UNCDF’s significant knowledge of and experience with financial and consumer markets in least developed countries means the SHIFT programme will have a strong foundation upon which to operate.
In addition, its role as a neutral UN agency means it can effectively negotiate and intermediate between government agencies and regulators and private sector companies and investors. As a result, SHIFT offers a safe and flexible way for UN agencies, national donor governments, private investors and other partners to make sizable and game-changing investments in financial inclusion efforts in the ASEAN region.
Additionally, the newly formed ASEAN Financial Inclusion Technical Committee has requested that SHIFT act as a programmatic partner as it works to fulfill its mandate on financial inclusion of the poor. UNCDF’s solid reputation in the ASEAN region means that the SHIFT programme is already trusted and respected by policy makers and financial market leaders at the regional and national levels.
How does SHIFT work?
SHIFT seeks to deliberately play the role of market facilitator by:
- Incentivizing; and
- Supporting behavior change.
SHIFT fulfills a specific need in the world of finance and development and thus is tackling the problem of financial exclusion in a unique way. Its strategies are predicated on the belief that rates of financial inclusion in ASEAN countries will increase if financial institutions have the right incentives to compete for customers in underserved markets. These incentives will reduce the perceived risk of investing in a new client base and the specific financial products they need.
SHIFT will achieve its goal of transitioning at least six million low-income individuals, micro-entrepreneurs and owners of small- and medium-sized businesses from using informal financial mechanisms to formal, well-regulated and low-cost financial services through the following four main pillars:
- SHIFT Fund Facility – Support financial service providers to develop prototypes and bring to scale viable business models that serve low-income individuals, micro-entrepreneurs, and small and medium businesses, especially women within these markets, in the ASEAN frontier economies.
- By 2020, SHIFT will have struck deals providing matching grants to approximately 20 financial institutions in the region, providing co-funding to develop innovative business models or technologies for serving the needs of low-income people, micro-entrepreneurs and small- and medium-sized businesses. By 2025, these ‘innovation funds’ will have resulted in approximately 800,000 new clients using regulated financial services in Cambodia, Lao PDR, Myanmar and Viet Nam.
- SHIFT will crowd-in investors, loan guarantors and parallel funding for an additional estimated 20 financial institutions by 2020, providing the capital and security they need to significantly expand their services and client base. Unlike the innovation funds, these ‘scale funds’ will be low-risk investments since the selected institutions will have already proven that their business models are profitable and scalable. In this way, an additional 2.8 million will achieve financial inclusion by 2025.
- Learning and Skills Development Portal – Support business development service providers by leveraging ICT solutions to develop and bring to scale viable e-learning models to improve financial service institution’s staff capabilities, productivity and professionalism in areas such as asset/liability management and governance.
- Policy, Research and Advocacy – Influence policymakers, financial service providers and governments to enable financial markets to be more responsive to the wider development priorities of governments and its people. SHIFT will advocate for pro-poor policies on the national and regional level, through the adoption of regional strategies and national financial inclusion roadmaps. SHIFT will also engage with ASEAN policymakers about the needs and profiles of poor people and small businesses, based in part on its data collection initiatives.
- Data and Analysis Hub – Undertake much-needed research and data collection about this largely untapped market segment of the poor, allowing the private sector and policymakers to identify regional trends and base policy decisions on up-to-date data and research. SHIFT will produce, consolidate and communicate data and information on supply, demand and regulation in financial markets to strengthen the evidence base and investment decisions of providers, regulators and policymakers, specifically targeted towards low-income individuals, micro-entrepreneurs, and small and medium businesses, especially women within these markets.
SHIFT’s programmes in Learning and Skills Development; Policy, Research and Advocacy; and Data and Analysis will also assist at least 2.4 million new clients in accessing and using formal financial services by 2025. While the SHIFT programme will focus first and foremost on the region’s four countries with the smallest financial markets—Cambodia, Lao PDR, Myanmar and Viet Nam—it will also work in Indonesia, the Philippines and the ASEAN region more broadly through its policy work.
SHIFT will work with a range of partners to reach its financial inclusion goals for the ASEAN region. These include policymakers; national and international regulators; experts from the financial sector; financial service providers like banks, microfinance institutions and insurance companies; and technical service providers like management and business development consulting firms and recognized experts in the field of financial services. It will also partner with donors and investors in order to expand the reach of SHIFT’s programmes.
How Can Organizations Partner with SHIFT?
There are several different ways that development partners can contribute to SHIFT’s financial inclusion work in the ASEAN region. The most critical need at this point is donors and investors who can become ‘core partners,’ meaning they provide general funding to SHIFT that UNCDF can allocate across the programme.
Partners who contribute over US$4 million will share branding on all UNCDF SHIFT communications products, website, events, etc. and participate in SHIFT’s Programme Management Committee, allowing them to contribute to significant decisions about the SHIFT programme. Additionally, donors, partners and investors can also contribute to SHIFT by providing thematic funding that is earmarked for one or more of SHIFT’s four pillars as outlined in the previous sections.
Additionally, funders can provide parallel funding to financial institutions in the ASEAN region who are supported by the SHIFT programme or provide funding to small- and medium-sized businesses that SHIFT-supported financial institutions will be investing in. Support could include the provision of credit guarantees, for example, or equity investment.