This is most acute among low-income populations in emerging and developing economies. Including people in the formal economy is a critical contribution to poverty reduction, tackling inequality, and fostering inclusive growth.
Financial inclusion means that individuals and enterprises can access and use a range of appropriate and responsibly-provided financial services offered in a well-regulated environment.
UNCDF supported 134 FINANCIAL SERVICE PROVIDERS through grant and loan instruments in 2016– banks, cooperatives, microfinance institutions, money transfer operators and mobile networks operators – to ensure that more households and small businesses gain access to financial services that expand their opportunities and reduce their vulnerabilities.
UNCDF’s work on financial inclusion focuses on:
- New products: Credit, savings, microinsurance, and payment systems, including remittance pathways.
- New populations: UNCDF helps rural women and girls save money by linking them to formal financial services; expands digital financial services to hard-to-reach communities; offers poor families access to clean household electricity and cook stoves; and connects small and medium enterprises (SMEs) and young people with the financial services they need to invest and grow.
- New platforms: UNCDF increasingly uses digital technologies to connect people to the financial sector and new economic opportunities.
- New providers: UNCDF works not only with traditional microfinance institutions, but also supports a range of private-sector financial service providers.
UNCDF also generates data and diagnostics to support policy change and develop national financial inclusion roadmaps and strategies. UNCDF also helps build inclusive financial ecosystems, for example, to support the use of mobile money.
UNCDF’s financial inclusion programmes focus on enhancing finance for agriculture and food security; strengthening women’s economic participation in their local economies; and providing young people with economic opportunities.
Disparities in incomes and living standards are the result of the unevenness of economic development, including within countries. Location matters more for living standards in poor countries than it does in rich ones.
Local authorities, especially in secondary cities, peri-urban, and rural areas, are facing growing pressures that increase their need to access and mobilize finance to build local infrastructure, provide services, support local economic development, and respond to the needs and aspirations of citizens. Yet, overall, sufficient resources do not always flow to the local level, resulting in underfunded or even unfunded local development plans.
UNCDF has long reached underserved localities in LDCs by helping financing to flow more smoothly and predictably to local governments in urban, peri-urban, and rural areas.UNCDF’s work focuses on building effective local development finance models – models that provide the capacities and tools to local government authorities to be able to address development challenges at the local level. By moving the decision-making process about government spending closer to the people, we empower local authorities to make investments and build infrastructure that address the most pressing needs in their communities.
UNCDF applies its local development finance approach and instruments to promote resilience to climate change; food security and land restoration; women’s economic empowerment; and local economic development and cross-border integration and development.
infrastructure investments by sector in
3 World Bank. ‘World Development Report 2009: Spatial Disparities and Development Policy’, Washington, D.C., 2009.
Around the world, significant inequalities remain between women and men in a range of areas, from formal participation in the labour market to income, entrepreneurship, access to credit, inheritance rights, and land ownership.
When women are empowered, whole communities and societies benefit too. But there are many structural barriers that impede women’s economic empowerment, such as deep-rooted discriminatory attitudes and inequitable social and economic structures. Laws and policies often deny or limit women’s rights to inherit and own land. In many countries, women generally have less access to resources, including to quality inputs and financial services, than their male counterparts.
Across all its work, UNCDF recognizes the importance of acting locally for gender equality. Increased investment in financial inclusion, local infrastructure, and entrepreneurship at the local level have the greatest potential to make a direct and lasting difference in women’s lives.
Although more people are gaining access to financial services worldwide – 62% of the world’s adult population had access to a financial services account in 2014, up from 50% in 2011 – 1.1 billion women are still excluded from formal financial services. Across the world, women still earn consistently less than men.
Financial inclusion can improve women’s earnings, increase consumption, strengthen household resilience, boost the health of children, and improve the prospects of the next generation of girls and women. Digital financial services can enable women to safely store funds, as well as save the time and effort required to travel long distances to collect or transfer cash.
UNCDF’s work on financial inclusion is piloting new financial services and products that empower women, and is focusing on bringing them to scale. As a result, more women will be able to access digital financial accounts, savings groups, mobile money, loans, and other financial services that can help lift them and their families out of poverty. UNCDF is proud that all its financial inclusion programmes collect sex-disaggregated data and include specific targets on women.
Investments in appropriate local infrastructure can accelerate progress for women’s economic empowerment by reducing their burden of unpaid care work and providing them with access to markets and resources.
Worldwide, the majority of women work in non-wage employment and informal sector. In 2015, a total of 586 million women were own-account or contributing family workers.
Women working in informal job market often work in unsafe and difficult working environment with no social protection and fewer opportunities to access market and services and with far less avenues to expand their businesses.
Lack of access to basic infrastructure exacerbate these problems. Unsafe and poor transport infrastructure often impedes women’s participation in the economy as entrepreneurs and workers. Moreover, with additional responsibilities at home taking care of household chores as well as looking after children and elderly, women work twice as many hours as men on average, which leaves them with no time to engage in productive employment.
UNCDF addresses these structural barriers by working with local governments and the private sector to design and implement high impact investments in gender responsive businesses and infrastructure, thus unlocking domestic capital for women’s economic empowerment and entrepreneurship. For example, UNCDF’s investment in energy projects such as micro-hydro allows women to grow their home-based businesses through enhanced production. Similarly, investments in gender responsive agri-businesses promote women’s economic empowerment through increased employment opportunities for women and better access of female farmers to market and inputs.
In 2016, UNCDF worked with 64 local governments in 12 countries to introduce and scale up a climate-resilient, performance-based grant system.Over 130 investments were completed, addressing a range of sectors from water and sanitation to agriculture, disaster prevention, and transportation.
In 2014, 46% of young adults (ages 15-24) worldwide owned a financial account, compared to 66% of older adults (age 25 and above). The gap is smaller for mobile money accounts: 10% of younger adults have a mobile money account in sub-Saharan Africa, compared to 12% of older adults5.
The lack of access to financial resources is a major constraint for young people transitioning from school to work.
It is difficult for young people to access the credit they need to start a business, accumulate assets, or get insurance and other relevant financial services that could help them build a bright future.
In 2016 alone, UNCDF partners provided access to savings accounts to almost 730,000 young people, of whom 44% were young women; trained over 700,000 young people in financial education; and provided loans to over 125,000 young entrepreneurs, of whom 54% were young women.
5 World Bank, Global Findex Database, 2014.
into the last mile
into the last mile
The Addis Ababa Action Agenda, the 2030 Agenda for Sustainable Development, the Paris Agreement on climate change, the mid-term review of the Istanbul Programme of Action, and the New Urban Agenda all have a strong focus on the need to leave no one behind.
These agendas call for tackling entrenched inequalities and exclusions, and for integrated development solutions that can support the achievement of multiple goals.
With their strong focus on the need to mobilize resources from multiple sources and get them working together effectively, these agendas are also giving impetus to UNCDF’s work to innovate ‘last mile finance’ models that use public resources to catalyse additional public- and private-sector funding, from both domestic and international actors.