1. Titel: Powerpoint Mustervorlage
Eidgenössisches Departement für auswärtige Angelegenheiten EDA
Direktion für Entwicklung und Zusammenarbeit DEZA
M4P & Financial Sector Development:
Looking at financial components
of agricultural/rural programmes
Discussing good and bad practices
Jane Gisin, Peter Beez, Hans Ramm
Focal Point e+i

2. 2
M4P – Market System (Players & Functions)

3. 3
Interconnected Market

4. 4
Key M4P Principles
Facilitation role:
 M4P means avoiding direct delivery of services by the
project: so don’t even think of providing loans or other
financial services directly by project!!!
 This is work for specialized professional organizations,
finance is complicated!!
 Facilitate initiative of market players, local or
international, whatever is necessary

5. 5
Key M4P Principles
Strengthening / deepening of market development:
 Support of existing, ideally the most suitable financial
intermediaries from the viewpoint of SDC target groups
(e.g. social mission, professional capacity, financial
leverage)
 Support policy-makers in setting right incentives through
regulation (change systems!)

6. 6

7. Areas for Smart Subsidies
in Financial Inclusion
● Facilitate access for all to basic services/common goods
(financial services) by capacitating financial intermediaries
• Creating new markets (green fielding)
• Improve markets (depth, breadth, linkages) through promotion of
transparency, responsible finance practices, “client first”, “best
practice” management, competition
7
● Strengthening social capital and financial literacy
● Support to the development of policy, regulatory and
supervisory framework
● Foster the infrastructure of the financial system (networks,
associations, rating agencies, credit bureaus etc.)

8. Dos and Don‘ts for Smart Subsidies
8
Dos
■ Public goods (e.g. financial education, research,
infrastructure, regulation)
■ Capacity building at all levels
■ Subsidies to subjects instead of objects where
possible

9. Dos and Don‘ts for Smart Subsidies
9
Dos
■ Assure ownership of partners
■ Performance-based
■ Cost sharing
■ Risk sharing
■ Leverage

10. Dos and Don‘ts for Smart Subsidies
10
Don‘ts
■ No interest rate subsidies
■ No long-term subsidies
■ No crowding out of private initiative
■ No excessive subsidies

11. SDC PCM Manual – Essentials
Importance of Context Analysis (in-depth as usual in M4P):
 What information does already exist?
 What information do we need to resolve bottlenecks in the
financial sector?
 Important steps to be taken into consideration are:
(1) Financial Sector Analysis
(2) Target Group Analysis
(3) Institutional Analysis
(4) Framework Conditions at Macro Level
(5) Risk Analysis
SDC Contract Templates for Financial Intermediaries:
 Performance-Based Grant Agreement
 Loan Agreement
 Guarantee Agreement
11

12. Key Messages
If you do an FSD project or just an FSD part in your
PSD or any other project:
No direct delivery of financial services!!
 Facilitate change of systems
Involve professionals to develop
And:
 Have a look at SDC’s Policy for Financial
Sector Development; then you will be
consistent with M4P principles and do a
professional job
12

13. Resources
SDC - shareweb on financial sector development:
www.sdc-employment-income.ch/en/Home/Financial_Sector
SDC Development Aid and Subsidies – An Art
SDC Financial Sector Development Policy
SDC PCM Manual for FSD
CGAP Pink Book
13

14. Additional Slide: SDC Policy – Key
Areas of FSD
 Rural Finance: agricultural + non-agricultural activities
 coping with high transaction costs in rural areas
 coping with high agricultural risks of wheather, disease …
 meeting medium- to long-term credit needs
 Microfinance: poor households (women!) + micro enterprises
 expanding breadth: how reaching 'ultra poor' (graduation)
 maintaining social mission despite commercialisation
Insurance
 Life and health: microinsurance for low-income people
Casstrophic: reduce livelihood risks caused by natural
disasters
 Crop/animal insurance: allows for more risk taking, more
investment, more income 14

15. 15
Additional Slide: Promoting retail
capacity: Up-Scaling
Institutional capacity-building of microfinance providers
by supporting:
 rapid expansion in breadth and depth
 implementing social mission (avoiding mission drift)
 transformation into regulated financial institutions
 "green field" as special case
- technological innovation with palm pilots + reaching also
'very poor' at SafeSave / Bangladesh
- evolution from credit funds into credit & savings associations
+ establishment of Albanian Savings & Credit Union
- rural windows for credit & savings co-operatives in Equator

16. 16
Additional Slide: Promoting retail
capacity: Down-Scaling
Motivate banks to serve low-end market segments:
 introducing methodologies and banking technologies on how to target
poor client households, farmers and small enterprises (research, product
development, MIS, service company model)
 efficient approach in expanding "access" where banks exist and bank
management perceives these new client groups as valuable (profitable)
clientele
 can offer different financial products at better conditions than MFIs
bank can better diversify risks (rural banks with development mission and
professional management)
- Medium- to long-term refinancing combined with TA in cash-based
lending methodologies, product development (e.g. instant loans with
disbursements in 48 hours; house improvement loans) in Balkan
countries by European Fund for Southeast Europe (www.efse.lu)

17. 17
Additional Slide: Promoting Retail
Capacity: Linkage
Bringing self-help groups, their
associations and other semi-formal
microfinance providers together with
formal financial institutions:
 facilitate reducing of risks and
transaction costs for clients, clients'
organisations and formal financial
institutions
 Self-Help Group Model: collaboration
with NABARD / India

18. Additional Slide: SDC PCM Manual – Evaluation Logic
Planned
Outputs
Planned
Activities
Planned
Inputs
Expected
Outcome
Achieved
Outputs
Implemented
Activities
Applied
Inputs
Demand
Achieved
Outcome
Impact
Implementation
Effectiveness
Relevance
Adequacy
Efficiency
Planning
Context-
analysis
Evaluation
Strategic
Planning
Operational
Planning
Result-
Evaluation
Impact-
Assessment
18