Sri Lanka boy
Photo: Thatcher Cook for Mercy Corps

Financial Services for the Poor

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Millions of hardworking poor people worldwide have high potential to move up the economic ladder – if they can access the financial products and services people in the developed world take for granted. Poor people need convenient, low-cost financial services from trustworthy institutions so they can build a business, pay school fees, save for unexpected emergencies, transfer money home and insure themselves against shocks.

Mercy Corps has a decade of experience providing financial services to underserved
people. We have created standalone start-up banks and commercialized financial institutions which have lent more than £1 billion to people in countries recovering from war, disaster or painful economic upheaval. Now we are leading the way in developing cutting-edge financial programmes – wholesale support organisations, remittances and microinsurance – on a much larger, country-wide scale.

Strengthening Microfinance: Indonesia
Despite having one of the world’s most mature microfinance sectors, with more than
50,000 microfinance institutions (MFIs), Indonesia has persistently high poverty. Nearly half the population lives on less than $2 a day, and 40 million people lack access to financial services. Since 2002 Mercy Corps has provided outreach support and training to microfinance providers, and in 2008 announced the creation of MAXIS (Maximizing Financial Access and Innovation at Scale), which ultimately will help poor working Indonesians build a financial identity and enter the formal economy.

MAXIS will transform the Indonesian financial market by:

  • Establishing a wholesale bank to provide innovative products and services to millions of low-income people;
  • Expanding the work of the Mercy Corps-founded MICRA (Microfinance Innovation
    Centre for Resources and Alternatives) Foundation, which provides MFI ratings, research and technical assistance to help the entire sector reach more poor people; and
  • Expanding this model regionally

Within 10 years, MAXIS will increase access to a full range of financial services for nearly
45 million people in Indonesia and the Philippines, helping them lift their families out of poverty, reduce their vulnerability to setbacks and contribute to local economies.

Credit Alone Is Not Enough
In many countries, microfinance began as microcredit. Yet credit alone does not meet the varied needs of the poor. That’s why Mercy Corps is developing these services:

  • Savings. Mercy Corps is a leader in transforming microfinance affiliates into new commercial entities that can offer a wider range of services to meet varied needs. We’re creating new organisations that mobilize savings and deliver payment services and remittance transfers. Because these new entities are accessing equity as well as debt, they can grow exponentially, reach out to more people and reduce transaction costs – which means lower costs to their clients.
  • Remittances. Remittance transfers represent a huge portion of developing countries’ GDP. However, people who send remittances usually do not belong to their host country’s formal financial system. Mercy Corps is providing financial education to migrant workers and facilitating links with their home country MFIs. We’re also exploring innovative ways to extend financial services to migrants via global financial institutions, money transfer organisations, mobile phone companies and local MFIs.
  • Microinsurance. While developing world entrepreneurs are now gaining access to health insurance, “loss of income” coverage does not yet exist. So if illness keeps a business owner absent, family income is compromised. Mercy Corps is exploring partnerships with MFIs and insurance companies to offer this coverage to poor entrepreneurs in Africa.

    • Reaching Remote Communities: Mongolia
    XacBank, a commercial bank co-founded by Mercy Corps, provides a full range of banking
    and financial services in one of the world’s least densely populated countries. As Mercy Corps’ largest bank affiliate, XacBank reaches 180,000 depositors and 60,000 borrowers. It offers home mortgages, leasing, remittances and a range of flexible deposit products. XacBank is launching mobile phone banking, eliminating the need for remote rural customers to travel vast distances to bank offices.

    Helping Banks Serve Small Businesses
    Indonesia
    In tsunami-affected Aceh, Mercy Corps is helping local businesses recover by increasing access to commercial finance and strengthening local financial institutions. We’re training local banks, cooperatives and microfinance institutions to “downscale” by providing demand-driven services.
    Mongolia and Niger
    Mercy Corps facilitates small business and youth access to financial services via commercial banks by providing cash collateral to partially guarantee loans. Together with our on-site assistance, this programme has significantly increased our target clients’ access to financial services.

    From Conflict to Jobs
    In post-conflict environments like Bosnia and Herzegovina, Kosovo and Afghanistan, Mercy
    Corps has established independent financial service providers that serve as role models for their communities and help restore pre-conflict relationships that are financially beneficial to all. In Bosnia and Herzegovina, we were the first to operate microcredit services in both of the country’s entities and to be governed by a multi- ethnic board. Today, the successor organisation founded by Mercy Corps, Partner Microcredit Foundation, is a recognized world leader in microfinance.

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