Development finance institutions and financial inclusion : from institution-building to market development

Significant strides have been made in connecting the world’s low-income populations and micro and small businesses to financial services. Yet, after decades, there are still large gaps in access, use, product offering, and quality of services. Several segments remain overlooked (e.g., rural populations, women, ethnic minorities, smallholder families, specific business sectors, etc.). Many countries still struggle with undeveloped financial systems, even when excluded populations gain access to financial products and services, many financial offerings are poorly designed, understood, or used. In the past, development actors assumed that access to capital was the main barrier to scaling financial inclusion, but over time, local bank financing and savings mobilization have increased, and foreign funding continues to grow (including through microfinance investment vehicles [MIVs]) (Soursourian and Dashi 2016). Other barriers that hinder financial inclusion include, among others, deficient market infrastructure, limited technological innovations, and restrictive policy and regulatory environments.