Opportunity knocks: Financial inclusion and the Sustainable Development Goals

by 25th Sep 2015
A village savings and loan association in Uganda A village savings and loan association in Uganda

Financial inclusion is a key enabler for the Sustainable Development Goals – but its key role will only be fulfilled if civil society, government and the private sector can work together really effectively.

A marked difference of the SDGs from their predecessor MDGs is the strength of their commitment to women’s equality, represented not just by the stand-alone women’s equality goal, Goal 5 “Achieve gender equality and empower all women and girls”, but also by a range of goals and targets which emphasise women’s access to and control over economic assets.

At CARE we strongly welcome these as we know that, for instance, access to appropriate savings vehicles is a proven intervention in improving women’s economic empowerment. However our experience shows us that while we can work very effectively with women to create Village Savings and Loan Associations (VSLAs) at very low cost and with no reliance on infrastructure, the VSLAs quickly get to the point where they need the security of a bank account and access to the additional credit that access to the formal financial sector brings. We have therefore been working with mainstream banks such as Barclays over the last few years to link our savings groups to them.

Our experience has shown the importance of civil society, the private sector and governments working together to support this access: banks need to design and implement new products which can be used by groups; governments need to change regulations to allow new types of accounts; and civil society organisations need to work with communities to develop financial literacy and support the definition of the products that VSLAs want access to.

Making the most of the opportunity

However, not everyone has yet recognised the scale of the opportunity that addressing the world’s 2 billion unbanked people represents: soon to be published research by CARE and Accenture, while pointing at the size of the opportunity, has also found that large numbers of banks in developing countries are not taking a strategic approach to the low income market. Further, while a number of countries, such as Rwanda, have incorporated VSLAs in their national financial inclusion strategy, a large number have not. Without everyone pulling together, the achievable aim of providing access to formal financial services for almost everyone on the planet, will not be achieved.

Financial inclusion should be an ‘easy win’ for all sides. While civil society and Southern governments have expressed concern about where the ‘means of implementation’ (cash, basically) for the SDGs is going to come from, financial inclusion can pay for itself. Reaching those on the lowest income is increasingly seen as being a viable business: group accounts cut the cost to serve, access to new deposits gives banks access to new, low cost funds for lending and investment, and an increased deposit base appears to be one of the most effective ways for a bank to improve its valuation by investors.

For countries, bringing citizens into the formal financial sector ensures new, low cost funds for investment in national development, as well as empowering citizens and supporting the informal businesses that are the only livelihood option today for up to 90% of the population.

Therefore we welcome the SDG concept of ‘global partnership’ (para 39 of Transforming our world) incorporating governments, civil society and the private sector. However, we need to get to detail beyond this high level aspiration. Over the next few years financial inclusion will be a key element of CARE’s commitment to improving the economic empowerment of 30 million women and we look forward to expanding our work with banks, telecoms companies and other businesses and engaging with governments to achieve this ambitious target as a key element of our contribution to the successful achievement of the SDGs.

Gerry Boyle

Gerry led CARE International UK’s policy analysis and advocacy around value chains and dignified work. He originally joined CARE as the Senior Policy Adviser on Private Sector Engagement. With the advent of our new Global Programme Strategy which put a particular emphasis on women’s economic empowerment, his focus changed a little.

Gerry co-chaired the Bond Private Sector Working Group. Immediately before he joined CARE he worked for Oxfam as Head of Business Relations for about three years, but the vast majority of his career was spent as a management consultant including being a consulting Partner at Deloitte, where for a time he led Deloitte UK’s Consumer Business consulting practice, serving many major multinationals. Gerry's original degree was in Law from Oxford University, and in 2008 when he left Deloitte he did an MSc in Philosophy and Public Policy at LSE.

One good thing I've read

Amartya Sen’s Development as Freedom. It provides a framework for many people’s modern understanding of what is development, based on a profoundly human-centred approach rather than anything instrumental. And to check whether one personally is doing enough to fight poverty, I recommend Peter Singer’s The life you can save: Acting now to end world poverty – it’s very clear and easy to read but very challenging! Finally, Ha-Joon Chang’s Bad Samaritans: Rich nations, poor policies, and the threat to the developing world is a very readable guide to economic development which argues strongly against many of the prevailing orthodoxies.

Twitter: @gerryboyle10