How can local financial resources be mobilised more effectively?
Partner countries across the globe are facing huge economic and social challenges. The rising cost of living, climate change, migration and cuts to international financial assistance are putting pressure on many national economies. Now especially, it is becoming clear that sustainable development can be successful if countries boost their economic capacity themselves.
Mobilising local resources
A crucial factor here is the mobilisation of local resources – the targeted use of local capital, know-how and motivation. The financial sector plays a key role in this context. Within the framework of Partners in Transformation, the German Sparkassenstiftung for International Cooperation (DSIK) supports financial institutions in partner countries in enhancing their performance and improving their image.
The aim is not only to increase public trust in banks but also to organise the institutes in line with international standards. This enables them to use public funding and refinancing credit from international development banks more effectively – an important step in paving the way for investment in the circular flow of income at local level.
Local financial systems as the basis for economic independence
A strong local financial system is a necessary condition for ensuring that savings, investment and growth remain in the country. Regional and municipal banks create access to financial services even in remote regions, promote small and medium-sized enterprises (SMEs) and thus make an important contribution to stable employment and local added value.
In Latin America, the German Sparkassenstiftung is supporting regional banks in digitising their operations, developing suitable financial products for SMEs and implementing international risk management and compliance standards. In the long term, this will make the institutes more resilient and more attractive for international partners.
Building trust through quality and proximity
Without trust there will be no savings, and without savings no investment. Trust in the financial system is thus the main requirement for mobilising local resources. This trust is built on quality, competence and fairness in banking. DSIK focuses on the following activities:
- Consumer protection creates transparency and ensures security, enabling customers to understand the benefits of the financial products on offer.
- Dual training combines expertise with practical advisory skills – a successful model that DSIK has established in a number of partner countries.
- Customer focus means tailoring products and services to the realities of people’s lives, for example with savings plans or agricultural loans.
- Financial literacy training in the form of practical training sessions enhances people’s ability to make their own financial decisions and consciously harness opportunities.
DSIK’s projects in Uzbekistan demonstrate that programmes on financial literacy and consumer protection boost public trust in banks on a lasting basis. An increasing number of people are deciding to invest their money safely and take out loans for their own business ideas.
From savings deposits to investment in the circular flow of income
If people trust their bank, deposits flow back into the local economy. Banks grant loans to small enterprises, enable investments and create jobs.
In Rwanda, DSIK is supporting credit cooperatives in transforming deposits into local credit more efficiently. This means that resources remain in the country, the local economy is strengthened and growth is generated where it is needed.
Cooperation and standards as success factors
Local resources can only be successfully mobilised if policy-makers, financial institutions and civil society work hand in hand. An enabling regulatory framework, stable monetary conditions and cooperation between different actors all create planning certainty.
Adapting to international standards is a further success factor. Only by working professionally, transparently and in compliance with rules can local financial institutions access international refinancing funding and partnerships. This funding is often crucial for granting long-term credit and for financing investment in SMEs.
The German Sparkassenstiftung advises its partners and, through its work, boosts trust in the financial sector, thus empowering people to take their economic future into their own hands.
