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Africa Is Top Recipient of Financial Inclusion Funding

When we last analyzed financial inclusion funding flows in Sub-Saharan Africa (SSA), using data from 2016, we noted that more international funders were prioritizing the region. Though total funding commitments in SSA still trailed Europe and Central Asia, SSA held the top share of international financial inclusion projects at around 30%. At the time, funders projected the region to remain a strategic priority in their portfolios over the next three years.

Here we are, more than three years later, and looking at the 2019 CGAP Funder Survey data we can see that funders’ projections came true: for the first time in 2019, SSA received more financial inclusion funding than any other region, with $7.6 billion in active commitments. This represents 18% annualized growth since 2015, on top of the preceding decade’s strong growth. It also represents stronger growth than any other region and total funding worldwide.

How are funders deploying these record levels of investments in the region? A closer look at the CGAP Funder Survey data reveals three key trends in how financial inclusion funders are working differently in SSA from other regions.

1. Funder activities are more diversified in SSA

Compared to the funding breakdown in other regions, SSA has a much higher share of funding aimed at purposes other than retail financing of providers. While retail financing comprised 84 – 96% of funding by purpose in other regions in 2019, in SSA it represented only 64% of funding. The remainder of SSA funding focused on capacity building (of both providers and customers), market infrastructure and policy, with proportionally more funding devoted to each of these areas than in any other region.

This likely reflects the development of inclusive financial markets in SSA, where significant barriers persist, leaving funders with fewer opportunities to support the growth of providers’ lending portfolios. Accordingly, funder portfolios in the region reflect efforts to address salient barriers like macro risks (e.g., political, economic, and currency), weak regulatory environments, market transparency, and capacity of providers to innovate and absorb funding.

2. SSA received more commitments for digital financial services (DFS) than any other region in 2019, linked to its higher level of mobile money account ownership

Of all DFS commitments globally, 35% were allocated to SSA; this is proportionally higher than the 21% of overall financial inclusion funding dedicated to the region. And roughly 11% of SSA commitments went toward DFS, compared to only 6% of total commitments.

SSA has the highest level of mobile money account ownership in the world, and funders likely see potential to build on this success. Close to 21% of adults in SSA have a mobile money account, according to Findex 2017, compared to 4.4% globally. The proportionally higher penetration of mobile money in SSA affords unique opportunities to expand, improve or build on top of digital foundations and make inroads in financial inclusion for other development goals.

In this context, it is notable that 85% of DFS funding for SSA is devoted to capacity building, infrastructure and policy, whereas only 57% of total DFS funding is directed to these areas. It is clear that funders are looking to develop the ecosystem that supports DFS globally, but especially in SSA.

3. Funders use a different mix of funding instruments in SSA – notably, a much higher proportion of grants

While representing only 13 – 16% of the total financial inclusion funding instruments mix since 2013, grants have consistently comprised at least one-third of total funding in SSA, registering 38% in 2019 — double the share of any other region. Grants are also the prevailing instrument (56%) in DFS funding in SSA, again proportionally higher than the 44% grant share of total DFS funding.

The choice of instruments is clearly related to the funding purposes mentioned above; policy and infrastructure development generally require a non-commercial approach, be it concessional development funding or local government funding. The prevalence of grants also signals the weight of bilateral funders in the region. Bilateral SSA commitments more than doubled between 2017 and 2019, from $602 million to $1.3 billion. SSA was the destination for 39% of all bilateral funding for financial inclusion in 2019, with increased commitments in the region driving the 25% annualized growth in overall bilateral funding recorded in 2019.

New pressures on international development budgets could impact financial inclusion funding, especially in SSA

While funders went big in SSA in 2019, 2020 unleashed a global pandemic and economic crises on funders and recipients alike. Early data shows a 26% decline in overall bilateral official development assistance (ODA). The United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), one funder heavily active in financial inclusion in SSA in recent years, also announced budget cuts that will affect future development funding. If anywhere near these same proportions of general funding decline transfer into financial inclusion, SSA could be even more impacted than other regions.

Other funders may be poised to help bridge gaps left behind by tighter budgets or shifting priorities. Notably, multilateral ODA increased by 189% in 2020, including big increases from funders like the African Development Bank and World Bank that are highly active in financial inclusion in SSA. But such increases might not be sustained longer term. How the fallout from 2020 and beyond manifests in financial inclusion funding for SSA relative to other regions remains to be seen. Regardless, greater awareness of what peers are doing and more coordination — supported by data initiatives like the CGAP Funder Survey — will help funders to make the most of available resources and continue advancing financial inclusion in SSA.


Learn more about the CGAP Funder Survey and explore the data here.

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