Financial inclusion is rising rapidly up the policy agenda but there is a tension between donors' pursuit of "best practice" institutional and policy reforms that are intended to develop market-based financial systems, and governments' more direct "activist" interventions, such
as offering loans to the poor with preferential interest rates. This note argues that donors need to adopt a more pragmatic approach, rooted in the political economy of individual countries. Without this their efforts are likely to be doomed from the start, with their proposed inclusion policies left on a shelf, or regulation distorted or circumvented.