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Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Alfred Hannig, executive director of the Alliance for Financial Inclusion.
Access to finance for low-income households can improve poor people’s income and overall wellbeing, and in turn spur macroeconomic growth. As International Monetary Fund Chief Christine Lagarde recently said, “inequality is hurting growth.” Realizing this, many central banks in developing countries now aim to use financial inclusion to spur economic growth and address inequality. As a global network of 117 central banks and financial regulators working in ninety-four developing and emerging countries, the Alliance of Financial Inclusion (AFI), where I serve as executive director, is closely tracking this issue. Fortunately, several developments that we’ve observed bode well for increased financial inclusion and global prosperity:
1. Developing countries are becoming financial innovators, particularly in digital financial services. In nine countries in Africa, more people have access to financial services through mobile technology than through bank accounts. And mobile financial technology is set to expand in coming years.
2. Faced with new technologies and regulatory challenges, financial policy makers are learning from each other more than ever. For example, a Chinese delegation of senior central bank officials recently traveled to Peru to learn about consumer protection and the regulation and supervision of nontraditional financial institutions. This is knowledge-sharing especially important as regulators play a critical role in the modern global market by ensuring consumer protection and encouraging competition.
3. Governments are setting ambitious national targets and implementing strategies for financial inclusion as part of their commitment to the Maya Declaration. The Declaration is the first global, measurable set of goals set by developing and emerging countries to unlock the economic and social potential of the 2.5 billion ‘unbanked’ population. More than ninety countries – representing more than 75 percent of the world’s unbanked population – have supported the Declaration. National targets are set through a bottom-up, consultative approach, which energizes stakeholders and strengthens their commitment to achieve the ambitious goals.
4. Public-private dialogues are strengthening policy making. As new products emerge, collaboration among financial service providers, mobile network operators, payment platforms, retail stores, and policy makers is critical to understanding opportunities and risks. Such partnerships help build robust financial systems that increase inclusion and guard against illicit activities. The latest G20 meeting in Sydney, Australia and the African Mobile Phone Financial Services Initiative meeting in Nairobi, Kenya were important steps forward on this front.
5. Global Standard Setting Bodies (SSBs) are recognizing developing country realities. For example, the Basel Committee for Banking Supervision and the Financial Action Task Force have a membership primarily comprised of advanced economies, but are now working with developing and emerging country policymakers. Historically, financial risks were believed to originate from developing and emerging countries with less rigid regulations. As a result, rules and standards prescribed by advanced economies tended to overlook developing country perspectives. But now, as innovative financial inclusion efforts develop and more financial service providers and products become available, SSBs have started to engage with financial inclusion regulators and advocates.
In short, central banks have found a new common ground for international cooperation: financial inclusion. In the struggle to get the global economy back on track, fighting inequality is emerging as one of the best ways to spark economic growth.