Financial sector development – financial services for all

An African woman sits at a table on which several mobile phones are lying and transfers numbers into a table.
Digital technologies play a central role in the development of the financial sector in developing countries. © John O’Bryan, USAID

A stable and efficient financial system is central to a well-functioning national economy.  Providing poor households, smallholder farmers and small enterprises with improved access to financial services can boost their involvement in economic life and reduce their vulnerability.

The SDC’s focus

The SDC has been active in financial sector development since the 1970s as an important strategy in poverty reduction. It focuses its efforts on promoting access to a range of client-centric, responsible and sustainable financial services for low-income households, smallholder farmers and small enterprises. The SDC also works to improve the financial inclusion of poorer households, i.e. their integration into the country's existing financial sector.

The SDC has long considered the promotion of savings to be a key first step in the financial integration of people with low incomes. It is therefore increasingly focusing on developing markets for agricultural insurance and disaster insurance schemes together with global reinsurance companies in order to break through this final barrier in financial integration.

To this end, the SDC prioritises the following:

  • For the clients: training courses for SDC target groups in general financial education with the aim of ensuring savings, insurance and credits and, thereby, also making access to institutional financial services easier.
  • For the service providers: support for financial institutions that have the capacity and willingness to build up their range of services for SDC target groups over the long term and in a cost-effective manner.
  • In terms of bolstering the financial sector, the SDC supports what are known as financial market infrastructures – a network of financial institutions or training centres, for example.
  • If certain conditions are restricting the positive development of a country's financial sector, the SDC relies on the support of and works together with legislative, regulatory and supervisory institutions.
  • The SDC plays an active role in international centres of expertise and networks such as the Consultative Group to Assist the Poor (CGAP) and the Social Performance Task Force (SPTF). Such organisations also help promote innovations and integrate relatively new topics such as digital technologies. The aims are to improve international coordination and harmonisation, exchange knowledge and experience, and support global and regional networks.

Background

A well-functioning financial sector is central to a country's economic development.  It offers the opportunity to mobilise savings to make productive investments. Providing private households and farmers as well as businesses with secure investment opportunities, access to payment transaction systems, credit and insurance services is essential in order to reduce income risks, achieve a more effective cushion against economic and market fluctuations and save for investments. Such investments can provide the basic foundation for an independent existence or for children's education. Crop and disaster risk insurance help smallholder farmers reduce their risks, which in turn increases their food security. An efficient financial sector accessible to all segments of the population has the effect of reducing poverty, both at the private household level and from the standpoint of the national economy. It also stimulates economic growth at all levels.

Current challenges

At present, poor people in many developing countries are largely excluded from the traditional financial system. They cannot open a savings account at a bank or apply for a small loan, for example. This is particularly true of rural regions, where the majority of the population have no access to such formal financial services.  Typical reasons for this deficiency are a lack of sales and service offices, high costs, insufficient infrastructure, services that are not geared to specific needs, and inadequate legal and regulatory frameworks.

As a result, poorer members of the population often have to resort to relatives, friends and other informal money lenders.  That is why the SDC works in financial sector development – to create enduring financial services for broad sections of the population who have so far had only limited, if any, access to such services.

The SDC also invests in new partnerships with the aim of attracting socially responsible commercial investors and works with other partners such as (local) commercial banks, insurance companies, leasing agencies and venture capital providers.

Microfinance

Financial services for poor sections of the population and microenterprises who have no regular access to the services offered by formal financial institutions.

Small enterprise finance

Small enterprises are of major importance in achieving broad-based development and employment. Yet often such enterprises have no access to services tailored to their needs.

Rural finance

Despite the major role they play in economic development, rural regions suffer from a massive deficit of financial services.

Micro-insurance

People in developing and transition countries tend to be exposed to a wide range of risks, such as disease, harvest failure, loss of income and theft, yet they have virtually no formal insurance protection.

Current projects

Object 73 – 84 of 1075

Building Regional and National capacities for improved Migration Governance in the IGAD Region

01.01.2022 - 31.08.2027

The Horn of Africa is of high interest for Switzerland in terms of migration policy. Swiss support to the Intergovernmental Authority on Development (IGAD) and its Member States will contribute to improve their migration governance capacities so as to enable the organisation to effectively implement regional, continental and global regulatory standards for the protection of refugees and vulnerable migrants in the region.


Fair and ethical recruitment of migrant workers

01.11.2021 - 31.12.2023

Approximately 105 million people are currently working outside their country of origin. Many of these migrant workers have profited from international labour recruitment intermediaries. Millions, however, have become victims of abusive and exploitative practices by unethical recruiters. Working together with different actors, SDC will support initiatives to ensure fair and ethical recruitment. Migrants and their families will be better protected and thereby better enabled to contribute to the development of their countries of origin and destination.


