Over the last two decades, the link between financial sector deepening and pro-poor growth has been firmly established. As a result, concepts such as finance for growth and finance for all have moved into the foreground of debates around poverty reduction. Translating these concepts into action, however, involves evaluating a range of models, matching strategies to local circumstances and building the capacity of financial sector regulators as well as financial institutions from commercial banks to local savings groups.
Branchless banking is recognised as one of the swiftest and – in many cases – most economically viable routes to extending access to financial services. Whether using agent banking or mobile phone banking or a combination of channels, there remain a vast number of issues to resolve. How do you promote service provision without creating a monopoly or oligopoly? How can regulators enable innovation without endangering stability? And how do you ensure that customers aren’t being exploited – while allowing providers to make a profit?
The complexity of designing accessible financial services for rural areas is not simply due to their remoteness and, in many countries, their relative poverty. The very nature of the agricultural economy is also a factor and must be understood for appropriately designed services to emerge.
There is now a broad consensus that access to a range of financial services is vital to poverty reduction. When it comes to how access should be provided, however, consensus evaporates: different approaches have been tried in different locations, with mixed results. For nations seeking to increase financial inclusion, the challenge is to identify which methods will prove applicable and sustainable, given their legal and regulatory environment, economic structures, demographic distribution and current levels of inclusion.
We provided a comprehensive and flexible programme of support to the Kenyan Ministry of Finance to support and build capacity to develop and manage the implementation of the Comprehensive Financial Sector Reform and Development Strategy. Read more
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