Global Development Program: Financial Services For The Poor

Helping the Poor Manage Risks, Take Advantage of Opportunities, and Build Financial Security
Overview
People in developed countries have a relatively easy time accessing reliable financial services. They can go to a bank to open a savings account, go online to transfer money, file paperwork to apply for a loan, or buy insurance with a simple phone call. For poor people in developing countries, however, these processes arent just more complicated; they usually dont exist. Everyone needs ways to manage moneyespecially those with little to spare. But fewer than 10 percent of the worlds poor have access to safe, affordable financial services like savings accounts, loans, and insurance. These services can be powerful tools for the poor. For example, savings accounts can help the poor stem losses from risky and expensive methods of saving like hiding money in a mattress or buying animals or jewelry. By setting aside small sums of money in safe places, the poor can build assets, pay for important expenses like health care or farming supplies, start small enterprises, and invest in education and opportunities for the next generation. In recent years, growing attention has focused on the potential of microfinancesmall-scale ways of borrowing, accumulating, or transferring moneyto enable poor people improve their lives. While there have been inspiring efforts and progress, especially by the microcredit movement, billions of people in the developing world still do not have access to reliable financial services. Meeting that need sustainably, and ensuring that these services reach the poorest, will require additional efforts, and new models and approaches.

What We Do

Our Approach
The Bill & Melinda Gates Foundation is working with a wide range of public and private partners to help make microfinanceparticularly savings accountswidely accessible to poor people throughout the developing world. We fund innovative ways to lower the costs, increase the value, and expand the availability of financial services that reach the poor so they can build household financial security. By harnessing new technology and innovation, and by helping bring effective approaches to scale, we hope to help billions of people in the developing world gain access to safe, affordable financial services.
www.gatesfoundation.org

Support Innovations in Product Design and Delivery: Traditional financial services are often too costly and inconvenient for the poor to obtain, and too expensive for banks to provide. We fund innovations in product design and deliverylike mobile-phone banking and the delivery of financial services backed by banks through neighborhood storesthat make it possible to bring quality, affordable savings accounts to the doorsteps of the poor. Were exploring savings accounts that encourage saving for specific uses like education, health care, and retirement. We also support the design and provision of new productslike crop and health insurancethat can help address some of the biggest causes of poverty in the developing world. Help Reach the Poor at Scale: One way to dramatically increase the availability of financial services is to ensure that effective approaches reach as many people as possible. Were supporting efforts by a wide range of organizationsfrom commercial banks and credit unions to microfinance institutions and community savings groupsto expand successful approaches to providing safe places to save. For

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Global Development Program: Financial Services For The Poor

example, we are working with banks and retailers to develop viable business models that bring financial services into stores the poor can reach. Other approaches include helping link credit unions together to improve client service and efficiency, and assisting microfinance institutions with offering savings. Strengthen Underlying Financial Systems: Providing financial services to the poor requires a number of underlying systems that are not often widely available in the developing world. We work to link financial service providers to critical infrastructurelike payment systems and credit bureaus necessary to extend savings accounts to many more poor people. We also support the design and development of financial instruments that help banking institutions mobilize and manage the capital necessary to deliver these services safely and soundly.

Improve the Policy Environment: An effective policy environment makes it easier and safer for financial institutions to provide, and the poor to obtain, savings accounts and other financial services. We support developing country policymakers design and implement sound policies by linking them with peers who have identified best practices in similar circumstances. When appropriate, we support advocacy efforts that highlight the importance of financial services for the poor. We also invest in research, data collection, and policy analysis that shed light on promising approachesparticularly approaches that make it possible to provide ways for the poor to save safely through channels like stores, post offices, and mobile devices.

www.gatesfoundation.org

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Global Development Program: Financial Services For The Poor

Financial Services for the Poor Grants

Topic
Using technology for better banking

Grantee*
Consultative Group to Assist the Poor (CGAP)

Purpose
To test and promote the use of information and communication technologiescell phones, SMARTcards, and credit scoringto deliver microfinance products with lower transaction costs to more people. ($24 million over 4 years)

Location(s)
Worldwide

Innovations in Product Design and Delivery

Delivering financial services to rural areas

Opportunity International Inc.

To test a model of delivering savings, insurance, and loans to hard-to-reach rural areas through technology-enabled mobile banking units. ($2.2 million grant over three years)

Malawi, Mozambique

Microinsurance

Aga Khan Foundation USA

To design, test, and roll out new and viable insurance products for the poor in Pakistan and Tanzania. These will help low-income families protect themselves from financial shocks such as the death of a breadwinner or loss of business or crops. ($5.5 million over 5 years)

Pakistan, Tanzania

Innovations in Product Design and Delivery Expanding banking access for the poor ProCredit Holding, A.G. Grant and program-related investment (PRI) to increase access to banking services for microentrepreneurs, small businesses, and the poor in Africa. ($9 million grant; $20 million PRI over 4 years) Credit unions World Council of Credit Unions Inc. To increase access to savings and financial services by downscaling credit unions in developing countries to serve the poor and double their memberships. ($6.5 million over 3 years) Using technology To expand reach Dvelopment International Desjardins To expand access to financial services into remote areas by promoting urban-rural connectivity ($24.2 million over 5 years) Burkina Faso, Haiti, Mali, Togo, Vietnam Kenya, Rwanda, Africa

Improving the Policy Environment Maximizing the impact of microfinance New York Universitys Financial Access Initiative To conduct research and collect reliable data on the impact of microfinance on the poor, client preferences and behavior, and which policy tools can improveor hinderpoor peoples access to financial services. ($5 million over 5 years) Worldwide

www.gatesfoundation.org