INCLUSIVE FINANCE

INCREASING ACCESS TO FINANCIAL SERVICES

THE CHALLENGE
Today 2.5 billion adults - more than half of the world’s As a means to broader development goals, financial
working adults - are excluded from formal financial inclusion is critical to the Post-2015 Agenda. Access to
services. This is most acute among low-income finance cannot be the privilege of a few, but should be
populations in emerging and developing economies, available to all and can be a means to reduce inequalities,
where approximately 80% of poor people do not have particularly for the most vulnerable, including those living
access. Including them in the formal economy is a critical in rural areas, women and youth.
contribution to poverty reduction, tackling inequality,
and fostering inclusive growth. Access to financial services is also essential to the ability
of businesses to invest, employ people, and grow and is
Access to formal financial services is essential to the therefore an essential element of an inclusive growth.
ability of individuals and households to manage their lives It is also tied to the financing for development agenda,
and build their futures. Positive correlation has also been especially in relation to mobilization of domestic
found between increased financial inclusion and lower resources, given the direct links between domestic saving
inequalities, showing that financial inclusion promotes rates and long term economic growth.
pro-poor growth.

© Microlead/ CARD
OUR APPROACH IN FOCUS
UNCDF’s mission is to reduce poverty in the world’s 48 least developed Mrs. Honewa Kuwik and her husband have
countries (LDCs); promoting financial inclusion is one of its key strategies been Oil Palm growers for the past 20 years
for doing so. UNCDF focuses first and foremost on LDCs with a special in the Galai oil palm Land Settlement Scheme
commitment to challenging environments – remote rural areas and countries area in Papua New Guinea. Like many rural
emerging from conflict. people, they saved their money by burying
and hiding it in and around their home, taking
For UNCDF, Financial Inclusion is achieved when all individuals and businesses turns to stay at home, in fear that their
have access to and can effectively use a broad range of financial services that savings would be stolen.
are provided responsibly, and at reasonable cost, by sustainable institutions
in a well-regulated environment. There is a strong consensus that increased One day, Honewa saw a MiCash Agent sign
levels of financial inclusion – through the extension of savings, credit, at her local trade store, West Eagle Trading.
insurance, and payment services – contributes significantly to sustainable She approached the agent, Mrs. Petronila
economic growth. Kinga, and explained that she wanted to open
a MiCash Bank account on her mobile phone
UNCDF is supporting 31 LDCs (20 in sub-Saharan Africa and 11 in Asia), and and deposit some money. Then she took out
serving 8 million active clients through the Financial Service Providers (FSPs) an old plastic shopping bag, removed layers
in which it invests. UNCDF has focused on supporting savings-led FSPs, given of rags and held out a collection of dirty
the dual benefit of FSPs using local sources to fund growth and positive crumpled notes and dusty old coins. “Where
findings from client impact studies on the benefits of savings. Sixty-five per did you get the money from?” asked the
cent of clients are women. agent, smiling as she opened the account and
transacted the deposit.
UNCDF has strengthened and continues to improve its systems to support
financial inclusion; it is ranked in the top two of all agencies scored by CGAP’s “I am cleaning my house now,” Honewa
SmartAid reviews since its inception: “Over the years, UNCDF has established replied. “I have taken out all the money I have
a solid base of good practice, whose oversight and execution lie with seasoned been hiding. In the past, I never felt free to
and competent professionals. Many of its strengths are reference points for leave my house, but now I can move around
peer institutions.” (CGAP SmartAid Report 2013). freely as I choose.”

Why Financial Inclusion MiCash is safe, flexible and easy to manage.

For rural people, this means no more traveling
“The poor are typically excluded from formal sector opportunities. They live and many kilometers and paying fares to go to
work in the informal economy—not by choice, but by necessity. They are both the bank or ATM. With MiCash the previously
producers and consumers, and they need financial access to build assets, create unbanked will now be able to deposit and
and sustain livelihoods, manage risks, and smooth consumption. withdraw cash at local agents where they
see the MiCash sign. Teachers and other
Without access to formal financial services, poor families must rely on informal government workers will be able to receive
mechanisms: family and friends, rotating savings schemes, pawn-brokers, their salaries and simply transfer their funds
moneylenders, money under the mattress. These informal mechanisms are on a mobile phone.
insufficient, can be unreliable, and are often very expensive. Thus, financial
exclusion imposes large opportunity costs on those who most need opportunity”
(CGAP, Strategic Directions 2014-2018).
© UNCDF/ Frederic Noy

OUR INVESTMENT INSTRUMENTS

UNCDF provides seed capital – grants and loans – and technical support through Inclusive Finance programmes to ensure
that more households and small businesses gain access to credit, savings, insurance and other financial services that
expand opportunities and reduce vulnerabilities.

UNCDF’s ability to provide risk capital directly to the private sector is helping bring new financial products to underserved
and hard to reach markets and spurring innovations. Through its flexible grant and loan instruments, UNCDF supports a
wide range of providers (e.g. FSPs, banks, cooperatives, money transfer companies, and mobile networks operators) and
financial products and services (e.g. savings, credit, insurance, payment services, remittances).

