Why financial sector development?
Stable, efficient financial systems are an elementary aspect of any national economy. Providing poor households, farmers and small enterprises with improved access to financial services can boost their involvement in economic life and reduce their vulnerability.
At present, poor sections of the population in many development countries are largely excluded from the formal financial sector. This is particularly true of rural regions, where more than 90% of the population often have no access to formal financial services. Typical reasons for this deficiency are a lack of sales and service offices, high costs, insufficient infrastructure, service offerings that are not geared to specific needs, and inadequate legal and regulatory frameworks.
As a result, poorer members of the population often have to resort to relatives, friends and other informal money lenders. Such informal options, however, rarely produce funding for investments.
What are the aims?
In the context of development policy, financial sector development aims to create enduring financial services for broad sections of the population who have so far enjoyed only limited access, if any, to such services.
A well-functioning financial sector is of paramount importance to a country's economic development. It offers the opportunity to mobilise savings for use in productive investments that create income and employment. Providing private households and farmers as well as businesses with access to secure investment opportunities, access to payment transaction systems, credit and insurance services is essential in order to reduce income risks, achieve a more effective cushion against economic and market fluctuations and save for larger investments such as children's education or setting up a business. Insurance against poor crops and natural disasters is particularly crucial in reducing the risks incurred by small farmers. It serves to increase productivity, thus strengthening food security. An efficient financial sector accessible to all segments of the population has the effect of reducing poverty, both at the private household level and from the standpoint of the national economy. It also stimulates economic growth at all levels.
How are they achieved?
“SDC supports its partners in their development, while aiming at sustainability and maximum depth and breath of outreach (access), by strengthening financial sectors at four levels:
SDC gives priority to rural areas and to capacity development in its FSD projects, and intervenes particularly at the first three levels mentioned above.” (SDC Policy for Financial Sector Development)
What will you find on the financial sector development pages?
Under topics, you find a short introduction to each topic of FSD with relevant documents, events, trainings and links. The Resource Box provides you with a manual along the PCM for your FSD projects as well as a selection of different case studies. You find an overview of all projects, events & trainings in the realm of financial sector development under the specific tab. Or you can also explore the latest saving and credit forum, or relevant partners. Last but not least, under reference indicators, you find the official mandatory aggregated reference indicator (ARI) from SDC for FSD, as well as further helpful documents on indicators for FSD.
For downloading our FSD Factsheet, please click here (for the German version here; for the French version here).
Our colleague Zenebe Uraguchi (HELVETAS Swiss Intercooperation) has edited this book together with his colleague Essam Mohammed (IIED, London).
The key objective of the book is to provide practical case studies of financial inclusion, rather than focus on academic debates such as the ideological basis of promoting microfinance. Using the recently adopted Sustainable Development Goals as an overall framing of the issues, it shows how poor and disadvantaged women and men can be bankable if the right facilitation for maximizing opportunities and addressing constraints are in place.
>> read more and have a look at the table of contents
>> or read the blog post: "We wrote a book and this is what we learnt about financial inclusion" by Zenebe himself, giving the major findings of their book.
Why and how formal savings services matter to low-income and vulnerable households
This Glossary includes the most important terminologies and definitions about e+i result measurement.
This Glossary includes the most important FSD terminologies and definitions.
In this paper, Christian Brändli from SECO and Luca Etter from SDC provide an overview on Social Impact Bonds (SIB) and put light on this "new" instrument for donors, listing critical questions and factors to consider before setting up a SIB.
A very well written must-read for everybody who participated at the Savings and Credit Forum on "Blended Finance" in September 2016, and is impatiently awaiting the next in March 2017 on Social Performance Management and Reporting Practices of Financial Institutions and Microfinance Impact Investors.
Social Impact Bonds (SIB) are a relatively “new” instrument for donors to finance development interventions. SECO and SDC have both launched projects that use a variation of SIBs in their partner countries. This paper explains the most important aspects of SIBs and lists critical questions and factors to consider before setting up a SIB. The paper is work in progress and aimed as an input for colleagues who are considering an SIB. It does not represent an official position.
The Global Programme Food Security and the Employment and Income Focal Point are pleased to share this Global Brief on “Agricultural Insurance: offering hope forthe future to smallholder farmers”.
For smallholder farmers in developing countries, extreme weather events, such as droughts or floods, can cause substantial losses and jeopardize their livelihoods. Supporting insurance schemes for smallholder farmers means offering them the possibility to manage the many risks confronting them more effectively, protecting their investments and increasing their resilience.
The purpose of this medium term orientation is to define the thematic and methodological priorities that SDC’s focal point and network on Employment and Income (e+i) will pursue over the next five years.
Given the increasingly clear link between financial inclusion and
development, governments should continue to push for greater access to
and use of financial services.
This note is addressed to programme staff of the Swiss Agency for Development and Cooperation and other interested development professionals. Its aim is to help them to assess the effectiveness of their activities and their support especially with regard to the possible effects of subsidies. The paper consciously abstains from giving a comprehensive theoretical overview on the complex topic of subsidies, but focuses rather on common practical questions and concerns in development cooperation.
In Chapters 1 and 2, a short overview on the delimitation of subsidies is given, without going deeply into the theory of Economics and Social Welfare.
Chapter 3 lays out the rationale for subsidies especially with regard to governments and development agencies.
Chapter 4 provides an overview of the most common types of subsidies in development cooperation, with practical examples as illustrations.
Chapter 5 lists a series of important questions to be asked or looked into at the time of project and programme planning, implementation and monitoring.
Chapter 6 summarizes important lessons learnt with regard to objectives, policies and results. They build on the examples given in Chapter 4.
Chapter 7 draws attention to some readings on subsidies related to development work.