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

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Competitive Industries and Innovation Program

03.10.2012 - 31.03.2022

Competitiveness strategies have recently gained renewed attention by focusing on specific industries. They target policies and public investments, catalyze private investments, and foster innovation systems with a view to growing those industries and therefore supporting job creation.


Partnership on Sustainable Urban Development - Phase II

01.07.2012 - 30.06.2023

The WB Trust Fund for Sustainable Urban Development - Phase II, is a continuation of the existing strategic cooperation with the World Bank on sustainable urban development. It will support cities in developing countries to sustainably plan and manage urban development with the help of evidence provided by the program.


The Sustainable Trade Initiative IDH

01.07.2012 - 31.12.2021

IDH is a neutral convener that brings together companies in a safe pre-competitive arena, acts as facilitator to organize cooperation between companies, NGOs, governments, knowledge institutes, banks and trade unions. IDH kick-starts sustainability programs by co-funding and de-risking private investments, and helps exploring new concepts that will help create scalable, self-sustaining solutions that deliver impact at scale on Sustainable Development Goals, with a focus on: improved livelihoods of smallholder farmers and increased, decent incomes for workers to help end poverty (SDG1), promote inclusive and sustainable economic growth (SDG 8), improve gender equality (SDG 5), nutrition (SDG 2) and help to halt deforestation (SDG 15) and reduce toxic loading.


Syrdarya Water Supply Project

30.05.2012 - 31.12.2021

In 2011, the World Bank approved a large water management project in the predominantly rural Syrdarya region with a WB-IDA-share of USD 88 million, in which the participation of the Swiss State Secretariat for Economic Affairs SECO with a parallel financing was sought. The SECO project is a complementary and self-contained operation. It comprises (i) an investment component aimed at the rehabilitation of the Beshbulok water pumping station and its well fields, a backbone of regional water supply and of Gulistan the capital of Syrdarya province (260'000 inhabitants). It also includes targeted physical investment measures in selected villages in the vicinity of Beshbulok- and (ii) an institutional component consisting of a corporate development programme for three pilot water utilities (Bukhara, Samarkand, Syrdarya) and a limited number of selective and targeted regulatory framework measures. The objective of the institutional component is the creation of a sound basis for financial and operational sustainability of the three water utilities.



Waste Water Treatment Plant in Thala and Feriana

01.03.2012 - 31.12.2021

This project aims at implementing wastewater infrastructure in the cities of Thala (15'000 inhabitants) and Fériana (27'000 inhabitants) in the Governorate of Kasserine, Tunisia. The infrastructure includes the financing of the treatment plants, the extension of the wastewater networks and pumping stations for both cities.


Emission Reduction in Cities - Solid Waste Management IND

01.01.2012 - 31.12.2020

Cities are important producers of greenhouse gases and at the same time highly affected by the impact of climate change, e. g. by more frequent flooding events which lead amongst others to loss of property and a spread of diseases. Solid waste management is part of Indonesia's strategy to address climate change. The programme foresees to support investments in solid waste treatment in different Indonesian cities, which have climate impacts. Besides the investments, consulting services are foreseen to support city efforts to manage their solid waste in a sustainable way. As a complementary component, the Swiss research institute Eawag will carry out applied research to identify market opportunities for recycling of organic waste and will develop these technologies in a showcase pilot situation.


Resource Efficient and Cleaner Production Program in Ukraine

01.10.2011 - 31.12.2020

The project "Promoting the adaptation and adoption of RECP (Resource Efficient and Cleaner Production) through the establishment and operation of a Cleaner Production Centre in Ukraine" aims at enhancing the resource productivity, competitiveness and environmental performance of industry in Ukraine.


Indonesian-Swiss Intellectual Property (ISIP), Phase II

14.09.2011 - 31.12.2020

Intellectual property rights support economic competitiveness and innovation. With its rich cultural diversity and 56 million SMEs, Indonesia has a strong potential to strengthen its creative industries. ISIP-2 supports Indonesia?s strategy to bolster innovation and income generation by improving stakeholder awareness, access and benefits from a robust Intellectual Property framework.


Europe and Central Asia : PPP Transaction Advisory Program

01.06.2011 - 31.12.2022

The ECA Program, managed by the International Finance Corporation IFC, is providing infrastructure transaction advisory and capacity building services to the public sector authorities to promote Public-Private Partnerships in Southeastern Europe and Central Asia.


Pamir Private Power Project II

01.03.2011 - 31.12.2021

In July 2011 the Swiss State Secretariat for Economic Affairs SECO approved the financing of a Phase II project comprising a more targeted lifeline subsidy scheme benefitting the poor (2012 - 2014) and the early completion of the ongoing metering programme (pre-requisite for the efficient and equitable operation of such a subsidy scheme).


Partnership for Market Readiness Peru

01.01.2011 - 31.12.2020

The Partnership for Market Readiness (PMR) is a forum for collective action and a fund to support capacity building to scale up climate change mitigation. The PMR brings together more than 30 countries, international organizations, and technical experts to facilitate country-to-country exchange and enables enhanced cooperation and innovation.

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