UNCDF is also paying particular attention to the new drivers of financial inclusion, especially innovative distribution
channels and technology. Increasingly a number of non-traditional players are involved in the design and delivery of
inclusive financial services. UNCDF is well-placed to help facilitate these partnerships that span public and private
sectors.
OUR WORK
COUNTRY PROGRAMMES: UNCDF inclusive finance CleanStart aims to lift people out of energy poverty
programmes help Financial Service Providers reach more through access to sustainable financial services that
poor households and small businesses and are tailored provide energy financing solutions. It assists leading
to the contexts of individual countries. UNCDF’s country institutions to develop financial products that will enable
programmes have recently been reoriented through off-grid poor people to afford clean energy technologies.
the development of Making Access Possible (MAP), It is supported by UNCDF, the Austrian Development
a diagnostic and programmatic framework to expand Cooperation, Norad and Sida.
access to financial services. The MAP framework creates The Pacific Financial Inclusion Programme (PFIP) is a
the space to convene a wide range of stakeholders around joint UNCDF and UNDP programme with support from the
an evidence-based country diagnostic which leads to the Australian Department of Foreign Affairs and Trade (DFAT)
development of national financial inclusion roadmaps. and the European Union. It helps to provide sustainable
MAP includes an integrated and holistic diagnostic that financial services and financial to low-income households.
shifts beyond the narrow supply-led focus to a broader PFIP has initiated and advanced a wide spectrum of
focus on the financial ecosystem. financial inclusion measures in the Pacific Islands including
financial competency, and mobile money solutions.
GLOBAL PROGRAMMES: Designed to complement
UNCDF country programmes by promoting product and ADVOCACY: To further financial inclusion, UNCDF is proud
institutional innovations that expand the frontiers of to provide support to Her Majesty Queen Máxima of the
financial inclusion. Netherlands in her role as the UN Secretary-General’s
MicroLead is a global initiative to support the development Special Advocate for Inclusive Finance for Development.
and roll-out of deposit services by regulated FSPs aiming UNCDF has been a strong promoter of responsible
to reach rural markets. Demand-driven products are finance and client protection, at the global advocacy level
offered via alternative delivery channels in combination (member of the Smart Campaign Steering Committee),
with financial education so that customers not only have as well as at industry level (engagement with national
access but actually use quality services. MicroLead is associations) and retail level (encouraging partner FSPs
supported by the Bill & Melinda Gates Foundation, The to subscribe to and implement the client protection
MasterCard Foundation and the LIFT Fund in Myanmar. principles).
YouthStart, carried out in partnership with The The Better Than Cash Alliance (BTCA) is an alliance
MasterCard Foundation, aims to reach youth in Sub- of governments, private sector and development
Saharan Africa with financial and non-financial services, organizations committed to accelerating the shift from
in particular savings and financial education that are both cash to electronic payments. The BTCA is funded by the
responsive to youth’s needs and protective of their rights. Bill & Melinda Gates Foundation, Citi, Ford Foundation,
The Mobile Money for the Poor (MM4P) programme aims MasterCard, Omidyar Network, USAID and Visa Inc. The
to adapt mobile money solutions to the more challenging UNCDF serves as the secretariat.
environment faced by many LDCs. It brings banks and
mobile network operators together to provide financial PARTNERSHIP WITH OTHER UN AGENCIES: UNCDF is
services to under-served and hard-to-reach markets, also active across the spectrum of inclusive finance issues,
particularly via mobile phones. The MM4P programme including remittances with IFAD, micro-insurance with ILO,
is supported by The MasterCard Foundation, the Bill and Agricultural Finance with IFAD and the FAO.
& Melinda Gates Foundation, Sida and the Australian
Department of Foreign Affairs and Trade (DFAT).
UNCDF’S WORK IN INCLUSIVE FINANCE
NEPAL
MYANMAR

NIGER
LAO PDR
BURKINA FASO SOUTH SUDAN
SENEGAL THAILAND
ETHIOPIA

LIBERIA
IVORY COAST
GHANA UGANDA
BENIN
TOGO
RWANDA
CAMEROON
BURUNDI
CENTRAL AFRICAN REP.
TANZANIA
DEM. REPUBLIC  CONGO

ZAMBIA

PAPUA NEW GUINEA

MOZAMBIQUE
MADAGASCAR
SOLOMON ISLANDS

SAMOA
LESOTHO
MALAWI VANATU

SWAZILAND
FIJI TONGA

UNCDF is the UN’s capital investment agency for the world’s more poor households and small businesses, and local
48 least developed countries. It creates new opportunities governments finance the capital investments – water
for poor people and their small businesses by increasing systems, feeder roads, schools, irrigation schemes – that
access to microfinance and investment capital. UNCDF will improve poor peoples’ lives. UNCDF programmes
focuses on Africa and the poorest countries of Asia, with a help to empower women, and are designed to catalyse
special commitment to countries emerging from conflict larger capital flows from the private sector, national
or crisis. It provides seed capital – grants and loans – and governments and development partners, for maximum
technical support to help microfinance institutions reach impact toward the Millennium Development Goals.

UN Capital Development Fund Cover: © MiCash

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