Financial sector development – financial services for all

An African woman sits at a table on which several mobile phones are lying and transfers numbers into a table.
Digital technologies play a central role in the development of the financial sector in developing countries. © John O’Bryan, USAID

A stable and efficient financial system is central to a well-functioning national economy.  Providing poor households, smallholder farmers and small enterprises with improved access to financial services can boost their involvement in economic life and reduce their vulnerability.

The SDC’s focus

The SDC has been active in financial sector development since the 1970s as an important strategy in poverty reduction. It focuses its efforts on promoting access to a range of client-centric, responsible and sustainable financial services for low-income households, smallholder farmers and small enterprises. The SDC also works to improve the financial inclusion of poorer households, i.e. their integration into the country's existing financial sector.

The SDC has long considered the promotion of savings to be a key first step in the financial integration of people with low incomes. It is therefore increasingly focusing on developing markets for agricultural insurance and disaster insurance schemes together with global reinsurance companies in order to break through this final barrier in financial integration.

To this end, the SDC prioritises the following:

  • For the clients: training courses for SDC target groups in general financial education with the aim of ensuring savings, insurance and credits and, thereby, also making access to institutional financial services easier.
  • For the service providers: support for financial institutions that have the capacity and willingness to build up their range of services for SDC target groups over the long term and in a cost-effective manner.
  • In terms of bolstering the financial sector, the SDC supports what are known as financial market infrastructures – a network of financial institutions or training centres, for example.
  • If certain conditions are restricting the positive development of a country's financial sector, the SDC relies on the support of and works together with legislative, regulatory and supervisory institutions.
  • The SDC plays an active role in international centres of expertise and networks such as the Consultative Group to Assist the Poor (CGAP) and the Social Performance Task Force (SPTF). Such organisations also help promote innovations and integrate relatively new topics such as digital technologies. The aims are to improve international coordination and harmonisation, exchange knowledge and experience, and support global and regional networks.

Background

A well-functioning financial sector is central to a country's economic development.  It offers the opportunity to mobilise savings to make productive investments. Providing private households and farmers as well as businesses with secure investment opportunities, access to payment transaction systems, credit and insurance services is essential in order to reduce income risks, achieve a more effective cushion against economic and market fluctuations and save for investments. Such investments can provide the basic foundation for an independent existence or for children's education. Crop and disaster risk insurance help smallholder farmers reduce their risks, which in turn increases their food security. An efficient financial sector accessible to all segments of the population has the effect of reducing poverty, both at the private household level and from the standpoint of the national economy. It also stimulates economic growth at all levels.

Current challenges

At present, poor people in many developing countries are largely excluded from the traditional financial system. They cannot open a savings account at a bank or apply for a small loan, for example. This is particularly true of rural regions, where the majority of the population have no access to such formal financial services.  Typical reasons for this deficiency are a lack of sales and service offices, high costs, insufficient infrastructure, services that are not geared to specific needs, and inadequate legal and regulatory frameworks.

As a result, poorer members of the population often have to resort to relatives, friends and other informal money lenders.  That is why the SDC works in financial sector development – to create enduring financial services for broad sections of the population who have so far had only limited, if any, access to such services.

The SDC also invests in new partnerships with the aim of attracting socially responsible commercial investors and works with other partners such as (local) commercial banks, insurance companies, leasing agencies and venture capital providers.

Microfinance

Financial services for poor sections of the population and microenterprises who have no regular access to the services offered by formal financial institutions.

Small enterprise finance

Small enterprises are of major importance in achieving broad-based development and employment. Yet often such enterprises have no access to services tailored to their needs.

Rural finance

Despite the major role they play in economic development, rural regions suffer from a massive deficit of financial services.

Micro-insurance

People in developing and transition countries tend to be exposed to a wide range of risks, such as disease, harvest failure, loss of income and theft, yet they have virtually no formal insurance protection.

Current projects

Object 85 – 96 of 1053

Resilience for Pastoralist Communities in Northern Kenya

01.09.2020 - 31.07.2025

Pastoralism is a millennia old livelihood strategy adapted to the marginal and harsh environ-ments of Arid and Semi-Arid Lands (ASAL). In order to support pastoralists, this programme contributes to strengthening public and private institutions in the water and livestock sectors, putting policy frameworks in place to ensure efficient county-wide and cross-border water and rangeland management systems, and to increase access to water and pasture.


Open source Health Insurance Management Information System (openHIMIS)

01.09.2020 - 31.12.2023

Many middle- and low-income countries strive to set up or expand national, district- or community- based health insurance schemes. For effective business processes bigger schemes require appropriate health insurance information management systems. Yet, countries have insufficient capacities to set up and manage such systems. The initiative aims to develop an open source, hence affordable and cost-effective ICT-based system with no restrictions on its use, change or distribution.


