, 90 percent of people work in the informal sector. Very often they are among the poorest and most vulnerable, earning no fixed salary and falling outside the scope of government programs. For many informal workers, the pandemic has destroyed income-generating opportunities and is disproportionately affecting women. CGAP has synthesized insights on the impact of the pandemic on informal workers and developed recommendations for governments and aid agencies on identifying vulnerable segments, designing appropriate relief and delivery methods, and monitoring program effectiveness over the longer term.
Impact on Livelihoods
In developing economies, 90 percent of people work in the informal sector. Very often they are among the poorest and most vulnerable, earning no fixed salary and falling outside the scope of government programs. For many informal workers, the pandemic has destroyed income-generating opportunities and is disproportionately affecting women. CGAP has synthesized insights on the impact of the pandemic on informal workers and developed recommendations for governments and aid agencies on identifying vulnerable segments, designing appropriate relief and delivery methods, and monitoring program effectiveness over the longer term.
“We feel protected now by the (health) measures that we are following, but not by the economic strategies of the government. We’re waiting. We will feel protected when the lockdown ends, and the authorities show their intention to include us in public policies.”
—Leader of street vendor organization RENATTA in Peru
“Honestly what you are doing for the sector is huge and I’m just grateful. Bringing the microfinance investment vehicles and practitioners together around data is a big achievement."
—Andree Simon, CEO of FINCA Impact Finance
CGAP’s Work Has Impact
We reach policy makers, shape laws, and change lives
“CGAP’s work is very tailored, among the best materials out there for financial markets. I haven’t found other materials that are as specific and relevant to this sector.”
—FSD Uganda Respresentative
DFS Policy
When Ghana became the first country to adopt a national policy outlining how digital financial services (DFS) can contribute to its financial inclusion goals and transition to a digital economy, it drew on a decade of CGAP’s engagement with the government and private sector. We played a key role in shaping the DFS policy, announced in May 2020, and continue to collaborate with partners to respond to the policy’s call to build out connected market infrastructure that supports DFS innovation. The policy launch received widespread media coverage, including Quartz Africa and The Conversation.
Shaped supervisory practices in Jordan, Pakistan, and El Salvador.
Trainings and remote support on the DFS regulations reached 20 countries in Africa and Asia.
Digital Rails
Input on payments reform in Colombia, Pakistan, Kenya, and Lebanon.
Worked on Jordan’s adoption of QR codes to enhance interoperable payments systems.
“As we work to build our post-COVID-19 economy, the lessons learnt on the digitalization of the economy, especially for financial services, have become even more pivotal. This makes CGAP’s role in supporting us to develop our DFS and cash-lite roadmap at this time an even more rewarding initiative in the midst of one of the worst health crises in human history.”
— Sampson Akligoh, Director of the Financial Sector Division, Ministry of Finance, Ghana
The Economist
1.6 MILLION READERS
“Research from 2016 cited in anew report by the Consultative Group to Assist the Poor (CGAP) … found that in the Philippines 83% of people surveyed had been targets of mobile-phone scams, with 17% losing money … CGAP makes three policy recommendations.”
—Article on data protection for poor people
Quartz Africa
4.3 MILLION VISITORS MONTHLY
“When it became apparent that (mobile money) adoption was falling well below expectations, with the support of the Consultative Group to Assist the Poor (CGAP), the Bank of Ghana agreed to engage with all stakeholders and take a second look at the regulations to change the course of mobile money in the country.”
—Article on Ghana’s new DFS policy
NextBillion
23,000 VISITORS MONTHLY
“But despite this growing impact, gig economy workers often face a lack of jobs and social benefits (including access to pensions and insurance)—and their vulnerability has been highlighted by the COVID-19 pandemic. CGAP reports that in Kenya, workers on gig employment platforms offering artisanal and personal services have seen their work drop off by up to 90% since business and mobility restrictions began.”
CGAP is a trust-funded consortium of 34 members with a mandate of advancing access to financial services to the world’s poor. It is housed in the World Bank’s Equitable Growth, Finance, and Institutions Global Practice. The Equitable Growth, Finance, and Institutions (EFI) Global Practice, on behalf of other member donors, has legal, financial, and administrative oversight of CGAP. CGAP’s initiatives span more than one fiscal year. CGAP follows the World Bank’s fiscal year, which ends on June 30.
These financial statements include a FY20 Financial Update, FY20 Member Contribution Update, and accompanying notes. They are unaudited. Internal audits are performed by World Bank Group Quality Assurance. CGAP also participates in the World Bank Group’s single audit exercise annually.
