Presenting the perspectives and challenges of the respondents and key results of the survey
More than 400 financial service providers (FSPs), from all regions and institutional types, reported on their demand for and use of capacity building services. On the supply side, over 200 capacity building service providers (CBPs) shared their perspectives and challenges. Respondents included individuals, companies, and organizations that offer a range of advisory services, training and skills building, IT services, human resources functions, and market research that FSPs need to improve and innovate. Theresults of the survey are summarized in this presentation and below we present the top ten results.
1. The Main Challenge Is Improving Business Capacity The survey confirmed that the lack of capacity remains a major bottleneck for scaling up and diversifying quality financial services for low-income people. More than 40% of the FSPs indicated that improving the capacity of their business is their main challenge for the coming years. This was especially the case for NGOs, cooperatives, and non-bank financial institutions (NBFIs). Improving business capacity ranked high across regions as well, except for South Asia where dealing with external factors is more important. On the supply side, more than half of the CBPs found that keeping up with the fast evolving financial inclusion space was their biggest challenge. Only in Sub Saharan Africa (SSA) did CBPs indicate that finding qualified staff is their greatest challenge.
2. Capacity Building Priorities Are Similar, But Differ By Organizational Type FSP priority needs for capacity building are: (1) risk management; (2) strategic planning, innovation and business case; and (3) mid-level and people management skills. The top three priorities showed consistent ranking by more than 60% of the FSPs across different types of FSPs, ranging from banks, NBFIs, and cooperatives to payment service providers. Beyond the top three, NBFIs prioritize IT skills and management, market research, and HR management more highly than banks. Banks express more need for services aimed at senior management leadership and change management.
3. Demand and Supply Mismatch The study revealed a mismatch between demand and supply in terms of content prioritization. Only one of the top three priority needs highlighted above was among the top three services offered by capacity building providers. Indeed, CBPs perceive relatively more demand for product development than for mid-level management skills. Their perception of the need for governance is also much higher than FSPs reported in the survey. Some respondents suggested that many FSPs are not aware of their own weaknesses and thus they don not really know what they need. Yet others posited that "demand" is actually more a reflection of what donors are willing to pay for than the needs FSPs would express left to their own devices. Addressing these demand issues is critical to building a viable market.
4. Local Supply Needs To Be Strengthened More than half of the FSPs consider that quality capacity building services related to market research are lacking. To improve the supply of quality capacity building services in this and other areas, FSPs suggested that local research capacity should be strengthened, creating opportunities for peer exchange and developing the capacity of local consultants.
5. Most Valued Services Capacity building services that are tailored to the needs of the organization and those that are locally relevant are most appreciated by FSPs. We see that the degree of formalization appears to affect the perceived importance of services. Banks and payment providers value quality of the service more, and they are less concerned about local relevance, while for NGOs and cooperatives the opposite seems to be true.
6. How We Learn All FSPs rely most on peers and colleagues for their capacity building and most of it is done in-house. This is an important insight that affects the business case for CBPs and highlights the importance of focusing on knowledge transfer and learning capabilities within organizations as part of the training and TA package.
7. Significant Changes Expected in the Future Half of all respondents to the survey expect significant change in demand for capacity building services in the coming years. This is largely driven by the need to scale up and transform and use of new technologies which require improvement in people, governance, processes and systems.
8. Value for Money The majority (85%) of FSPs consider capacity building services worth their money. Many FSPs still see capacity building services as a cost to doing business as opposed to an investment in growing their businesses. In order for this mind set to shift, it is key for capacity building to demonstrate results through change and improved performance. Capacity building doesnât work without management buy-in: 86% of FSP respondents reported that managerial support for capacity building is by far the ingredient most likely to lead to change through capacity building.
9. The Presence of Subsidies How much do FSPs pay for services with âtheir ownâ? money? In most regions external support for capacity building remains extremely or very important for around two thirds of the FSPs. In SSA, for example, 25% of the FSP training and TA is fully funded by scholarships and grants, with 43% of FSPs paying less than half of the costs of those services. Moreover, a third of the CBPs indicated that more than 50% of their income comes from subsidies. Despite the heavy reliance on subsidies, two thirds of the CBPs want to be sustainable and run as a business. Interviews with CBPs indicate that these numbers may even underestimate the actual dependence on subsidies. This suggests that the "market" for capacity building services for financial inclusion is artificial and does not work as a real market.
10. The Most Important Factor for Effectiveness Interestingly, cost-sharing does not feature high among the conditions for capacity building services to lead to change and improved performance. This response is consistent across regions, CBPs as well as for FSPs, including those that demonstrate a reasonable ability to pay, and those that rely heavily on subsidies. According to survey respondents, factors other than cost-sharing are more important in ensuring capacity building "sticks" within an organization. The value FSP management places on capacity building is by far the most critical factor.
The views of those who use or deliver capacity building services are revealing: we are still very far from getting the market for capacity building right. Despite years of donor programs that have an explicit goal of helping build the market for capacity building, the market is highly subsidized with few viable providers able to adapt to an evolving landscape. How do we move beyond this?
Deeper research is needed to understand the constraints, answer some of the big questions we raise, and uncover possible solutions and innovations that will truly facilitate market building. CGAP is planning more research, a case study series, and eventually some new guidance for funders to help move beyond this stalemate.