M4P and Financial Development

M4P and Financial Development

• 1.
  Titel: Powerpoint Mustervorlage EidgenössischesDepartement 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
• 2.
  2 M4P – MarketSystem (Players & Functions)
• 3.
  3 Interconnected Market
• 4.
  4 Key M4P Principles Facilitationrole:  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
• 5.
  5 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!)
• 6.
  6
• 7.
  Areas for SmartSubsidies 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 7 ● 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.)
• 8.
  Dos and Don‘tsfor Smart Subsidies 8 Dos ■ Public goods (e.g. financial education, research, infrastructure, regulation) ■ Capacity building at all levels ■ Subsidies to subjects instead of objects where possible
• 9.
  Dos and Don‘tsfor Smart Subsidies 9 Dos ■ Assure ownership of partners ■ Performance-based ■ Cost sharing ■ Risk sharing ■ Leverage
• 10.
  Dos and Don‘tsfor Smart Subsidies 10 Don‘ts ■ No interest rate subsidies ■ No long-term subsidies ■ No crowding out of private initiative ■ No excessive subsidies
• 11.
  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
• 12.
  Key Messages If youdo 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
• 13.
  Resources SDC - sharewebon 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 13
• 14.
  Additional Slide: SDCPolicy – 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 14
• 15.
  15 Additional Slide: Promotingretail 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
• 16.
  16 Additional Slide: Promotingretail 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)
• 17.
  17 Additional Slide: PromotingRetail 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
• 18.
  Additional Slide: SDCPCM Manual – Evaluation Logic Planned Outputs Planned Activities Planned Inputs Expected Outcome Achieved Outputs Implemented Activities Applied Inputs Demand Achieved Outcome Impact Implementation Effectiveness Relevance Adequacy Efficiency Planning Context- analysis Evaluation Strategic Planning Operational Planning Result- Evaluation Impact- Assessment 18