Key Highlights for Fiscal Year 2020
Donor Contributions: Total donor contributions in FY20 were $20.4 million, slightly down from $20.8 million in FY19. CGAP bilateral members provided 57% of the total FY20 contributions, while foundations provided 31%. Multilaterals provided 9%, and DFIs provided 2% of the total funds used to implement CGAP work program in FY20.
Operating Expenses: CGAP’s FY20-end expenses were $23.9 million, or 6% under the originally approved budget of $25.6 million. Staff costs represented 57% of the total costs, compared to 54% in FY19. In FY20, CGAP’s expenses were funded 68% from core funding, and 32% from designated funds.
Financial Position: CGAP maintained a sound financial position and ended FY20 with $21.7 million cash on hand. Additional receivables (based on the signed member agreements) were $29.8 million, totaling $51.5 million available in cash and signed donor agreements for the start of FY21. In addition, there was also $4.8 million in funding already approved by members or forthcoming from members who communicated their intention to contribute but have not yet signed formal agreements. Combined, this represents $56.3 million in secured or pledged funding available for the CGAP VI Strategy cycle.…
1. Basis of Accounting
CGAP financial reports are prepared on a cash accounting basis.
Revenue from donor pledges is recognized when written notification of a donor’s intent to process the grant is received. In most cases, pledges are fulfilled during the fiscal year in which they were made. Sometimes they are received in the following year(s).
These (unaudited) financial statements are prepared on a historical cost convention and are denominated in United States dollars.
2. Contributions from Donors—Core and Designated: Donor contributions (including pledges that have not yet been received but are being processed by the donor), interest income, and foreign exchange gains make up CGAP’s revenues. Per CGAP’s charter, all members are expected to contribute core funding to carry out CGAP’s operations. Once donors have made core (unrestricted) contributions, they can make, in exceptional cases, a contribution limited to a specific purpose (designated). Amounts of donor contributions to CGAP’s core funds can be found in the table on CGAP Member Donor Contributions.
3. Interest Income: Interest Income is the interest received during the fiscal year on cash balances held.
4. Operating Expenses: Operating expenses are comprised of the following:
Staff Salaries and Benefits for direct-hire CGAP staff.
Consultant fees are costs related to the hiring of individual CGAP consultants.
Travel are expenses related to delivery of corporate activities including inter alia participation in external events, CGAP-hosted meetings, etc.
Contractual/Firm services related to hiring of external companies.
Other Operating Expenses include all other expenses related to delivery of CGAP’s program, including those related to organization of CG and ExCom Meetings, office and building expenses, telecommunications, office supplies, etc.
5. Operating Reserve: Operating Reserves are funds available for ongoing operations and future commitments. Given that CGAP does not generate revenue, an operating reserve is maintained to cushion potential effects of delays in member contributions and to allow an orderly wind down of CGAP activities should members decide to discontinue CGAP's operationsin its present form. Our practice is to target operating reserves at a level that would sustain at least six months of operating costs, which is currently estimated to $15 million.
Fiscal Year 2020 Financial Update
In US dollars (’000)
FY19 (July 2018–June 19) Actual
FY20 (July 2019–June 20) Approved Budget*
FY20 (July 2019–June 20) Actual
FY21 (July 2020–June 21) Approved Budget†
CASH INFLOWS
Cash balance at the beginning of fiscal year
27,298
28,919
24,859
21,693
Donor contributions
20,637
23,500
20,372
4,102
Investment income
565
565
457
457
Total Inflows
48,500
53,169
45,688
46,295
EXPENSES BY EXPENSE CATEGORY
Staff Salaries & Benefits
13,890
13,703
13,637
14,530
Consultant Fees
3,919
4,609
4,326
4,363
Contractual/Firm services
3,424
3,844
4,161
2,938
Travel Expenses
1,956
2,156
1,400
1,473
Other operating expenses
453
1,244
471
862
Total Expenses by Expense Category
23,641
25,556
23,994
24,166
Balance at the end of fiscal year
24,859
27,614
21,693
22,130
EXPENSES BY WORK STREAM
Customers
Pillar Level
—
726
720
589
Segments and Insights
