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Microfinance and Financial Inclusion

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At a Glance


With 2.5 billion adults lacking access to financial services, improving access to finance affords many development opportunities. The World Bank’s Global Financial Inclusion Database (Global Findex) reports that three quarters of the world’s poor lack a bank account because of poverty, costs, travel distances, and the often burdensome requirements involved in opening an account. Only 25% of adults earning less than $2 a day have saved at a formal financial institution. Being “unbanked” is linked to income inequality: the richest 20% of adults in developing countries are more than twice as likely to have a formal account.


Improving access to responsible finance has a positive impact on:


·         Household access, which helps families build assets, manage risks, and smooth consumption. An increasing body of evidence shows that when the appropriate service is matched with the needs of poor clients, financial services can lead to increased income and improved health and education, allowing children more days in school and families more regular meals.


·         Micro, small, and medium enterprises, which are, collectively, the largest employers in many low income countries. Yet, their growth is often stifled by lack of access to credit and savings services that would enable them to invest in fixed capital, grow their turnover, and employ more people.  Savings, insurance, and payments services are also needed for firms to better manage risks and make new investments.


·         Spurring growth and reducing inequality, which is aided by integrated and universal financial systems. The G20 has made financial inclusion a permanent policy priority by establishing the Global Partnership for Financial Inclusion (GPFI)which counts the World Bank, IFC, and CGAP as implementing partners.


Over the last few decades, different types of financial services providers for poor people have emerged to offer new possibilities—non-government organizations; cooperatives; community-based development institutions like self-help groups and credit unions; commercial and state banks; insurance and credit card companies; telecommunications and wire services; post offices; and other points of sale.


Financial delivery systems can improve the efficiency and reduce the costs of public policy interventions. For example, Brazil’s Bolsa Familia shifted its government payments onto one electronic benefit payment card. As a result, transaction costs fell by 12.1 %, resulting in billions of dollars in savings. Mobile money--financial services such as payments and savings delivered through cellphones-- is promising as a means to dramatically reduce costs. It enables greater outreach to more people in isolated areas and can be safer and more convenient.


Within the World Bank Group, different institutions work together towards responsible financial inclusion:


The World Bank is the leading global development partner for governments and regulators for financial inclusion, Their support includes policy advice, data and diagnostics, technical assistance for legal and regulatory reforms, institutional development, risk-sharing, and financing.  The World Bank has an active financial inclusion portfolio of over $3 billion, with lending and technical assistance projects in over 60 countries. In 2012, this portfolio reached 24.5 million micro, small, and medium enterprise (MSME) clients.


Led by the Financial Inclusion Global Practice and its international network of over 170 financial specialists, the World Bank takes a comprehensive approach to working with governments and regulators towards creating financial inclusion. The World Bank supports increased access to a range of financial products and services through: i) policy and regulatory reforms for micro and SME finance, ii) the development of sound and efficient financial infrastructure for payments, supply chain finance, credit information, and collateral frameworks, iii) innovations to reach poorer households, including through Government to Person Payments linked to financial accounts, and iv) responsible finance, through consumer protection and financial capability (CPFC). The World Bank also partners with countries to support national strategies for financial inclusion and provides data, technical assistance, financing, and capacity building to support the implementation and sustainability of these strategies. 

The World Bank’s global surveys provide data and insights on financial inclusion, including the Global Financial Inclusion Database (Global Findex), a Bill and Melinda Gates Foundation funded survey of 150,000 people in 148 countries, implemented with Gallup, and the Global Payment Systems Survey (which covers financial infrastructure related to payments and mobile money, in 142 countries).  Country-level diagnostics and surveys on financial sector development, SME finance and consumer protection are conducted globally, with World Bank support.

IFC is the World Bank Group’s lead investor in microfinance in terms of volume and is one of the leading multilateral investors in terms of reach to microfinance institutions, working with 150 institutions in more than 60 countries.  As of December 2011, IFC's combined investment and advisory reach through our financial institution clients reached an estimated 19.7 million micro loans for a total $19.8 billion outstanding portfolio. In fiscal year 2012, IFC committed $546 million in 51 projects with financial institutions.

IFC works to create and support commercially viable microfinance institutions that can attract capital to scale up and meet demand. Since pioneering commercial microfinance in the early 1990s, IFC has led innovation in microfinance, using technology, financial products, and policy to help financial institutions reach a greater numbers in a more cost-effective way. As of June 30, 2012, IFC had a $2 billion microfinance investment portfolio, and $53.6 million in advisory services, representing technical assistance for 70 projects.


As a leader in SME finance, IFC provides investment and advisory services to SMEs in over 33 countries.  By  December 2011, IFC’s SME loans totaled US$ 3.3 million, for a $181.3 billion outstanding portfolio. Through the SME Finance Initiative framework, which provides advisory support and financing to banks targeting SMEs in under-served markets, the IFC launched the Global SME Finance Facility, a global platform that blends donor funding with funding from international development institutions to expand lending to small businesses in emerging markets, and the SME Finance Forum, an online hub for data, research, and best practices.


CGAP (Consultative Group to Assist the Poor), is a global policy and research center dedicated to advancing financial access for the world's poor. As a multi-donor partnership housed at the World Bank, it is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. CGAP promotes standards, develops innovations, and shares knowledge and best practices. It also offers advisory services to governments, financial service providers, donors, and investors. 


CGAP is widely recognized as the leading global knowledge resource for financial inclusion, offering vital information through its renowned publications and online knowledge resources that include the Microfinance Gateway and the CGAP Blog, which covers innovative trends in microfinance and technology.


CGAP projects cover a wide range of topics on financial inclusion and microfinance. Focus areas include developing new business models for mobile banking and promoting effective policy frameworks for branchless banking. CGAP also leads an innovative global program to understand how safety nets, livelihoods, and microfinance can be sequenced to create pathways for the poorest out of extreme poverty.


Media Contacts


Nicole Frost, World Bank, FPD (202) 458-0511                                                                                                                 

John McNally, IFC   (202) 458 0723                                                                                                   

Jeanette Thomas, CGAP (202) 744-4829 


 Updated September 2012


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