Innovative approaches to financial systems development
Project description
Title: Sector Programme Innovative approaches to financial systems development
Commissioned by: Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Global
Lead executing agency: Federal Ministry for Economic Cooperation and Development (BMZ)
Term: 2018 to 2021
Context
Roughly 1.7 billion people worldwide do not have access to financial services, primarily in developing countries and emerging economies. This particularly affects poorer population groups, women and young people, and forcibly displaced persons.
More than 200 million micro, small and medium-sized enterprises (MSMEs) also have difficulty in securing financing. Forty per cent of registered MSMEs in developing countries have financing needs and no opportunity to meet them. As a result, necessary investments are not being made, and yet MSMEs provide two thirds of all formal jobs in developing countries and up to 80 per cent in low-income countries.
Investments are also required for implementing the United Nations 2030 Agenda for Sustainable Development. The Agenda places great emphasis on the importance of inclusive, stable and efficient financial systems: six of the 17 development goals explicitly mention access to financial services.
A number of international organisations and programmes stand firmly behind this objective and actively support efforts to make access to financial services possible for all. Key supporters include the G20 countries, the Addis Ababa Action Agenda on Financing for Development, the United Nations Framework Convention on Climate Change and the reform partnerships with Africa.
Financial systems development faces the challenge of responding to global developments and issues with innovative solutions. Topics include digital financial services via mobile phones, the internet or card systems; sustainable financing models for adapting to climate change; and financial services for forcibly displaced persons. The approaches and instruments of financial systems development must be continuously developed and the experiences gained processed and disseminated. This drives more effective implementation and helps shape national and international discussion.
Objective
Innovative approaches to financial systems development are gaining in importance in German development cooperation and in the international development policy debate.
Approach
The project works to develop, test and establish innovative approaches on financial systems development. The focus lies on financial inclusion and digitalisation, MSME financing, sustainable financing and investment, and the development of local financial and capital markets.
The 1.7 billion people worldwide without access to financial services make up the target group. Particular attention is awarded to economically disadvantaged population groups, especially young people and women, and forcibly displaced persons. Financial systems development also addresses the needs of self-employed persons and owners of MSMEs who lack the financing required for making necessary investments.
One focus here is on the African cooperation countries of German development cooperation. Innovative approaches to financial systems development used in German and international development cooperation projects aim to reach out to the relevant people.
Other participants and implementation partners include national and international institutions and networks, investors, experts and managers from central banks, regulatory and supervisory authorities, ministries, associations, national and international financial institutions, digital financial service providers (FinTechs) and German implementing organisations.