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New USAID Handbook: Digital Finance for Development

By Guest Writer on April 22, 2015


The Digital Financial Services for Development Handbook was developed by USAID and FHI360 for use by USAID personnel to maximize the Agency’s use of and contribution to the growth of digital financial services in emerging markets around the world.

As an Agency, USAID brings significant comparative advantages to the collective effort required to build out financial services and market infrastructure that serve the poor and create pathways out of poverty. The Handbook is for use across USAID, though content is often framed with a Mission perspective in mind. It explores practical ways in which USAID personnel can advance digital financial services in support of USAID’s mission: partnering to end extreme poverty and to promote resilient, democratic societies.


Why does USAID see value in strengthening and using inclusive digital financial services?

Access to finance is not a banking challenge. It’s a livelihoods challenge and an empowerment challenge that cuts across all sectors (particularly with respect to gender and rural communities). If we resolve this challenge, we can transform lives by improving economic resilience and creating new market opportunities.

Although evidence substantiates the importance of financial inclusion to broad-based development, many of the world’s poor remain excluded from financial services because they are simply too expensive to deliver through traditional banking models (see Figure 1). But the prospects for deepening financial inclusion are bright for two reasons:

  • the incredible, rapid growth of connected technologies, especially mobile telephone infrastructure; and
  • the advent of branchless banking models that, when paired with the mobile phone, can make a host of useful services and products possible.

Together, these two elements constitute a key market infrastructure for a new, highly accessible digital economy that upends long-standing constraints to traditional business models. The value of this market infrastructure—digital financial services—is apparent in at least three broad ways:

  1. reducing loss (tied to theft, time, corruption, and business processes);
  2. increasing social protection (by enabling fast, secure transfers and extending saving, insurance, and credit services); and
  3. creating new market opportunities (for new business models, products, and services in every sector).

A central message of this handbook is that a digital financial services ecosystem is a key means to many ends. In addition to helping to expand financial inclusion, it can also be used as a channel to achieve other development outcomes. For example, it can be used to facilitate conditional cash transfers aimed at increasing school attendance, improve agricultural yields for smallholder farmers, and extend the reach of critical services such as power and water.

The Digital Financial Services for Development Handbook is intended to be used in concert with other resources being developed by USAID to equip its staff to harness the power of information and communication technology for development (ICT4D).

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