Management of the World Bank thanks the Independent Evaluation Group (IEG) for the report Financial Inclusion: Lessons from World Bank Group Experience, Fiscal Years 2014–22. The report provides insights to inform the World Bank’s financial inclusion work, including having greater outcome orientation in the indicators to be included in the new World Bank Group Corporate Scorecard. While account ownership increased significantly during the last decade, there are still 24 percent of adults globally who do not have a transaction account. The World Bank’s work is guided by the evidence that having access to transaction accounts gives poor people a chance to save their money safely, increase financing for their microbusinesses, invest in education and health, and reduce their vulnerability to shocks. The World Bank’s engagement on Universal Financial Access 2020 (UFA2020) has been underpinned by close partnership with the Consultative Group to Assist the Poor, with 32 private sector partners and several donors. Management thanks IEG for the constructive cooperation throughout this evaluation.
World Bank Management Response
Management considers financial inclusion an important component of the World Bank’s support for improving the well-being of poor people. Many studies and the World Bank’s own experience confirm the role of financial inclusion as an enabler for achieving various development outcomes. This underpins the importance the global community attaches to financial inclusion in achieving several of the Sustainable Development Goals. Management agrees with IEG that a few studies have shown inconsistent impacts of financial inclusion on poverty reduction, and it is important to build more robust impact assessments to address the evidence gaps.
Management is pleased that the report finds the World Bank has had substantial involvement in the financial inclusion agenda covering 100 countries during the evaluation period. In addition to a substantive portfolio of investment project financing, development policy financing operations, and advisory and analytical services, the World Bank together with the International Finance Corporation (IFC), “played a central role in leading the UFA2020 [Universal Financial Access 2020] drive for universal financial access, in mobilizing partnerships and in generating financial inclusion knowledge” (14). An example of a knowledge product that contributes to the public good is the widely cited indicators of financial inclusion, the Global Financial Inclusion database (Findex). Management is also pleased that the report acknowledges the World Bank’s contributions at the country level including through long-term engagement and close alignment with the National Financial Inclusion Strategies on digital payments and financial consumer protection. The case studies point to the World Bank’s effective use of diagnostic tools, technical notes, and policy advice to support client countries.
Management acknowledges opportunities for continued improvements in World Bank engagements on financial inclusion, building on important lessons highlighted by the report. First, long-term and sequential engagement with in-country presence is critical. These allow long-term dialogue and continued participation in national processes, and facilitate delivery of projects that build on one another. Second, supporting private sector ability and incentives to participate in delivering financial services to underserved groups, while challenging, is decisive to achieving results. Third, good quality both at entry and during supervision, informed by local conditions and client capacity and needs, enhances the effectiveness of projects. Management also acknowledges the importance of fostering client commitment and collaboration within the World Bank and with external partners in achieving financial inclusion goals. Management will reflect on these rich lessons to incorporate them in current and future engagements to advance financial inclusion.
Management agrees with the first recommendation to “further encourage account usage by underserved groups, including women and rural poor people, and emphasize this more in the strategies and projects” (xvii). Management agrees with the report that it is important to leverage progress in account ownership to foster account usage and will redouble efforts, for example, via specific interventions focusing on acceptance of digital payments by small merchants, and supply chain digitalization. The report highlights long-term and sequenced approaches to encourage account use by underserved groups through the case studies of Pakistan and Tanzania. Management will continue expanding the use of such approaches currently being implemented in many other countries, such as the Arab Republic of Egypt, Morocco, Mexico, Madagascar, Albania, Kosovo, Georgia, and Nepal. Management will continue supporting increases in account ownership in countries where key enablers for usage are not yet in place. Prioritizing access to financial accounts in these challenging contexts helps strengthen market confidence, consumer financial capability, demand for financial services, and related investments (such as systems for payment and claim services and cybersecurity).
