Systemic action
In depth
The M4P approach recognises that the lives of the poor are inextricably linked to the functioning of the systems around them. Too often, poorly functioning market systems - uncompetitive and unresponsive to producer, worker and consumer needs - have a disproportionately negative impact upon the poor, who lack the resources to overcome such dysfunctions.
The M4P approach fosters understanding of the functions and players within market systems and how these can be strengthened in order to better serve the needs of the poor. The approach targets intervention at critical weaknesses in the market system, building capacity within the system to enable key players more effectively for the benefit of the poor.
In practice
Access to financial services is low, reaching only 38% of the adult population. The mainstream financial sector is at an impasse: a frustrated government is proposing coercive regulation or establishment of a dedicated ‘bank for the poor’; anti-bank hostility is rife amongst politicians and the public; banks are conservative and defensive. Efforts to develop alternative microfinance providers have had little impact on levels of access. An M4P programme recognises that significant improvement in financial access will only be achieved if the resources and incentives of the mainstream banks are harnessed to serve the mass low-income market.
The programme’s analysis finds that: (a) there is no common vision to improve financial access, resulting in inappropriate policies and uncoordinated actions; and (b) banks have limited understanding of the low-income consumer segment – information services are weak. Using this analysis and its neutral status, the programme brings together regulators, banks and their representatives and other interest groups to develop a coherent vision for improving financial access. The programme then works with different players to pursue the vision: improving regulation and coordination processes and consumer education; developing an industry-owned syndicated market research product; stimulating industry innovation. This effort contributes to an increase in financial access to 60% in six years (an additional 7.1m people).