Innovations for efficient quality health systems

01.09.2020 - 31.12.2026

Despite enormous progress in access to healthcare in low and middle-income countries, nearly 9 million people still die every year in these countries because of poor quality of care. SDC supports the establishment of a global design lab for the development of innovative tools to enhance quality measurements that form the base for cost-effective investments into quality improvements. The lab will benefit from Swiss research knowhow.


Local Economic Development (LED) Project

01.08.2020 - 30.09.2029

Small and medium entrepreneurs, their employees, and citizens will benefit from inclusive economic growth and equitable employment generation. Public and private sector actors will engage in joint local economic strategizing, planning and implementation. The improved framework conditions for inclusive business will result in more jobs, economic empowerment and ultimately increased sustainable income and well-being; particularly of the poor and disadvantaged.



The "Bosnia i Herzegovina"-Platform

01.07.2020 - 31.12.2025

The Bosnia i Herzegovina Platform (BiH) is an initiative of diaspora associations that are already involved in development activities. The platform will enhance cooperation and strengthen the diaspora associations’ role as development actors. SDC aims at promoting the potential of migrants for sustainable development mainly through improved framework conditions. The permanent platform as an effective and dynamic network will set the grounds for competent coordination services to diaspora organizations, to the country of destination and to the country of origin.


Horn of Africa: One Health Units for Humans, Environment, Animals and Livelihoods

01.07.2020 - 30.06.2032

The project aims at improving the well-being of targeted pastoral communities challenged with inadequate access to basic health/veterinary services and environmental conditions in Somalia, Ethiopia and Northern Kenya through integrated health service delivery for both pastoralists and their livestock. The project will contribute to stability and vulnerability’s reduction of citizens in the region, thereby reducing their displacement/migration which is in the interest of Switzerland and the international community.


Global co-operative movement for health

01.06.2020 - 31.12.2026

Many low- and middle-income countries strive to extend access to essential health services to the entire population. The private co-operative movement has potential to complement government efforts by providing efficient low-cost services for rural populations and informal sector workers. Following the principle of subsidiarity, SDC help the movements’ efforts establish a global platform for capacity strengthening of co-operatives.


FAO Desert Locust Emergency Response in the Horn of Africa Region

20.02.2020 - 19.02.2021

To control the spread of the worst outbreak of desert locusts in decades in the Horn of Africa (Somalia, Ethiopia, Kenya) and safeguard livelihoods of thousands of affected vulnerable households, Switzerland intends to contribute to the regional desert locust crisis appeal by the Food and Agriculture Organization (FAO) of the United Nations. 


UNMAS: Regional coordination for Mine Action

05.02.2020 - 04.10.2020

SDC will support UNMAS to consolidate and expand the Mine Action Authority (The Office of the High Counsellor for Peace - Descontamina Colombia) capacity to coordinate with regional and local authorities in 13 prioritized mine-affected departments, ass well as with other public socio-economic development policies. This will ensure transition period to new local and regional governments and the inclusion of Mine Action public policy in the general planning of 13 prioritized departments, facilitating the improvement of efficiency and efficacy of Mine Action in the field. It will build on a project previously financed by the UN Multipartner Trust Fund for Sustaining Peace, within the implementation of the Peace Accord and the MIne Ban Treaty's obligation to have a mine-free country. 


Contribution to the VII Regional Platform on Disaster Risk Reduction in the Americas and the Caribbean

01.02.2020 - 31.07.2021

Financially support the Regional Platform on Disaster Risk Reduction (DRR) in Jamaica 2020 (RPDRR 20) co-convened by CDEMA and UNDRR with a non-earmarked contribution to the overall costs and thereby assist implementation of the Sendai Framework in the Americas. Accompany this contribution by providing assistance in the preparations relying on the experience from previous platforms and the GPDRR 19 and support the participation of key stakeholders in the Americas that exhibit their activities in collaboration with SDC.


Mercy Corps - Building Resilience in Conflict-Affected Communities (BRAC)

01.02.2020 - 31.01.2022

South Kordofan is one of the areas in Sudan were the armed conflict is temporarily halted, but not yet solved, and many communities are still suffering from its consequences. These communities are hosting significant numbers of IDPs and refugees from war torn South Sudan, who share the very limited available resources. The project aims at increasing the resilience of female and male members of vulnerable households to economic, social and climate related shocks through improved access to gender responsive basic services and increased agricultural production.

Object 85 – 96 of 1053