Investment and Funding Landscape

A wide range of public funders and private organizations, from across the investment landscape, have committed billions of dollars in a global effort to advance financial inclusion. The incentives and funding tools used and the planned time frame will depend on the type of funder. Public funders offer a range of funding instruments, including grants, investments, and support in the form of technical assistance. Public funders generally have a development agenda, with poverty reduction, improved economic conditions, and social welfare among their main priorities. For private investors, the incentive is the return on investment, whether financial, social, or both. Investments are made using debt, equity, or guarantees and are typically directed to refinancing and strengthening the capacity of loan portfolios, improving market infrastructure, and refining the regulatory environment.

In response to the growing interest in financial inclusion, many intermediary holding companies, such as microfinance investment vehicles, have been established. Their clients may be both local and international, and they often have a focus on the so-called double bottom line approach of financial performance and social performance.

The increase in the range, number, and sophistication of investment and funding opportunities has led to cases of over-concentration of funds in some regions. In response, funders are working to improve coordination and are emphasizing topics such as responsible finance, consumer protection, transparency, and market sustainability. Some funders have begun diversifying their investments to include not just microfinance institutions, but also other players in the market who are working on mobile banking, agent networks, and other market infrastructure initiatives.

Man carrying coal. Photo by Sutipdo Dass, 2014 CGAP Photo Contest.