Facilitating Market Development to Advance Financial Inclusion

This Focus Note presents a 'market development approach' to supporting the development of financial markets characterized by multi-pronged donor interventions that are coordinated, catalytic and responsive to the market. It also discusses the role of a market facilitator in ensuring market responsiveness and presents several areas critical to building financial markets that work for the poor such as information, capacity building, incentives, and a well-designed enabling environment. Conclusions include:

• Market development occurs through a variety of inter-related ways: by encouraging change in behavior through capacity building; by helping market actors to take more informed decisions through access to better and timely information; by incentivizing innovation through better-informed risk assessment and creation of a favorable enabling environment;
• For facilitation to be effective it requires independent facilitator(s) that can use light-touch interventions such as research to catalyze market action.