Elections and Interruptions: Financial Inclusion Strategy Pitfalls

> Posted by Sonja E. Kelly, Fellow, CFI

I was thrilled when I opened the paper this week to the news of Michelle Bachelet’s victory in Chile. The first female president in Chile, first elected in 2006, is back in office after a one-term break. I have long admired her advocacy for those living in poverty, her tenacity, and her activism. However, her victory also means a question of what will happen to the admirable financial inclusion initiatives begun by the Piñera administration.

In many of my conversations with government employees in Chile in the past year I have heard some caveat to the effect of, “I’m not sure what we’ll be able to do in the coming months given the upcoming election.” Initiatives like electronic government-to-person (G2P) payments, for example, were pushed forward by people connected with the Piñera government, and if the new administration does not prioritize such initiatives, financial inclusion may receive less policy attention.

This highlights a larger issue of who “owns” government-initiated financial inclusion efforts. The answer matters because the leadership structure of government-led initiatives determines longevity. If financial inclusion policy is spearheaded by the Central Bank, and the Central Bank ministry is largely independent, financial inclusion initiatives are unlikely to change course with an administration change. If it is a Ministry of Finance-led push, however, financial inclusion may indeed be an administration-specific initiative.

In the Chilean case, the electronic G2P payment initiative was in part tied to the administration because the work was led by the ministry of Social Development, a part of the president’s cabinet. Recognizing that lack of continuity may be a weakness, many countries, including Chile, have created intra-departmental committees with formal structures that involve departments with a spectrum of players and a diversity of mandates. Rwanda and Fiji have established Financial Inclusion Taskforces. Brazil organized a National Partnership for Financial Inclusion. Mexico has a National Council for Financial Inclusion. These committees or councils are set up to endure beyond the political lives of their participants.

Governments are also moving toward formalizing longer-term goals and structures that outlive the tenure of a particular administration by undertaking initiatives like national strategies, complete with long-term targets for access, use, and quality. Examples of these efforts include Nigeria’s Financial Inclusion StrategyBrazil’s Financial Education Strategy, and Mexico’s Financial Inclusion Strategy. We’ve talked before about various national strategies for financial inclusion here on the blog. In the past few years, many additional countries have adopted such strategies or announced their intention to create a financial inclusion strategy through their Maya Commitment to the Alliance for Financial Inclusion.

Long-term financial inclusion efforts like these, however, require broad political support and long-term thinking. Initiatives that have been set up for the long-term, with broad support from both ends of the political spectrum, will not be very affected by political change. Countries with large and complex government structures are attempting this—India, Nigeria, South Africa, and Mexico, for example, are all moving toward or have achieved this kind of a sustainable financial inclusion strategy.

We would be naïve, however, if we did not acknowledge how difficult such efforts are—a reality we considered in the Financial Inclusion 2020 consultative work that we undertook this year. A robust and long-term financial inclusion strategy involves accommodating a large number of stakeholders, both internal to the government and external. It means finding common ground between elected, appointed, and long-term government figures, and it often requires outside consultation. Given how many hoops they have to jump through, I admire the regulators, policymakers, and legislators who promote financial inclusion at the government level.

To Michelle Bachelet and her future administration, congratulations. And please don’t forget financial inclusion as you move forward in your work in Chile.

Image credit: Sebastián Villanueva

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