Bangladesh Agricultural and Disaster Insurance Programme

01.11.2021 - 31.12.2028

Farmers will improve their productivity and resilience by gaining access to client-oriented and affordable agricultural insurance products. Insurance-cover will allow farmers to invest in higher-return activities, access credit and to recover faster when affected by weather, diseases and disasters. By building capacity of and facilitating coordination and linkages among key stakeholders, inclusive insurance markets will be developed to eventually cater for several million farmers.


Promoting Social Entrepreneurship in selected countries

01.08.2021 - 28.02.2026

This regional program with national implementation components supports Social Entrepreneurs (SEs) contributing to solving societal and environmental problems with a market-based approach. The contribution identifies and supports selected SEs and helps them to reach out to the poor. It serves the creation of employment and income for low-income households improving their livelihoods. SEs use innovative ideas and business models that are well-aligned with SDC’s objectives of poverty reduction.


CLIMATE AND CLEAN AIR IN LATIN AMERICAN CITIES PLUS (CALAC+) PROGRAMME

01.03.2021 - 28.02.2023

Air pollution is an important impediment to sustainable development in cities, and short-lived climate pollutants such as black carbon represent a major trigger for climate change. Supporting increasing voluntary efforts, CALAC+ will assist clean air strategies in five Latin American cities by fostering normative and technological changes and share lessons at the global level. Capacity building will use the comparative advantage of Swiss experience and the private sector’s interest to increase its stance in urban clean air issues.


Strengthening democratic local governance

01.01.2021 - 30.06.2026

The project aims at supporting the democratic transition and the peace efforts in Myanmar. Using a decentralized budget support approach to all townships of one state in the Southeast of the country, it will strengthen township’s participatory planning and budgeting capacity. The project will also deepen the community’s capacity to demand public services. Additionally it will support national level policy discussions based on this experience.


Joint Peace Fund

01.01.2021 - 31.12.2027

After 60 years of conflict, the government and 8 Ethnic Armed Groups have signed a National Ceasefire Agreement (NCA) in October 2015, opening up a unique opportunity to find lasting peace. The Joint Peace Fund is a multi-donor fund set up to channel coordinated international support for such efforts, including the implementation of the NCA and following political dialogue of the peace process, a requirement for development especially in border areas.


Skills for Local Economic Development SLED

01.01.2021 - 31.12.2030

Switzerland will explore opportunities for supporting local economic development through vocational skills development in predominantly rural areas in Southern Shan. A focus on market-oriented skills opportunities accessible to young women and men, especially from vulnerable groups will be identified that open life-long learning opportunities to improve livelihood options and support peace building and security in conflict-affected areas.


Pathfinders for Peaceful, Just and Inclusive Societies (Sustainable Develoment Goal 16+)

01.01.2021 - 31.12.2030

The promotion of peaceful, just and inclusive societies (SDG16) is integral to the success of the Agenda 2030 for Sustainable Development. In order to accelerate its implementation, a group of UN Member States are coming together to leveraging intersections within the Agenda (16+) and to accelerate national and international implementation, while building a movement of the willing around three grand challenges. Switzerland is a co-convener, a member and a donor to this initiative.


Redevabilité, sécurité et prévention de l’extrémisme violent pour les citoyennes et citoyens tunisiens RESPECT

01.12.2020 - 30.11.2026

L’intervention renforce la gouvernance du secteur de sécurité tunisien et les capacités institutionnelles de prévention de l’extrémisme violent. Elle contribue ainsi à une meilleure protection des citoyennes et des citoyens tunisiens à travers une assistance vers une gestion de la sécurité redevable et efficace, et à travers un soutien à la définition et à la mise en œuvre de politiques publiques limitant le phénomène de l’extrémisme violent.

 


Agricultural Services and Livelihood Improvement (ASLI)

01.10.2020 - 31.07.2028

Farming households in the Central Highlands of Afghanistan suffer from high levels of poverty and food insecurity. Their agricultural productivity remains low due to insufficient access to inputs and information. The Agricultural Services and Livelihood Improvement (ASLI) project aims to improve the livelihoods of poor rural families by strengthening the public extension system at subnational level to enable targeted, demand-driven agricultural service delivery.


Economic Policy for Inclusive Growth

01.10.2020 - 31.12.2029

The planned intervention aims at supporting inclusive growth that improves the living standards for the Mozambicans, in particular women and youth. It will be pursued through increased analytical capacity and better informed policy making, by means of focussed support to economic analysis and discussion in and between government and non-government institutions. Emphasis on non-government institutions will enhance the demand for and accountability for effective policy making for inclusive growth

Object 73 – 84 of 1075