The G-20 eyes financial inclusion using mobile phones, other ICTs
by Jim Rosenberg : Tuesday, March 9, 2010
To promote effective regulation of branchless banking, especially mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the third Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking. CGAP’s Technology Program and AFI are supported by the Bill & Melinda Gates Foundation. This week we’re blogging from the seminar.
Last fall, leaders of G-20 nations identified financial inclusion as a policy priority in a communiqué:
…we will launch a G-20 Financial Inclusion Experts Group. This group will identify lessons learned on innovative approaches to providing financial services to these groups, promote successful regulatory and policy approaches and elaborate standards on financial access, financial literacy, and consumer protection.
CGAP and AFI are working with the G-20 as it eyes increasing financial inclusion with information communication technology (ICT). To dig deeper into this process and how it will be evaluated for success, I interviewed Paul Flanagan, co-chair of the G-20 Financial Inclusion Experts Group and General Manager, International Finance Division, Australian Treasury.
What is Australia’s interest in branchless banking and the G-20 agenda?
Australia’s interest in the Financial Inclusion Experts Group, and in particular the Access through Innovation Sub-Group, reflects Australia’s interest in ensuring the G-20 provides practical leadership on development related issues. Korea has made it clear that development will be a major theme in the November Leader’s Summit, and our work will be an important part of this focus. Australia is an active member of the G20 and is committed to supporting its work as the premier forum for international economic cooperation.
The G-20 commitment recognizes that around 2.5 billion adults around the world do not have access to formal or semi-formal financial services – nearly 90 per cent of whom live in Africa, Latin America, Asia and the Middle East. Access to a wide set of financial tools, such as credit, savings products, payment services and insurance, provides poor people with much greater resilience to economic shocks, and increased capacity to increase or stabilize their income or build assets. The establishment of the Financial Inclusion Experts Group (FIEG), and its two sub-groups on Small and Medium-sized Enterprises Finance, and Access through Innovation, recognized the mutually reinforcing policy objectives of financial stability, financial inclusion and consumer protection.
Australia has historically had a leadership role in East Asia and the Pacific when it comes to fighting poverty and promoting development.
In developing countries, nearly one billion people live on less than US$1 a day. Two billion people have no access to clean water, while 150 million children never get the chance to go to school. At least two thirds of these people live in the Asia Pacific region, the focus of Australia’s aid program.
We know of ANZ Bank rolling out mobile banking in PNG and Cambodia. What is it about branchless banking that you think would have high impact for vulnerable populations in the Pacific and East Asia?
With its highly dispersed populations, poor and ageing infrastructure and low levels of formal enterprise, the Pacific region has been very poorly served by financial services. Branchless banking offers new hope to the more than 80 per cent of Pacific Islanders currently without access to financial services of any kind.
In East Asia outreach to the poor is limited by these factors and by poorly targeted or outdated national regulation, low levels of financial literacy and a perception that providing services to the poor cannot be made commercially sustainable.
The Australian Government has supported ANZ’s WING projects in Cambodia, Papua New Guinea and in parts of the Pacific, and through these initiatives and others helped extend financial services to people living in rural and remote areas. Only through new technologies such as mobile phone banking can we hope to reach the most remote and most vulnerable people in these regions.
In development, the narrative for the past 60 years has been that the developing world can learn a lot from advanced economies. But when it comes to branchless banking, is it possible that this logic is reversed a bit?
Over my 32 years involvement in “development issues” my view has always been that people coming together and sharing experiences, of what has worked and what has not, is the essence of improving governance, institutions and capabilities. Creating different categories, based on “developing” or “advanced” is a reflection of current states of development, not what people and countries can bring to discussions. The lack of this distinction is one of the fundamental strengths of the G-20. The G-20 FIEG Access through Innovation Sub-Group is developing principles based on the experience of leading countries in this field, regardless of where that leadership comes from. We are delighted to find that innovation in access to financial services is mostly coming from economies with lower GDP per capitas, but learning is never one-way. CGAP is doing a great job of facilitating an iterative learning process and AFI is conducting valuable peer-to-peer learning on these issues.
How might we measure success for the G-20 FIEG ATISG one year, or five years from now?
The work of the FIEG ATISG will have been a success if it provides the political catalyst for national level policy makers and regulators to increase financial inclusion though innovation. By the end of this year we are aiming to get G-20 leaders to endorse principles on increasing innovative access to financial services and an action plan to transform these principles into practice. We hope that national level policy makers and regulators make commitments to take action on implementing those principles.
In the medium-term, practical success will be seen where there are increasing numbers of rural and low income are included in the financial system thanks to the implementation of those principles. But it will not just be attributed to our work, but to each government, NGO, private business and the networks of each of those, that are working hard to achieve this goal.
-Paul Flanagan, as told to Jim Rosenberg
March 31st, 2010 at 9:25 am, Patrick ()
Great share! Branchless banking especially mobile banking sounds really great. This is of the best things to happen in mobile phones if this project will be achieved.
4 Comments
March 9th, 2010 at 9:59 am, Zeeshan ()
Thanks for posting this, Jim.
Your post has motivated me to learn more about branchless banking. What an interesting concept!
Keep up the great work.