UNCDF’s second major area of expertise – financial inclusion – traces its roots to the late 1990s, when UNCDF’s work at the local level often included support for microcredit institutions. Over the following years, UNCDF moved towards the broader concept of microfinance, promoting access to a variety of financial services, especially savings, based on the evidence that savings were actually much more in demand especially from the most vulnerable segments of societies. UNCDF established itself as a leader in that field.

In 2005, UNCDF made a strategic shift to focus its interventions on financial inclusion more broadly. The new approach is supporting a market development approach to make financial sectors more inclusive. It was designed to create enabling environments for a wide range of retail financial service providers and to address gaps in the policy, legal, and regulatory constraints that prevent a financial sector from being inclusive. UNCDF has been continuously assessed and recognized as a leader in the SmartAid Index by the Consultative Group to Assist the Poor (CGAP) since 2007. The SmartAid Index measures an organization’s effectiveness in supporting financial inclusion.

Today, UNCDF’s “last mile” financing models support microfinance institutions, banks, cooperatives, money transfer companies and mobile network operators to extend the reach of financial markets where they may not go without our demonstration value. In so doing, UNCDF ensures that suitable financial products - savings, credit, insurance, payments, and remittances - are available to individuals – notably the ‘unbanked’ – and micro, small, and medium enterprises, at a reasonable cost, and on a sustainable basis.

UNCDF also supports digital finance innovations to reach unbanked, poor and remote populations who have been excluded from traditional financial networks. These services are often seen as safer than carrying cash, and they promote transparency by creating audit trails and reducing fraud.