Economic development, growth and employment

Financial systems development

Employee and customer of the FINCA Bank in Kampala, Uganda

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.

In­ter­na­tional pioneers

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.

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