Find and replicate innovative models for delivering financial services to the poor through sequenced and evidence-based approaches. To deliver sustainable, low-cost services, the Bank Group and its partners should research, pilot, and scale up innovative business models and approaches to reach underserved (especially rural) clients. Such an approach would focus on delineated and evaluable interventions and ensure a feedback loop in the design of new projects. A key part of this is to ensure that the Bank Group effectively applies its research and evaluative resources to better understand the extent to which its interventions actually support poor households and microenterprises (as well as other excluded groups), and how best to adapt its interventions to different country conditions.
Innovation is still needed to enable to the poor to sustainably access a range of financial services. The promise of financial inclusion is that credit, savings, and payment and insurance services help the poor manage their day-to-day lives and offer choices and risk mitigation mechanisms. Yet the evidence to date suggests only modest and mixed benefits of major approaches, emphasizing the need for a sequenced approach toward innovations facilitating financial inclusion.
Lowering transaction costs through innovation is recognized as an essential challenge in the context of sustainably reaching the poor and underserved. This evaluation found that financial inclusion faces persistent obstacles in reaching the rural poor. Among promising areas of innovation are delivery models such as mobile, correspondent banking, agent, and "branchless" banking, as well as innovations in underlying technology platforms and initiatives such as universal IDs and biometrics to satisfy the know-your-customer requirement. An important way forward is to systematically use a sequenced approach building on comparative advantages of development partners and the Bank Group to develop, test, and scale up these and other innovations, rigorously monitoring the benefits (and costs) for the poor.
Such a sequenced approach focuses on clearly delineated and evaluable interventions, building on lessons from past and ongoing interventions and dynamically feeding these lessons into the design of future projects. Given that only 2 percent of Bank Group operations report on beneficiary outcomes, such a feedback loop clearly does not yet exist even within the Bank Group's own portfolio. The weak evaluative evidence of a clear connection between the Bank Group's interventions and increased financial inclusion emphasizes the need for a more robust approach to M&E as part of this sequenced approach.
The WB and IFC systematically identify and support innovative approaches to financial inclusion already. For example: (a) the Universal Financial Access 2020 conceptual framework identified critical reforms and government actions to drive the expansion of transaction accounts, including through e-money and "digital" delivery mechanisms, and the WBG is orienting its financial inclusion support accordingly and (b) in early 2015 the WB, IFC, and CGAP launched the cross-WBG "Harnessing Innovation for Financial Inclusion" program, which will cover over 20 countries.
The WB and IFC have strengthened reporting and monitoring of financial access/inclusion activities, for example through evaluations conducted by DEC on financial literacy and consumer protection. Management will further explore how to apply a similar approach more systematically to other areas relevant to financial inclusion. Monitoring and evaluation is already central to the global initiatives introduced to strengthen and scale up the WBG's support to financial access/inclusion, including through the Financial Inclusion Support Framework and the Harnessing Innovation for Financial Inclusion program.
Through the Universal Financial Access 2020 initiative a reporting model has been developed and is being rolled out in WB lending and ASA projects, in close coordination with the IFC (which has a similar model).
Action 2A: Identify and scale-up promising approaches to expand financial inclusion based on digital (technology-enabled) financial services.
Indicator: a) Number of country programs that address the innovative models dimensions of delivering financial services b) UFA lab established for brainstorming on innovative approaches c) WBG knowledge products focused on this theme.
Baseline: F&M GP, CGAP, IFC FIG, DEC and other parts of the WBG identify promising, innovative approaches and cases for expanding financial inclusion (i.e. there is a knowledge base to be leveraged and further refreshed) no UFA lab in existence during IEG evaluation period.
Target: a) F&M GP, CGAP, IFC FIG, DEC initiate innovative financial activities with potential to scale-up in a minimum of 15 countries b) UFA lab âoperationalâ c) at least 1-2 relevant knowledge products per fiscal year.
Action 2B: IFC FIG Digital Finance approach to be developed.
Indicator: Adoption of IFC FIG Digital Finance approach by IFC management.
Baseline: Preliminary strategy framework as part of FIG Financial Inclusion program
Target: An approach document drafted and adopted by IFCâs management.
The adopted DFS strategy reflects the intention of the recommendations very well and set an ambitious agenda. IEG looks forward to implementation of the strategy and awaits evidence of the DFS strategy being implemented next year, in order for the progress of implementing this recommendation to be considered "complete".
The Digital Finance Services (DFS) strategy was prepared and presented to the Management team in March 2017. This strategy is already being implemented through new and existing Investment and Advisory operations.The digital transformation of financial services is reducing barriers to access and increasing the availability of appropriate and sustainable financial services products for underserved populations and SMEs. We are supporting this transformation through both investment and advisory projects.Three key operating elements of this strategy for the DFS team are:1. Develop the ecosystem (example: ASEAN Financial Innovation Network, in conjunction with Monetary Authority of Singapore)2. Invest in innovators (IFC Fintech and Digital Finance Portfolio and sub-sectors have $399m Invested to date)3. Leverage and maximize the value of our network (close to 80 advisory projects have supported DFS capabilities of our clients and delivered 60 million new registered users significant efforts around partnership of bank clients with fintechs).