1,819
1,515
1,747
1,877
Customer Protection and Value
917
793
652
961
Evidence and Impact
566
699
406
—
Livelihoods (Agri)
—
—
—
629
Business Models
Pillar Level
—
714
697
408
Digital Business Models
1,242
853
815
551
Financial Innovation for Development
1,066
1,018
935
934
Livelihoods - MSE
—
—
—
1,847
Enabling Infrastructure
Pillar Level
—
1,252
1,152
1,051
Digital Rails
4,657
3,898
3,121
2,480
Livelihoods - Platforms
—
—
—
877
Policy
Pillar Level
—
1,663
1,532
419
DFS Regulation and Supervision
1,125
1,514
1,429
1,215
Data Protection and Privacy
1,281
886
925
757
G2P
—
—
—
674
Global Forum for Inclusion Standards
1,160
—
—
—
Cross-Cutting
Sector Support
801
1,003
894
1,206
Gateway Academy
1,783
1,623
1,701
542
Functional Work
Communications & KM Products
1,922
1,660
1,705
1,707
Information Technology Support
456
779
599
696
FinDev Gateway
572
622
650
596
Governance & Member Relations
1,289
1,459
1,520
1,421
Research & Development
283
255
158
147
Budget & Administration
1,374
1,149
1,310
1,290
Front Office
998
1,105
911
1,048
Monitoring & Evaluation
130
220
264
245
MIX
199
150
150
—
Total Expenses by Work Stream
23,641
25,556
23,994
24,166
*Approved by CG May 2019 †Approved by CG June 2020
Member Contributions
In US dollars (’000)
Contributions received
Contributions with signed administrative agreement but not yet received
Assumed pledge based on historical trend or current discussions
FY 2019
FY 2020
FY 2021
FY 2022
FY 2023
FY 2024
Core Contributions
—
—
—
—
—
—
African Development Bank
100
100
100
100
100
—
Australia
354
309
300
—
—
—
Bill & Melinda Gates Foundation
2,483
6,000
4,500
4,500
3,000
4,500
Canada
385
385
—
—
—
—
Citi Foundation
150
—
—
—
—
—
Credit Suisse Foundation
253
251
200
—
—
—
Denmark
1,247
445
471
471
471
—
European Commission
1,697
1,333
1,333
1,333
—
—
France
454
454
454
454
454
—
Flourish Foundation
300
225
225
100
100
100
Germany
456
434
—
—
—
—
IFAD
450
450
450
450
—
—
Italy
347
—
—
—
—
—
Japan
300
300
300
—
—
—
Jersey Overseas Aid
—
275
275
275
275
—
Republic of Korea
200
200
200
200
—
—
Luxembourg
450
1,371
450
—
—
—
The Mastercard Foundation
—
—
—
—
—
—
MetLife Foundation
175
175
175
—
—
—
Michael & Susan Dell Foundation
—
—
—
—
—
—
The Netherlands
1,125
1,000
1,000
1,000
1,000
—
Norway
1,408
1,759
700
700
700
—
Sweden
—
2,081
1,000
1,000
1,000
—
Switzerland
265
251
252
252
252
—
UNCDF
100
100
100
—
—
—
United Kingdom
1,322
1,246
1,246
1,246
1,246
1,246
United States
450
350
350
—
—
—
World Bank
—
—
—
—
—
—
Subtotal Core Contributions
14,469
19,494
14,081
12,081
8,598
5,846
Designated Contributions
Bill & Melinda Gates Foundation (Indonesia)
900
—
—
—
—
—
Bill & Melinda Gates Foundation (Agents)
1,420
—
—
—
—
—
Bill & Melinda Gates Foundation (Gender)
1,496
—
—
—
—
—
Australia (G20 GPFI)
—
—
—
—
—
—
Bill & Melinda Gates Foundation (Interop/APIs)
1,668
—
—
—
—
—
Bill & Melinda Gates Foundation (Interop/APIs)
—
—
6,000
—
—
—
The Mastercard Foundation (Gateway Academy)
1,451
—
—
—
—
—
Switzerland (SECO-Ghana DFS)
978
749
271
—
—
—
United Kingdom (HIFI)
1,565
1,750
3,750
1,875
1,875
1,847
MetLife Foundation (Arab World)
528
—
—
—
—
—
Subtotal Designated Contributions
10,006
2,499
10,021
1,875
1,875
1,847
TOTAL
24,475
21,993
24,102
13,956
10,473
7,693
Note: Updated as of June 30, 2020
About CGAP
CGAP is an independent think tank that works to empower poor people, especially women, to capture opportunities and build resilience through financial services. We test, learn, and pioneer solutions through practical research and active engagement with our partners. The goal of all our work is to build responsive and inclusive financial systems that help move people out of poverty, protect their gains, and advance global development goals. Housed at the World Bank, CGAP is supported by over 30 leading development organizations committed to making financial services meet the needs of poor people.
About CGAP
CGAP is an independent think tank that works to empower poor people, especially women, to capture opportunities and build resilience through financial services. We test, learn, and pioneer solutions through practical research and active engagement with our partners. The goal of all our work is to build responsive and inclusive financial systems that help move people out of poverty, protect their gains, and advance global development goals. Housed at the World Bank, CGAP is supported by over 30 leading development organizations committed to making financial services meet the needs of poor people.