Promoting financial inclusion

Project description

Title: Promoting financial inclusion
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Democratic Republic of the Congo
Lead executing agency: Ministry of Finance
Overall term: 2019 to 2022

Context

Thanks to rising commodity prices, the Congolese economy recovered slightly in 2018. However, its growth rate of 4.1 per cent is far behind the level of previous years. For example, from 2006 to 2015, growth averaged 7 per cent.

The financial sector in the Democratic Republic of the Congo (DRC) remains severely underdeveloped. Bank loans to the private sector account for only 8 per cent of the country’s gross domestic product (GDP). This is the lowest rate a regional comparison. One positive aspect is the progressive expansion of the services offered thanks to the development of digital financial services.

Micro, small and medium-sized enterprises and low-income households make insufficient use of formal financial services. Yet this is a key prerequisite for sustainable economic growth, from which even poorer segments of the population can benefit. Sustainable and responsibly used financial services foster economic development by enabling investment in health, education and income-generating activities.

There are signs of continuing improvement in financial inclusion in the DRC. Between 2014 and 2017, the percentage of people with a bank account rose by 9 per cent. Nevertheless, 74 per cent of about 40 million adults are still excluded from the formal financial system and thus restricted in the development and expansion of their economic activities. 

Objective

Micro, small and medium-sized enterprises and low-income households make greater use of financial services.

Approach

The project strategy builds on the results of the preceding project and paves the way for micro, small and medium-sized enterprises and low-income households – especially in mining regions – to benefit from financial services. The project operates mainly in the provinces of North Kivu, South Kivu, Haut Uélé, Haut Katanga and Lualaba.

As part of the German development cooperation programme Sustainable Economic Development in the DR of Congo, the project provides support in the following areas: 

• Financial literacy: Financial literacy gives consumers and enterprises the necessary knowledge, self-confidence and trust in formal financial service providers to make informed decisions and choose the financial services appropriate for them. For example, the project trains trainers and multipliers. They pass on their knowledge to the customers of financial service providers as well as to the general population and employees in mining areas.
• Financial services: The project supports financial service providers in their efforts to tailor their products and distribution channels more closely to consumer needs, especially in mining areas. To this end, they are given a better understanding of the target group and taught how to develop suitable products and expand their networks.
• Information on the use and range of financial services: The aim here is to give financial service providers sound, gender-sensitive information about the needs of micro, small and medium-sized enterprises and of households in mining areas. Studies and research on the target groups are aimed to spark the interest of the financial service providers, highlighting the market potential and making risks measurable. Better information is an important prerequisite if the financial service providers are to make their services more suitable.