Helping people in developing countries access financial services
Small businesses account for over 45% of all employment in developing countries. Their growth is vital to creating jobs and increasing prosperity - yet they are typically thwarted by difficulty in raising finance.
More than 2.5 billion people have no bank accounts or insurance. We will help more than 50 million people have the means to work their way out of poverty, including giving 18 million women access to savings, credit and insurance through programmes to expand the reach of the financial sector, to serve the needs of poor people.
We support and encourage innovative financial sector trusts that work with governments, regulators and financial service providers to support financial sector development. For example, one of these trusts, Enhancing Financial Innovation and Access in Nigeria will help 10 million people get access to finance by 2015.
We support countries to strengthen their financial sectors by making them more stable, efficient and inclusive, so that they better support economic growth and poverty reduction. We fund the World Bank’s Financial Sector Reform and Strengthening Initiative which provides world class technical expertise and assistance to developing country regulators and policy makers. To date, the scheme has supported over 300 projects across 80 countries.
In complement to this, we work through the G20 Global Partnership for Financial Inclusion (GPFI) to engage the global standard-setting bodies - who set the overarching guidelines - to ensure the regulatory environment supports national efforts to increase access to finance for poor people and small businesses around the world.
Women’s access to assets and financial services
We work to help more women gain direct access to, and control over, economic assets. This includes support for increased access to financial services and financial literacy training, increased incomes through more jobs and better working conditions for women, and programmes supporting land reform and inheritance rights to secure women’s rights to own and use property.
We will make sure our cash transfer programmes reach women and support initiatives to give women and girls the skills, confidence and networks that will help them to keep hold of their economic assets and make productive use of them.
We are planning initiatives to improve access to financial services for over 18 million women, to help 2.3 million women access jobs, and to secure access to land for 4.5 million women (including in Rwanda and India).
We help poor people protect themselves from financial abuse and educate them to use financial services responsibly. Through innovative approaches to financial education pioneered by the Financial Education Fund across sub-Saharan Africa, we are working to build the financial capability of poor people, investing in them to manage their finances effectively and understand their consumer rights.
Development in information technology such as mobile phone is making it possible for poor people to receive financial services without having to travel long distances to bank branch and at affordable cost.
Over a billion people own a mobile phone but do not have a bank account. DFID support for the Consultative Group to Assist Poor technology programme alongside the Bill & Melinda Gates Foundation aims to use mobile phones and other technology to help 30 million people get better financial services.
For example, M-PESA is a mobile banking platform introduced in Kenya with DFID support. In Pakistan, we are supporting the mobile banking service easypaisa. Within just 2 years easypaisa covers a larger area than all the banks in Pakistan combined and has processed over 10 million transactions.
Microfinance facility for sub-Saharan Africa
Microfinance involves giving small loans and other financial services to poor people so they can start or carry on small businesses. We recognise microfinance as one of the established options for providing financial services to the poor. We will continue our work to build up microfinance institutions and the development of new products including micro-savings and micro-insurance.
DFID, in partnership with the World Bank, is developing the microfinance capacity building facility for sub-Saharan Africa. It aims to increase access to affordable and quality micro-finance services for the poor by building up the institutional, organisational and human capacity of microfinance institutions.
New Global Small and Medium Enterprise Finance Initiative
In the developing world, small and medium enterprises hold the key to creating new jobs and driving the economic growth that powers development. They employ, on average, two-thirds of the permanent, full-time workforce in the world’s poorest countries.
High transaction costs and high perceived risks prevent banks in developing countries from financing small and medium enterprises, leaving them unable to develop and create the new jobs that are urgently needed in many countries in South Asia and Africa. Therefore, it is vital to unblock commercial lending and allow entrepreneurs from the poorest countries to thrive. This is the aim of the Global SME Finance Initiative, which DFID funds through the IFC.
The UK’s investment of £75 million will help over 200,000 small and medium enterprises in developing countries to access capital, creating over a million new jobs over seven years (2012-19) and driving economic growth in some of the world’s poorest countries. At least a quarter of all loans will be for businesses headed by women.
Entrepreneurs in 15 of the poorest countries in Africa and South Asia are initially benefiting from the Initiative. The Initiative shares the risk of lending to small businesses among donors, development finance Institutions, commercial banks and financial institutions, and gives banks the technology they need to more accurately assess the risks of lending to small businesses.
This new and innovative approach to banking in developing countries will unblock an additional £5 billion of commercial lending to small and medium sized enterprises, enabling up to 35 commercial banks and institutions to improve their product offering, reduce their transaction costs and start lending.