2007 Annual Report

UNCDF: Broadening the reach of financial services

The UN Capital Development Fund (UNCDF), under the administration of UNDP, works with LDCs on programmes to improve local development, including through access to basic financial services. Worldwide, up to two billion people are excluded from access to formal financial products and services, which hinder progress in everything from building a home to getting an education. The situation is particularly dire in sub-Saharan Africa, where more than 90 percent of people cannot get a loan or use a bank.

Building Inclusive Financial Sectors in Africa is a joint UNCDF-UNDP programme. Active in 10 countries, it finds ways to provide sustainable access to financial services for poor and low-income people. It also supports the generation of employment and economic growth, including by encouraging small enterprises.

The first country to use the programme has been Sierra Leone, where with the additional involvement of KfW and Cordaid, a $12.5 million initiative was launched. The programme has invested in a series of financial service providers, under the guidance of a joint investment committee comprising the programme partners as well as the Bank of Sierra Leone and the Sierra Leone Ministry of Development. By 2006, nine new micro-finance institutions were serving nearly 43,000 clients. Five of the institutions had become self-sufficient. One had branched out into a series of different towns. Another had started negotiations with a major international investor. The success of the project has attracted an additional $3.9 million in funding for continued expansion.

UNCDF is currently conducting financial sector assessments in 22 countries to assist in developing national policies that promote inclusive financial mechanisms. The fund will use these policies to guide additional investments, targeting the provision of financial services to at least 3.5 million Africans by 2010. Half the beneficiaries will be women, and the great majority will come from the rural poor.

In 2006, UNCDF and UNDP jointly organized the UN Conference on Financial Inclusion in Africa. Delegates from 53 countries agreed to develop a network of governments, central banks, financial service providers, development agencies and others to mobilize resources for extending financial services to all Africans.