Management agrees with the second recommendation to “design and implement more comprehensive approaches that address constraints in the enabling environment for DFS [digital financial services] to reach underserved and excluded groups” (xviii). Management’s operational approach comprises upstream work on strengthening the enabling policy environment and downstream work on service delivery interventions that include work with the private sector on promising innovations and scale-up of sustainable business models. This has included the delivery of technical assistance and global engagements to advance universal identification, digital access, financial literacy, consumer protection, and data privacy. Examples include Identification for Development, government to person, Financial Inclusion Global Initiative, Digital Economy for Africa, Harnessing Innovation for Financial Inclusion, Remittances and Payments Program, and Consumer Protection and Financial Literacy. Other examples to increase usage include World Bank’s work to enhance competition by enabling new business models, private sector participation, and development of financial products for climate change mitigation and adaptation. Management will explore ways to integrate financial inclusion more systematically in World Bank projects involving government payments, including social assistance transfers, pensions, and subsidies as well as those involving digital transformation.
Management agrees with the third recommendation to “collect outcome data across different underserved and excluded groups, initially on a pilot basis” (xviii). The World Bank has developed results frameworks for trust-funded financial inclusion technical assistance programs such as the Financial Inclusion Global Initiative, or Harnessing Innovation for Financial Inclusion. The new Finance for Development umbrella trust fund has been built on these earlier efforts to develop its results framework for financial inclusion. These frameworks rely on project-level data and on global databases such as Findex, Enterprise Surveys, and Remittance Prices Worldwide, which themselves are used to monitor progress toward Sustainable Development Goals 8.10.2, 9.3.2, and 10.1. As part of the new World Bank Group Corporate Scorecard, management is considering usage indicators to measure outcomes on financial inclusion. To address some of the measurement challenges, the World Bank plans to participate in a new Consultative Group to Assist the Poor program that aims to improve the understanding of how financial inclusion interventions contribute to higher-level development outcomes, and to define outcome indicators beyond usage of accounts to understanding the depth of financial inclusion (for example, access and use more financial products beyond accounts) and the utility of financial inclusion (for example, mitigating climate risks via financial products or building financial resilience). Findings of this work will be tested in country pilots to complement the World Bank’s ongoing efforts to strengthen outcome measurement.
International Finance Corporation Management Response
IFC management welcomes IEG’s evaluation Financial Inclusion: Lessons from World Bank Group Experience, Fiscal Years 2014–22, and appreciates the collaboration with IEG throughout the preparation of the evaluation and this opportunity to reflect on its work in this area. IFC management considers financial inclusion important to IFC’s mission of advancing economic development by encouraging the growth of private enterprise in developing countries.
Management notes that the IEG evaluation highlights the positive evidence on the impacts of financial inclusion as an enabler of and pathway to resilience and poverty reduction. We acknowledge the evidence gaps and the limitations of our key development metrics (number and volume of loans to micro, small, and medium enterprises [MSMEs]) in addressing these questions. We welcome the recommendation from IEG to pilot efforts to collect more detailed data on financial inclusion outcomes through additional data collection and impact assessments.
Management acknowledges the use of microenterprises, poor households, women, and other excluded groups (MPWEG) in the report but notes that it is not used by IFC. While MPWEG is an interesting concept to explore, it is not used for IFC’s own target-setting and performance measurement. Further, to properly track the projects benefiting excluded groups, it is essential to establish a clear and applicable definition of excluded groups that aligns with the specific contexts of relevant countries and markets. The World Bank strategy is to expand financial inclusion for all underserved segments, not just women or excluded and poor households but also, for instance, forcibly displaced populations and small business owners who may not be poor but may lack access to the credit they need to grow their businesses.
The evaluation states “only a few sustainable business models” (56) mainly focused on credit services were able to increase financial inclusion among poor people. IFC’s investment track record suggests otherwise. Between FY14 and FY21, IFC committed $9.2 billion in 378 projects in the Financial Institutions Group that were classified as “inclusive business.” This classification signifies an investment that proactively reaches a significant share of the base of the pyramid stakeholders—20 to 30 percent of a particular stakeholder group—thereby improving accessibility, affordability, or quality for this population. Further, the examples in the evaluation speak less to the sustainability of a “business model”; rather, they highlight the need to work upstream (for example, credit infrastructure and legal and regulatory reform in the Colombia case study) and downstream to build the capacity of firms and address their constraints, including helping them to innovate and adapt products and delivery models to enhance financial inclusion, as in the Mozambique case study. Regardless, IFC believes that financial inclusion is a key development challenge for economic development and inclusion across many segments of the economy. For example, a microentrepreneur may not be poor, but they may be underserved by the formal financial sector as banks may not be interested in lending to their business (due to lack of credit history, documentation, collateral, and so on), leaving only the option to borrow informally. Thus, management emphasizes that the scope and strategy for financial inclusion for Financial Institutions Group projects is broader than only financial inclusion for poor people.
