World Bank Lending for Financial Inclusion: Lessons from Reviews of Select Projects

This paper provides a detailed large scale evaluation of the role played by the World Bank Group in financial inclusion. It presents a granular view of projects undertaken by the World Bank to understand the factors in the design of such programs that have helped achieve objectives of expanded access. The paper also identifies interventions that have been less successful and highlights the reasons for the same. In addition, the paper examines the nature of World Bank’s lending vehicles, partnering borrowing institutions, country environments in which loans were extended, and good practices that have resulted in successful loans. Some of the key findings of the study include:

• Credit line operations do not increase sustainable access to finance if other institutional, legal, and regulatory constraints to financial sector development are not addressed;
• Matching grant programs can potentially be an effective way of providing incentives to small firms that are clients of expanded access;
• There can be tensions between the achievement of expanded microfinance outreach and the achievement of financial sustainability;
• Strong borrower commitment is particularly essential for the success of an adjustment operation involving policy and institutional reforms;
• Project development objectives that are too general cannot be effectively monitored.