Challenges

Financial inclusion policymaking often lacks an evidence base in the form of robust diagnostics, and reliable, inclusive data, rooted in people’s daily lives and realities, resulting in most of the population remaining unseen by both financial service providers and policy makers to facilitate financing to low-income market segments. By understanding the real needs of consumers, i.e., education, health, energy and productivity needs, governments and the private sector can ensure a conducive financing environment that builds markets for low-income consumers, thus contributing to broader national development objectives and the SDGs.  Least developed countries (LDCs) lack both detailed data to understand the market demand of consumers for businesses to invest in and at the same time lack the financing to facilitate better investments for growth, especially at the low-income end of the spectrum.  Providing consumer data on the use of financial services for their economic needs allows the financial sector to better understand and quantify the market for financial and other services, while allowing government to develop evidenced-based policies. 

Toward a Solution

Given these cross-linkages to national development objectives linked to building domestic financial markets, financial inclusion policymaking cannot be confined to a discussion with the central bank and the Ministry of Finance but needs to include a much larger set of institutional and private sector actors at a country level, resulting in long-term sustainable local ownership to enhance domestic financing. By providing in-depth data on livelihoods, diagnostics, and national level stakeholder platforms, the Making Access to Financial Services Possible (MAP) programme, implemented by the United Nations Capital Development Fund (UNCDF), solves a multifaceted problem, and ensures longevity through local ownership, in spearheading the development of domestic financing. 

MAP is a multi-country initiative to enhance financial inclusion in LDCs in support of inclusive growth, through a process of evidence-based analysis feeding into a financial inclusion roadmap jointly implemented by a range of local stakeholders. It is implemented in LDCs such as Benin, Burkina Faso, Cambodia, Democratic Republic of the Congo, Lao PDR, Lesotho, Madagascar, Malawi, Mozambique, Myanmar, Nepal, Togo, and Zambia, as well as non-LDCs such as Botswana, Eswatini, Thailand and Zimbabwe. It seeks to enhance participating countries’ productive capacity (SME development, access to energy), human and social development (education, healthcare, gender equality, social protection) and mobilize financial resources for broader national development objectives and the SDGs. As such, the programme contributes to Sustainable Development Goals (SDGs) 8 (Decent Work and Economic Growth), 10 (Reduced Inequalities) and 17 (Partnerships for the Goals), while indirectly contributing to SDG 1 (No Poverty) and 3 (Good Health and Well-being) as well as the Istanbul Programme of Action (IPoA) Priority Areas 1 (Productive capacity), 5 (Human and social development), 7 (Mobilizing financial resources for development and capacity-building) and 8 (Good governance at all levels). 

The programme integrates the strengths of two development approaches, successfully linking them as part of a common goal of achieving the SDGs at national level: the sustainable livelihoods approach, which focuses on helping the poor harness their own resourcefulness in alleviating poverty; and the making markets work for the poor (M4P) approach, which focuses on improving people’s lives via market systems development. MAP places the consumer at the centre while working to improve the enabling institutional and political environment, to grow the market ecosystem. MAP uses nationally representative, inclusive, livelihoods data on consumers, combined with other in-country data and analytics to anchor its initial diagnosis in the country and to conduct ongoing monitoring and measuring. Along with this, the programme provides a platform for highly effective stakeholder engagement and iterative testing and trialling of financial inclusion innovations based on evidence and aimed at real-world improvement. The approach relies on local ownership by ensuring the buy-in of key national entities at the earliest stage, as well as full government endorsement, which ensures the initiative has longevity for continued implementation. 

The MAP framework was designed to convene a wide range of stakeholders to participate in and own the development of national financial inclusion roadmaps and their implementation in 18 countries throughout Africa and Asia. This critically requires a deliberate focus on stakeholder engagement and buy-in from the outset, prior to initiating any data collection or diagnostic work. Therefore, responsibility for oversight of roadmap implementation is allocated to a committee of local stakeholders, led by the Ministry of Finance or the Central Bank, with the mandate and ability to influence the financial inclusion landscape, to ensure that they become active participants in the implementation of the roadmap. This also requires a well-defined technical framework and data validation and analysis for stakeholder coordination, to monitor sequencing, prioritizing, and budgeting for activities, usually provided by UNCDF. 

The programme ensures systemic, cross-country transfer of good practice and knowledge in four ways: 1) participating in global cross-country workshops where policy makers exchange learning on policy formulation and implementation; 2) engaging regional bodies responsible for financial inclusion to implement regional level  monitoring and evaluation, which provides an additional channel for sharing learning, and puts pressure on countries to implement and deliver their strategies; 3) replicating and scaling successful proof of concept implementation projects that demonstrate viability of roadmap actions across other participating countries; and 4) producing global level cross-country synthesis notes on lessons arising from country-level work. 

Findings from the use of the MAP tools have challenged conventional assumptions around financial inclusion and use by the low-income market, in the process contributing to the global pool of financial inclusion metrics. Furthermore, expanding the evidence base and understanding of the low income and particularly the informal segment in the 18 ‘MAP countries’, has pushed the boundaries of thinking in financial inclusion beyond just products but rather determining the extent and types of financing needs to create long-term pathways out of poverty. In terms of the Sustainable Development Goals (SDGs), the programme helped improve financial inclusion in all countries where follow-up data has been collected (SDG 8.10.2), as well pilot projects such as the widely successful cross-border remittance product between South Africa and Lesotho (SDG 10.c.1/SDG 17.3.2). The programme also contributes to the Istanbul Programme of Action (IPoA) Priority Areas 1?Productive capacity), 5?(Human and social development), 7 (Mobilizing financial resources for development and capacity-building), and 8?(Good governance at all levels). 

In 2020 alone, the programme benefitted nearly 2.5 million mobile money savers with newly allowed interest on mobile savings in Malawi. In addition, the programme supported the formulation of two MSME strategies (eSwatini and Malawi) through its diagnostic processes, and five clean energy investment case diagnostics (eSwatini, Lesotho, Madagascar, Malawi and Mozambique) in support of productive capacity and mobilization of finance. The programme also raised parallel funding for government policy implementation of at least $8.4 million across all participating countries. More recently, the programme has been working with governments in the Association of Southeast Asian Nations (ASEAN) region to link financial inclusion to inclusive growth, in support of the SDGs and the ASEAN 2025 Blueprint. Furthermore, the programme hosts global workshops on financial inclusion bringing together MAP participating countries from the Southern African Development Community (SADC), West Africa and ASEAN regions, which further supports South-South cooperation. 

The single greatest challenge facing development is turning research and strategies into implementable solutions. However, accurate research and diagnosis of a country’s problems, while crucially important, were not enough: they called for a means of supporting governments to forge strategic partnerships around solving their most pressing problems, to achieve their national ambitions. The MAP tools are central to supporting government and stakeholders in evidence-based decision-making towards smart, consumer-focused solutions. The programme partners extensively with the private sector to pilot innovative solutions for MSMEs, remittances, savings etc. However, for these to reach scale in order to achieve the SDGs, extensive public-private partnerships are required to adequately build vibrant local financing markets.