Management would like to stress that IFC’s work on DFS dates back more than a decade before the Covid-19 pandemic and has been much broader than government to person payments. While the social impact of digitizing government to person payments is indeed significant, such projects represent only 9 percent of the identified portfolio. The assessment of DFS in the evaluation does not reflect IFC’s broader work on fostering the development of digital channels and business models to facilitate access and usage of financial services, before and through the pandemic. Foundations laid earlier by long-standing World Bank support for DFS enabled the acceleration of adoption during the pandemic. For example, several banks and microfinance institutions that participated in IFC’s DigiLab program before the pandemic were among the first in their markets to respond to the pandemic with enhancements to their digital channels and digital loan products, leveraging the digital road maps and skills previously developed through DigiLab. For those participating in COVID-19 DigiLab cohorts, adopting DFS to serve internal and client needs during lockdowns was top of mind from the outset.
Leveraging technology to improve services for the underserved is an important area of focus for IFC. Technology can and is being deployed to enable development not just of payment services but also of credit, savings, microleasing, insurance, microhousing finance, and other inclusive offerings made possible by close collaboration of multiple teams at IFC, such as Disruptive Technologies and Funds and IFC’s Upstream and Advisory. To illustrate, the credit infrastructure programs developed by Financial Institutions Group advisory promote access to finance to MSMEs, women-owned enterprises, and underbanked individuals with limited access to finance, facilitating the development of inclusive offerings of financial products. Two examples include the Global Financial Infrastructure Program and the Global Index Insurance Facility. This sectorwide enabling work is complemented by customized advisory engagements with financial institutions to support access to a wide range of financial services globally.
Further, management would like to note that IFC’s work in Embedded Finance has not been covered in the report. IFC’s efforts such as the upstream project with &Frnds (a payment service provider in Southeast Asia) and Disruptive Technologies and Funds investment and advisory with the business-to-business commerce platform, Growsari, have supported financial inclusion through Embedded Finance, which is an emerging area reflected in the more recent portfolio. Delivering financial services in the context of other activities in which end users are engaged is a powerful way to reach underserved populations across all industry clusters. Economic drivers, market implications, and regulatory considerations for Embedded Finance were covered by the World Bank in Fintech and the Future of Finance: Market and Policy Implications and have been widely covered by industry experts.
Ultimately, the evaluation concludes that IFC’s work in financial inclusion is important and relevant. Management appreciates the recommendations that invite the World Bank to continue to focus on this space, possibly expanding its efforts to long-term approaches and programmatic interventions.
Recommendation 1: “The World Bank and IFC should further encourage account use by underserved groups, including women and rural poor people, and emphasize this more in its strategies and projects” (xvii). IFC management agrees with this forward-looking recommendation to strengthen usage of the accounts already opened for underserved segments (for example, women). IFC agrees that a range of interventions would be required to encourage usage and will leverage tools and approaches, such as IFC advisory services and upstream, digitalization, and blended finance. Private business models may require upstream efforts to become sustainable, and the success of these models would depend on the country context. Management notes that the Pakistan and Tanzania case studies are two examples of long-term and well-sequenced engagements that have been successful in encouraging account usage. These examples demonstrate that strong collaboration between IFC and the World Bank can be developed as we move toward the One World Bank Approach highlighted in the Evolution Roadmap.
Recommendation 2: “The World Bank and IFC should design and implement more comprehensive approaches that address constraints in the enabling environment for DFS to reach underserved and excluded groups” (xviii). IFC management agrees with the recommendation to design comprehensive approaches consistent with market conditions. We note that the integration of digital solutions into the delivery of financial services requires a strong enabling environment (of the legal and regulatory framework and institutional capacity) and supportive infrastructure. In addition, to leverage innovations in technology and new business models financial services must be better integrated into the workflow and activities of end users. IFC will continue efforts to strengthen the enabling environment while also pursuing investment and extending advisory to develop and scale innovative inclusive finance business models. The case of Tanzania where IFC supported the merchant channel to improve acceptability of mobile payments by the MSME sector is noted. It might not be practical to follow this type of approach in every market given the limited World Bank resources as well as constraints in the ability and capacity of governments and the private sector to support such comprehensive engagements.
