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

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M4P – Market System (Players & Functions)

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Interconnected Market

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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

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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!)

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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.)

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

Dos and Don‘ts for Smart Subsidies

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Dos

■ Assure ownership of partners

■ Performance-based

■ Cost sharing

■ Risk sharing

■ Leverage

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

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 11

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 12

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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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

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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

Additional Slide: SDC PCM Manual – Evaluation Logic

Planned

Outputs

Planned

Activities

Planned

Inputs

Expected

Outcome

Achieved

Outputs

Implemented

Activities

Applied

Inputs

Demand

Achieved

Outcome

Impact

Imp

lem

enta

tio

n

Effectiveness

Relevance

Ad

equ

acy

Eff

icie

ncy

Planning

Context-

analysis

Evaluation

Str

ateg

ic

Pla

nn

ing

Op

erat

ion

al

Pla

nn

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Res

ult

-

Eva

luat

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Imp

act-

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