1. Titel: Powerpoint Mustervorlage
Eidgenössisches Departement für auswärtige Angelegenheiten EDA
Direktion für Entwicklung und Zusammenarbeit DEZA
M4P & Financial Sector Development:
Looking at financial components
of agricultural/rural programmes
Discussing good and bad practices
Jane Gisin, Peter Beez, Hans Ramm
Focal Point e+i
4. 4
Key M4P Principles
Facilitation role:
M4P means avoiding direct delivery of services by the
project: so don’t even think of providing loans or other
financial services directly by project!!!
This is work for specialized professional organizations,
finance is complicated!!
Facilitate initiative of market players, local or
international, whatever is necessary
5. 5
Key M4P Principles
Strengthening / deepening of market development:
Support of existing, ideally the most suitable financial
intermediaries from the viewpoint of SDC target groups
(e.g. social mission, professional capacity, financial
leverage)
Support policy-makers in setting right incentives through
regulation (change systems!)
7. Areas for Smart Subsidies
in Financial Inclusion
● Facilitate access for all to basic services/common goods
(financial services) by capacitating financial intermediaries
• Creating new markets (green fielding)
• Improve markets (depth, breadth, linkages) through promotion of
transparency, responsible finance practices, “client first”, “best
practice” management, competition
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● Strengthening social capital and financial literacy
● Support to the development of policy, regulatory and
supervisory framework
● Foster the infrastructure of the financial system (networks,
associations, rating agencies, credit bureaus etc.)
8. Dos and Don‘ts for Smart Subsidies
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Dos
■ Public goods (e.g. financial education, research,
infrastructure, regulation)
■ Capacity building at all levels
■ Subsidies to subjects instead of objects where
possible
9. Dos and Don‘ts for Smart Subsidies
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Dos
■ Assure ownership of partners
■ Performance-based
■ Cost sharing
■ Risk sharing
■ Leverage
10. Dos and Don‘ts for Smart Subsidies
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Don‘ts
■ No interest rate subsidies
■ No long-term subsidies
■ No crowding out of private initiative
■ No excessive subsidies
11. SDC PCM Manual – Essentials
Importance of Context Analysis (in-depth as usual in M4P):
What information does already exist?
What information do we need to resolve bottlenecks in the
financial sector?
Important steps to be taken into consideration are:
(1) Financial Sector Analysis
(2) Target Group Analysis
(3) Institutional Analysis
(4) Framework Conditions at Macro Level
(5) Risk Analysis
SDC Contract Templates for Financial Intermediaries:
Performance-Based Grant Agreement
Loan Agreement
Guarantee Agreement
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12. Key Messages
If you do an FSD project or just an FSD part in your
PSD or any other project:
No direct delivery of financial services!!
Facilitate change of systems
Involve professionals to develop
And:
Have a look at SDC’s Policy for Financial
Sector Development; then you will be
consistent with M4P principles and do a
professional job
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13. Resources
SDC - shareweb on financial sector development:
www.sdc-employment-income.ch/en/Home/Financial_Sector
SDC Development Aid and Subsidies – An Art
SDC Financial Sector Development Policy
SDC PCM Manual for FSD
CGAP Pink Book
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14. Additional Slide: SDC Policy – Key
Areas of FSD
Rural Finance: agricultural + non-agricultural activities
coping with high transaction costs in rural areas
coping with high agricultural risks of wheather, disease …
meeting medium- to long-term credit needs
Microfinance: poor households (women!) + micro enterprises
expanding breadth: how reaching 'ultra poor' (graduation)
maintaining social mission despite commercialisation
Insurance
Life and health: microinsurance for low-income people
Casstrophic: reduce livelihood risks caused by natural
disasters
Crop/animal insurance: allows for more risk taking, more
investment, more income 14
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Additional Slide: Promoting retail
capacity: Up-Scaling
Institutional capacity-building of microfinance providers
by supporting:
rapid expansion in breadth and depth
implementing social mission (avoiding mission drift)
transformation into regulated financial institutions
"green field" as special case
- technological innovation with palm pilots + reaching also
'very poor' at SafeSave / Bangladesh
- evolution from credit funds into credit & savings associations
+ establishment of Albanian Savings & Credit Union
- rural windows for credit & savings co-operatives in Equator
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Additional Slide: Promoting retail
capacity: Down-Scaling
Motivate banks to serve low-end market segments:
introducing methodologies and banking technologies on how to target
poor client households, farmers and small enterprises (research, product
development, MIS, service company model)
efficient approach in expanding "access" where banks exist and bank
management perceives these new client groups as valuable (profitable)
clientele
can offer different financial products at better conditions than MFIs
bank can better diversify risks (rural banks with development mission and
professional management)
- Medium- to long-term refinancing combined with TA in cash-based
lending methodologies, product development (e.g. instant loans with
disbursements in 48 hours; house improvement loans) in Balkan
countries by European Fund for Southeast Europe (www.efse.lu)
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Additional Slide: Promoting Retail
Capacity: Linkage
Bringing self-help groups, their
associations and other semi-formal
microfinance providers together with
formal financial institutions:
facilitate reducing of risks and
transaction costs for clients, clients'
organisations and formal financial
institutions
Self-Help Group Model: collaboration
with NABARD / India