It is also important to recognize that investment of equity and debt in scaling DFS to reach underserved and excluded groups may involve higher risk than investing in established financial institutions servicing established customer bases. Drivers of risk include startup and scale-up business risks and the customer segment risks of serving new-to-finance and new-to-credit customers. IFC has made strong progress in developing an innovative equity DFS portfolio and on the debt side, the bulk of IFC’s investments has been to better established digital lenders. Most DFS providers in emerging markets and developing economies are at earlier stages of development and do not meet IFC’s standard credit criteria. Management would welcome further discussion on how far to push the envelope in pursuing inclusive impact while maintaining portfolio performance.
Recommendation 3: “To enhance learning on what works to increase the beneficial use of financial services at the MPWEG, the World Bank and IFC should collect outcome data across different underserved and excluded groups, initially on a pilot basis” (xviii). IFC management welcomes the recommendation to explore ways to capture more detailed information on underserved segments in addition to the development outcome data that IFC collects through Anticipated Impact Measurement and Monitoring. This would allow IFC to clearly identify the beneficiaries and how they are using financial services supported by IFC projects. We fully agree that IFC should assess outcomes of projects and programs in future engagements (with the caveats regarding constraints of data quality and the resource-intensive nature of this effort) and would appreciate IEG support and collaboration to systemically assess outcomes of broader programs that have already been implemented.
Management would like to emphasize that defining excluded groups is important. These definitions will vary by country and market and will have to be embraced by stakeholders. IFC is strengthening its existing outcome and impact reporting indicators, particularly with respect to gender reach. However, capturing information on final users or ultimate borrowers is challenging. Financial service providers track and report on overall accounts, loans, and insurance policies, necessitating in some cases customer surveys to gather such information—a task that is often complicated by confidentiality constraints imposed by regulators. Gathering information on income and other demographics for customers and developing and conducting more impact assessments to estimate the effects of improved access to financial services on well-being is a priority for IFC, but it is not feasible for each project in the portfolio at the final beneficiary level.
Multilateral Investment Guarantee Agency Management Response
Multilateral Investment Guarantee Agency (MIGA) welcomes the evaluation, which follows up on the 2015 evaluation on financial inclusion and also benefits from the updated data from Findex. MIGA thanks the IEG team for the engagements and discussions during the evaluation process.
The evaluation aims to enhance the World Bank’s learning from supporting client countries for advancing financial inclusion, which is narrowly specified as financial intermediary interventions that target MPWEG. The evaluation questions are focused on the relevance and effectiveness of the World Bank support to financial inclusion and its impact on poor people. MIGA notes the evaluation coverage and IEG assessment based on the evaluation period (FY14 to the first half of FY22). The evaluation identified six operations, of which one was evaluated. MIGA considers the evaluation cut-off date and very specific focus on targeting financial inclusion for MPWEG contributed to the limited inferences derived from MIGA’s experience and the failure of the report to capture the strategic importance of inclusiveness, including financial inclusion for MPWEG, for MIGA and its work.
In summary, MIGA would like to assure its stakeholders that inclusiveness is one of the Agency’s areas of strategic importance, as evidenced by MIGA’s dedicated work in gender beginning in FY21. Also, MIGA supported financial inclusion in its project work through several vehicles, including through (i) MIGA’s support to projects with the issuance of political risk insurance; (ii) MIGA’s support to global banks through its Capital Optimization Product and (iii) through guarantees in protecting commercial lenders from non-honoring of financial obligations by central governments, municipalities and state-owned enterprises. Across these vehicles, MIGA is making good progress in generating projects with significant financial inclusion dimensions.
Multilateral Investment Guarantee Agency’s Strategic Emphasis on Inclusiveness
One of the evaluation findings is that MIGA has not traditionally defined overarching financial inclusion goals as defined in this evaluation, which refers to financial inclusion as the intervention that targets MPWEG.
