A boost for financial inclusion

Global investment in affordable financial services for the poor has risen by an average seven percent per year since 2011, a World Bank think tank said in a survey released on Wednesday.

The annual Funders Survey by the Consultative Group to Assist the Poor (CGAP), which analyses trends in international funding for financial inclusion, found that donors had allocated at least $31 billion (20.9 billion pounds) in 2013, up from $29 billion (19.5 billion pounds) the previous year.

Ways of giving the poor access to financial services can be anything from opening a bank account to give them easier access to credit and encouraging them to save, to making small grants and providing them with microcredit.

Public donors like development financial institutions accounted for 75 percent of financial inclusion funding in 2013 despite persistent strains on the global economy, the CGAP said.

Commitments from the private sector – foundations, institutional and individual investors – fell by around 2 percent annually between 2011 and 2013, the survey found.

Most funding commitments were directed to sustaining the growth of financial service providers, and eastern Europe, central and south Asia received the majority of funds. But the largest number of financial inclusion projects took place in sub-Saharan Africa, the survey’s authors said.

“Advancing financial inclusion requires more than expanding the supply side,” said Estella Lahaye, financial sector specialist at CGAP and co-author of the report.

“It requires an … approach that aims to build markets that include and serve poor people.”

Financial inclusion projects have long been considered an effective way of helping reduce poverty worldwide.

In recent months, a group of leading economists has challenged the effectiveness of initiatives such as microcredit, and has published research showing there was no clear evidence it reduces poverty.

This article is published in collaboration with the Thomson Reuters Foundation Trust.org. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Maria Caspani is a journalist at the Thomson Reuters Foundation, covering humanitarian crisis and women’s rights.

Image: U.S. one dollar bills blow near the Andalusian capital of Seville. REUTERS/Marcelo Del Pozo.