35 Central Banks Commit to Financial Inclusion

> Posted by Dave Grace, Advisor, CFI

HOPE! Maybe it’s my punch drunk self toward the end of a way too long U.S. election cycle, but it’s the word that comes to mind following the meeting of 80 regulatory agencies in Cape Town. The Cape Town affair was the Alliance for Financial Inclusion’s (AFI) annual Global Policy Forum.

What was so hopeful? That 35 central banks from developing and emerging markets made or reported on past commitments to increase financial inclusion! In my two decades of work in development finance, this is the first time that policymakers, who have the power to change financial systems, are creating a global movement to help the poor in a material way. While some of the commitments from central banks are malleable, most are concrete. For example, Malaysia is seeking 95 percent access by 2012, Ghana is seeking 70 percent inclusion by 2017 and is changing its payments, financial literacy and mobile financial services framework to get there.

The environment in Cape Town was frothy on networking but the hype stopped there. I’ve been to too many past forums where a single solution/provider was seen as the silver bullet for financial inclusion. The answer was agricultural finance in the 1980s, credit in 1990s and mobile in the naughties. In Cape Town people recognized that it will take multiple actions and multiple offerings to get there, including expanding agent banking networks, mobile financial services, savings initiatives, government-to-person electronic transfers and financial service providers acting responsibly. There was considerable discussion around when and how to regulate mobile financial services, including a hot debate around interoperability among mobile providers. Should interoperability be entirely left to the market, encouraged by regulators, or required? Opinions coalesced around strong encouragement from regulators, but only once the market has a moderate level of adoption.

What is AFI?

This movement among supervisors toward financial inclusion would not be occurring at the pace it is if it weren’t for the formidable activities of AFI and its backers. AFI was started in 2008 with funding from the Gates Foundation to facilitate peer-to-peer learning among central banks and regulatory agencies in developing and emerging countries. With its high-level support, committee structures and small but talented team, AFI has become the forum for exchange and learning among developing country banking sector supervisors.

Having started and run a similar network to AFI, for credit union supervisors from 30+ jurisdictions, I know firsthand that peer-to-peer learning is often the most effective method for unbiased supervisory training. It is also a constant effort for supervisors’ knowledge to keep pace with developments in industry. Cross-country forums are an effective way to do this. The members of AFI have not only moved their own institutions forward, but, as a first, the G20 has looked to central banks in developing countries for how to define and track financial inclusion. This is happening by measuring access, usage and quality of financial services through a similar set of metrics in many countries.

Intersection with Financial Inclusion 2020

The Center for Financial Inclusion in partnership with AFI, is building upon AFI’s great work with central banks to ensure providers of financial services and technology companies also have a peer learning platform designed to promote financial inclusion within the decade. This is happening through the Center’s Financial Inclusion 2020 initiative which seeks to achieve full financial inclusion globally by 2020.

With 2/3 of the 73 countries present in Cape Town having a full or partial strategy for financial inclusion, it is clear that this is an area moving FORWARD!!!

For more information, sign up for updates from the Financial Inclusion 2020 campaign.

Image Credit: AFI

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