MIGA’s Strategy and Business Outlook has been emphasizing small and medium enterprise (SME) finance under the heading of financial inclusion, while this evaluation categorically excluded SME finance from the scope of its work unless the project benefited not only small and medium enterprises but also MSMEs. IEG applied this approach and specified six MIGA guarantees totaling $1 billion (table O.1) as financial inclusion projects for this evaluation. As this evaluation takes a restrictive definition of financial inclusion, many SME finance activities supported by MIGA’s political risk insurance instrument and Capital Optimization Product were excluded. As a result of IEG’s specific definition of financial inclusion (targeting MPWEG as opposed to SME finance), the evaluation gives the impression that inclusion was not among MIGA’s priorities.
However, as pointed out in the evaluation, from FY21, MIGA unequivocally highlighted working with our clients to enhance opportunities for supporting women-owned enterprises and expanding women’s access to DFS. This was noted in the Strategy and Business Outlook FY21–23, along with the establishment in FY21 of the Agency’s first dedicated Gender Unit and the launch of MIGA’s first Gender Strategy Implementation Plan FY21–23 (highlighted in the evaluation). MIGA, using the Gender Flag methodology developed by the World Bank as the Gender Tag and then adopted by IFC as the Gender Flag methodology for private sector operations, successfully booked its first “gender-flagged” operation in FY21 and added another gender-flagged operation in the second half of FY22.
Furthermore, in FY22, MIGA enhanced its ex ante development impact assessment tool, the Impact Measurement and Project Assessment Comparison Tool, to more accurately capture, describe and assess ex ante project-specific and beyond-project outcomes that provide positive direction and demonstration effects in gender and other excluded and underserved groups. MIGA also introduced an Inclusion Uplift methodology in the Impact Measurement and Project Assessment Comparison Tool framework whereby—subject to a range of required conditions—certain projects that display a significant focus on underserved groups (for example, women, rural residents, ethnic minorities, and Indigenous peoples) may receive a scoring uplift that can translate into a higher Impact Measurement and Project Assessment Comparison Tool score or rating. The MIGA Strategy and Business Outlook FY24–26 emphasizes the inclusion agenda, targeting the bottom 40 percent of all developing economies. It is clear from these documents and actions that MIGA is fully incorporating financial inclusion in the Agency’s strategic focus and following through with implementation.
Based on the above, MIGA would like to emphasize that inclusiveness is of strategic and operational importance to the Agency, and MIGA is increasingly active in this area, as demonstrated in the following section.
Financial Inclusion in Political Risk Insurance Projects
MIGA recognizes that DFS have the potential to extend financial services to underserved groups, as highlighted in this evaluation. MIGA supported the development of mobile money services through a project that entered MIGA’s portfolio shortly after the evaluation’s cut-off date. In June 2022, after the cut-off date of the evaluation period (December 31, 2021), MIGA issued contracts of guarantee for $180 million to cover investments made by the Rise Fund into Airtel Money, one of the region’s leading mobile money service providers. Originally a subsidiary of Airtel Africa, Airtel Money, with a presence in 14 countries across Sub-Saharan Africa, was spun off as a separate entity to help bring outside investors, such as the Rise Fund and Mastercard, to foster growth and innovation. With this arrangement, there will be increased attention to Airtel Money’s operations, contributing to greater financial inclusion in the 12 countries across Sub-Saharan Africa where MIGA is providing support, most of which are International Development Association countries and countries classified as fragile and conflict-affected situations (that is, Chad, the Republic of Congo, the Democratic Republic of Congo, Gabon, Kenya, Madagascar, Malawi, Niger, Rwanda, the Seychelles, Uganda, and Zambia) or both.
Financial Inclusion in Capital Optimization Projects
One MIGA product that is especially important in fostering financial inclusion is the Capital Optimization Product. The product is designed for global retail banks with significant exposures to central banks in Emerging Market and Developing Economies. Under this product, MIGA provides insurance for mandatory reserves held by a parent bank’s Emerging Market and Developing Economies subsidiaries at the local central bank, which helps to reduce counterparty risk and leads to a reduction in the bank’s risk-weighted assets and hence the amount of regulatory capital required on a consolidated basis. The capital relief that is freed up can then be used to grow the bank’s loan book rather than be locked up in reserves held at the central bank. The evaluation covered only one Capital Optimization project in Serbia, where MIGA supported MSMEs and other priority sectors.
