Stories from the field highlight innovations in financial inclusion

Written by Adam Vincent

As part of the 38th session of IFAD's Governing Council earlier this week, John McIntire, IFAD Associate Vice-President, Programme Management Department, moderated a panel discussion about financial inclusion with six IFAD experts. The panel gave Member States an opportunity to learn more about how inclusive financing affects the lives of rural people – empowering them to build their resilience, increase their asset base and transform their communities.

Participants in the Governing Council panel of IFAD experts on financial inclusion in the field. ©IFAD/Flavio Ianniello
Hubert Boirard, Country Programme Manager for Bangladesh and Pakistan, offered a broad definition for financial inclusion: namely, access for those who are currently excluded. More than 2.5 billion working adults – more than half of the working adult population – are excluded from any form of financial services, he said. Without access to services like credit or savings, even simple investments (and subsequent growth) become difficult. Some rural people have no option but to accept the high usury rates charged by loan sharks.

Offering basic financial services can empower rural people to reach the microeconomic achievements outlined in the goals of IFAD-supported programmes and projects. For example, short-term loans with low interest rates have helped increase food security. Boirard shared the fact that in Bangladesh, these loans helped farmers achieve a 40 per cent to 63 per cent increase in revenue and shorten the hungry season by one month. He also noted that investing in smallholder producers can lead to greater production and, consequently, national economic growth.

Likewise, Robson Mutandi, IFAD Representative and Country Director for the IFAD Country Office in Ethiopia, described the benefits of savings and credit cooperatives. As access to loans creates opportunities for entrepreneurship and growth, he explained, fewer workers need to sell their labour or engage in petty trade. Rather, they can invest in industry, like one farmer who was able to begin raising livestock. This farmer needed a loan to buy her first goat, but the profits and further investments she made have enabled her to now own five cows.

In a similar vein,  Ndaya Belchikta, Country Programme Manager for Sierra Leone, described how loans helped one man in that country expand his business selling rechargeable phone cards. He now owns both a generator and a storefront and has hired two workers.

These community banks tend to be more beneficial to rural communities than commercial banks, as they also offer services to non-members. However, Abdelkarim Sma, Regional Economist for IFAD’s Near East, North Africa and Europe Division, advocated for using both types of banks. In Sudan, he said, he had worked with grassroots financial organizations as well as commercial banking in rural areas. Unlike community banks, commercial banks can help increase the visibility of rural areas and their needs.

Pedro De Vasconcelos, Programme Coordinator of the Financing Facility for Remittances, added another layer to the conversation: remittances. Although remittances sent back to their home country by migrants can be as high as a third of its GDP, access to remittance services in rural areas is sometimes scarce, he said. The opportunity cost of a journey to the nearest remittance services facility can be prohibitively high.

Throughout the panel, McIntire stressed that financial inclusion represents an investment in people. He and Michael Hamp, Lead Technical Specialist, Programme Management Department, pointed out that financial inclusion supports diversification of livelihoods and fosters resilience and empowerment, creating opportunities for rural people to improve their communities. New mobile technologies and digital infrastructure can present alternative methods of financial inclusion and inspire new ideas. With financial inclusion still unavailable to 2.5 billion adults, the opportunities and possibilities are virtually endless.