Economic development, growth and employment
Financial systems development
German development cooperation fosters responsible and effective financial systems for individuals, businesses and the state. The German approach is holistic in nature and aims to develop the financial system as a whole. Cooperation countries receive support at three levels:
- At micro level, Germany promotes individual institutions and the development of financing instruments including loans, savings accounts and insurance schemes. Specialist advisory services delivered to the managerial level improves organisation in the banking sector. New microfinance products are introduced to commercial banks to broaden their impact.
- At meso level, Germany helps build the financial infrastructure in cooperation countries, as well as putting in place the pertinent institutional environment. Microfinance associations are established and developed to strengthen networking in the sector, as are credit information systems and specialised training facilities.
- At macro level German development cooperation helps cooperation countries improve their financial stability by introducing regulatory standards. Germany also fosters financial sector reform, partly in the form of advisory services on monetary policy. One important focus is the establishment and development of technical capacities within supervisory bodies, such as central banks.
Financial systems development is extremely important for German development policy, and measures here constitute an important contribution to achieving the Millennium Development Goals. They encourage individual development and strengthen self-sustaining economic structures.
On average Germany provides more than 140 million euros a year from the national budget to promote financial systems development and microfinance. The KfW Entwicklungsbank is one of the world's largest and most active bilateral development financing body: the overall portfolio of KfW Entwicklungsbank at July 2011 was worth some 2.3 billion euros (of which about three quarters come from the bank's own funds).
In the field of financial systems development, Germany is currently active in 63 countries (including 40 cooperation countries), where a total of 147 projects and programmes are being implemented (as at 2011). The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the KfW regularly achieve top scores on the Smart Aid for Microfinance Index published by the Consultative Group to Assist the Poor (CGAP), and are considered pioneers in innovative financial systems development.
Non-governmental organisations, too, non-profit foundations in the banking sector and banking associations are actively involved in the field of financial systems development and microfinance. They bring successful financial models into line with conditions on the ground in developing countries and adapt them to local conditions.
Security at little cost: Microinsurance in Financial Systems Development
BMZ Position Paper
Strategies 179 new window, PDF 288 KB, accessible 05/2009 | pdf | 288 KB | 23 P. | accessible