In the past, when MIGA provided banks with its Capital Optimization Product, the use of additional lending headroom resulting from the capital relief provided by the MIGA guarantee supported general lending of the Emerging Market and Developing Economies’ local banks. However, MIGA has increasingly changed this practice and instead is asking and receiving specific commitments from its financial institution clients that the additional lending will be directed to particularly developmentally impactful lending, including financial inclusion. For example, as part of their contractual commitments, clients agree to use part of their freed-up capital to extend new loans to women-owned or led enterprises. Lending commitments mean that over the life of the guarantee our clients have committed to lending a specific amount to women and women-owned businesses or both. MIGA receives annual data from clients on their lending to assess where they are in terms of actuals versus commitments. From June 2021 to date, four of MIGA’s Capital Optimization clients have committed to gender lending targets totaling $1.2 billion.
One example of a project with a commitment to use additional lending capacity in the areas specifically relevant to this evaluation is the National Bank of Canada Mandatory Reserves Coverage of its subsidiary in Cambodia, the Advance Bank of Asia (ABA). MIGA issued a guarantee of $300 million that covered the risk of expropriation of funds related to the mandatory reserves of National Bank of Canada’s subsidiary, ABA, held at the Central Bank of Cambodia. ABA is using the MIGA-enabled capacity to support new lending. By supporting ABA’s loan growth, MIGA’s guarantee helps improve access to finance for Cambodian MSMEs in the context of an MSME financing gap estimated at 20 to 30 percent of GDP and at a time of increased pressure due to the COVID-19 pandemic. In addition to improving access to finance for MSMEs, 75 percent of the freed-up capital will be used to support women-owned or led enterprises. The project also enhances the stability and resilience of the MSME sector in Cambodia and demonstrates the viability of lending to a segment often perceived as risky. At the same time, the project demonstrates the importance MIGA attaches to adopting inclusive frameworks targeting women-owned or led enterprises. This was among MIGA’s early gender-flagged projects as well as MIGA’s first in an International Development Association country, first in the East Asia and Pacific Region, and the first with a North American guarantee holder. The contract’s effective date of January 31, 2022 was just a month after the evaluation‘s December 31, 2021 cut-off date.
Financial Inclusion in Credit Enhancement Projects
MIGA’s Non-Honoring of Financial Obligations (NHFO) guarantee provides a powerful credit enhancement in transactions involving sovereign and subsovereign entities and state-owned enterprises. The coverage protects against losses resulting from a sovereign, subsovereign, or state-owned enterprise’s failure to make a payment when due under an unconditional and irrevocable financial payment obligation or guarantee given in favor of a project that otherwise meets all MIGA‘s normal requirements. The primary beneficiaries from this cover are commercial lenders that provide loans to these public sector entities.
In the context of this evaluation, IEG identified five NHFO projects as financial inclusion transactions. They are primarily in upper-middle-income or high-income countries aligned with MIGA‘s commitment to serving all clients and the second of the World Bank’s twin goals to foster shared prosperity, as many of these countries still face a large financing gap for MSMEs.
Given the products offered by MIGA, the evaluation could have articulated the complementarity of MIGA‘s product with those of other products across the World Bank. The three institutions serve different types of clients based on their product offerings, business models, and markets (such as addressing financial inclusion challenges in middle-income countries). The evaluation missed the opportunity to highlight the complementarity of MIGA’s role alongside the World Bank’s other institutions for promoting financial inclusion. A similar observation on the complementarity of products could have been made for MIGA itself, as one of MIGA’s strategic priorities has been serving all clients. MIGA’s political risk insurance covers are most aligned with low-income countries and lower-middle-income countries, the NHFO product with middle-income countries, and the Capital Optimization Product with all client countries. It is also worth noting that four of the five NHFO projects identified are COVID-19 response guarantee projects: (i) Caja de Ahorros, Panama; (ii) Banco Davivienda, Colombia; (iii) Bancoldex, Colombia; and (iv) Bahamas COVID-19 Response, Bahamas. They were beneficiaries of “Pillar 2A. Fast-Track Credit Enhancement to Financial Institutions for Working Capital Financing to Micro, Small and Medium-sized Enterprises (MSMEs), Corporates and Individuals” under MIGA’s COVID-19 response program. This important rationale for MIGA’s support to these countries during the COVID-19 response is also missing from the evaluation.
