To mark AFI's 10-year celebration, we sat down with Executive Director, Dr. Alfred Hannig for a walk down memory lane to reflect on AFI's early years and its decade of impact on financial inclusion.
#AFITurns10: Celebrating 10 years of financial inclusion
Over 10 years ago, a team gathered for a retreat in Seattle, United States to map out a single shared dream on a drawing board. The Alliance for Financial Inclusion (AFI) had humble beginnings but since receiving their initial grant from the Bill & Melinda Gates Foundation, AFI has flourished from a project ran by the German Agency for International Cooperation (GIZ), to a leading global network of financial policymakers from developing and emerging countries where majority of the world’s unbanked resides. Financial regulators in the AFI network work on developing and implementing policies that bring the financial services to the world’s underserved.
The one person who has championed and promoted financial inclusion tirelessly from the beginning is the Executive Director of AFI, Dr. Alfred Hannig. Together with Lawrence Yanovitch from the Gates Foundation, he was there when just a few of them gathered “with a black pen and white board” to develop the concept of AFI. And today, looking back in awe and looking forward with hope for so much more — 10 years later, Hannig is still here highlighting why financial inclusion is in everyone’s interest and should remain at the top of the regulators’ agenda.
The early years
Hannig recalls that it took them two years to prepare and officially launch AFI. In 2006, there was an emerging recognition that policies mattered when it came to financial inclusion. “There was a lot of international debate on financial system development and what the financial sector can do to alleviate poverty through micro finance,” he said. "We were just starting to see the potential of digital financial services for increasing financial inclusion for the unbanked," Hannig explained.
“At the same time, the Gates Foundation was looking for opportunities to invest in financial inclusion policy. They were looking around the globe for interesting initiatives they could learn from and speaking to a few people. We realised that many of the solutions needed to drive financial inclusion globally were in fact out there, but the missing piece was the mechanism to share them so that everyone could benefit,” he added.
While there was an inspirational party through the Gates Foundation, willing to explore cutting edge approaches and solutions, Hannig and his GIZ team had to first contend with the second financial crisis that had broken out. The timing was not ideal as they began the whole initiative at a point in time when everyone was of the opinion that too much financial inclusion was the problem.
“We needed to think out-of-the-box because we did not have a point of reference for a project of this kind and no experience in this field for a global initiative to learn from. Essentially, we had to start from scratch,” Hannig said.
The creation of AFI not only needed supporters but also had to first convince a lot of people that this was the way to go. Finally, in 2008, the GIZ received the grant from Gates Foundation to kick-off the first phase of AFI and by the end of 2008, they had designed a business plan, kicked-off the project in Bangkok, Thailand and subsequently, launched AFI officially in Kenya in 2009.
Building the network
Hannig wasted no time travelling around the globe to garner support. One of AFI’s first supporters was Indonesia. Hannig met with the Deputy Governor of the Central Bank of Indonesia, who became very enthusiastic and said that the idea behind AFI was exactly what they were looking for. Hannig was told that while there were plenty of resources and information available through publications and online, there was no way of learning how their peers were applying practical solutions and tackling political economy issues when it came to financial inclusion through regulatory approaches. The Deputy Governor assured Hannig that if AFI can provide this kind of knowledge and connect people to help each other, then it would truly be a valuable tool.
Shortly after, Hannig met with the newly appointed Governor from Bangladesh Bank, who immediately expressed interest in the project. In fact, the Governor was not merely excited about FI; few years later, he went on to become a member of the AFI Steering Committee and played a big role within the network and advocating for financial inclusion.
Next came Kenya. Hannig met the Governor in June of 2008 and although they were not yet members of AFI, he knew the Central Bank of Kenya had a lot to offer. Initially, the Governor was a tad cautious and did not seem too comfortable. However, within 30 minutes of their meeting, he immediately offered to host AFI’s first GPF in September that year.
Hannig remembers another crucial encounter in Egypt. “I met with the assistant governor in 2007, who is actually now the Deputy Governor and an AFI Board member. To start with, it was a tough meeting to arrange but when I presented to her, she was instantly taken with the idea and said ‘it was music to her ears.”
From there, many other countries jumped on the bandwagon and played a big role in AFI’s early years and advocating for financial inclusion, including Mexico, Philippines, Pakistan, Tanzania and many others.
A decade of impact
Since then, AFI has carved its mark within the global financial sector. From 2011 to 2014, the Global Findex revealed that there was a reduction in the global unbanked population of 700 million people, who had once been financially excluded, from the initial number of 2.1 billion.
“I would say that one of our biggest impact that we are proud of is the number of countries with individuals and households that now have access to finance,” Hannig said.
Up until 2017, the network has developed and implemented over 380 policy changes in 63 countries. AFI tracked down the countries which have applied these policies to find out how they were used and the effect they had. The analysis showed that out of the reduction of the unbanked by 700 million globally, estimated by the Global Findex, AFI network has contributed to banking more than 300 million adults.
Advocacy is another AFI legacy; financial inclusion has become one of the cornerstones of any development approach or thinking. Many countries have now embarked on solid FI initiatives as a result of AFI’s huge contribution to making financial inclusion more popular between developing and emerging economies.
“It is also nice to see international organisations and development partners increase their funding and supporting activities towards financial inclusion, and also change their approach. Many are now acknowledging that it is the developing economies that are taking the lead in defining their own agenda and knowledge sharing. I believe that AFI’s work has contributed to this change,” he said.
Hannig says that AFI’s main focus for the next 3-5 years will be issuing guidance and country implementation support. “If the network becomes more competent on policy content and how policy reforms can be implemented successfully, we can take the next steps and be brave, and issue guidance to others, as well as offer support along the implementation chain,” he said.
On a global level, standard setting bodies have taken financial inclusion into account but there are still gaps in the global regulatory landscape. In other words, the traditional standard setting bodies sometimes fall short of producing results that can be used by developing economies, simply because their reality is different from the reality of the developing economy.
This is where the AFI network can contribute and share knowledge, based on how other countries have dealt with similar issues and fill the gap within the global standard framework. “We are cultivating a bottom-up approach in this area, which means the network will produce guidance for others, but it will not make it a principle or mandatory; countries can choose to follow if they want to. This is how AFI can issue guidance,” he said.
Another big pillar for the future is the In-Country Implementation support. AFI can play a role in providing additional funding for specific policy reforms in areas such as, SMEs and digital financial services, closing gender gaps, climate change, consumer protection and financial literacy.
“We can’t predict what will happen in the next 10 years — we can only hope that the world remains stable politically and economically, which will have an impact on financial inclusion. I think it is important to preserve what we have achieved and ensure that financial inclusion does not fall into any critical phase or crisis,” Hannig said.
According to Hannig, AFI’s one big objective in the next 10 years is to narrow the gender gap to zero. “When it comes to financial inclusion, we can’t promise that we will have universal access in 2028 but I think we can work on the gender gap because we see an enormous momentum in bringing women into access and usage of financial services.”
“The internal dynamics and engagement within the network is very conducive to narrowing down the gender gap to zero,” he said.