In addition, MIGA issued guarantees that have the specific aim to improve women’s financial inclusion. After the evaluation period (on June 30, 2022), MIGA issued guarantees to Citibank, N.A. and Commerzbank AG against the risk of nonpayment of a loan of up to $100 million to Agencia Financiera de Desarrollo (AFD), a state enterprise owned by the government of Paraguay, for a period of seven years. The loan to AFD will support the government of Paraguay’s COVID-19 response initiatives aimed at ensuring financing to MSMEs and to the housing sector. In addition, the operation was also gender flagged as AFD agreed to implement a gender action plan to set the foundation for further financing to women-owned MSMEs. AFD’s gender action plan includes the development of new products or services targeted at women retail clients and women-owned MSMEs as well as training to enable gender capacity building and raising organizational gender awareness on financial inclusion for women, while supporting the transfer of gender knowledge among AFD client institutions. MIGA worked for technical assistance to be provided by AFD, in this instance by IFC’s Banking on Women team.
In addition to AFD, the Non-Honoring guarantee has been used to support other gender-flagged operations through gender action plans with two additional state-owned development banks: Bancoldex, Colombia (issued on December 19, 2022), and Fondo Mivivienda, Peru (issued on June 27, 2022).
- For details, visit https://ufa.worldbank.org/en/partners.
- Inclusive business is defined in the International Finance Corporation (IFC) glossary as private sector approach to providing goods, services, and livelihoods on commercially viable basis, either at scale or scalable, to people at the Base of the Pyramid (BOP) by making BOP part of the value chain of Clients’ core business as suppliers, distributors, retailers, or customers.
- IFC’s official definition for base of the pyramid is “a market segment composed of all people with income below $8 per day in purchasing power parity or who lack access to basic goods and services.” Typically, income data are not available, so we use proxies to define the base of the pyramid, and then assess whether a significant portion of the project is targeting that population. These proxies for the Financial Institutions Group include loan size, mortgages affordable to the bottom 40 percent, access to a bank account for the first time, employment as smallholder farmers or in the informal sector, and so on.
- Embedded finance is the integration of financial services or tools—traditionally obtained through a bank—within the products or services of a nonfinancial organization. Examples include e-commerce platforms providing working capital to merchants selling through the platforms, or loans provided to retailers or restaurants using data from business management applications that they are using for orders, inventory, payments, bookkeeping or other functions.
- See, for example, Krijnsen, Eugénie, Bauke Sprenger, and Jeroen Crijns. 2023. “Challenging Assumptions to Chart New Growth.” PWC Global. https://www.pwc.com/gx/en/industries/financial-services/publications/embedded-finance-challenging-common-assumptions.html. According to these authors, “embedded finance is now central to innovation and future growth in the financial industry.” See also Harris, Matt, Adam Davis, Blake Adams, and Jeff Tijsesen. “Embedded Finance: what it Takes to Prosper in the New Value Chain.” Bain & Company. https://www.bain.com/insights/embedded-finance/. According to this article, “The rise of embedded finance marks a new era, not only for banking transactions but also for how consumers and businesses build and manage relationships with financial services more broadly.” Also see Dresner, Andy, Albion Murati, Brian Pike, and Jonathan Zell. “Embedded Finance: Who Will Lead the Next Payments Revolution?” McKinsey & Company. https://www.mckinsey.com/industries/financial-services/our-insights/embedded-finance-who-will-lead-the-next-payments-revolution. The authors assert: “The value of this integrated experience for customers helps explain why embedded finance reached $20 billion in revenues in the United States alone.”
- See https://www.miga.org/project/airtel-mobile-commerce-0.
- See https://www.miga.org/project/erste-bank-ad-novi-sad.