DFS helping MSMEs, women tackle COVID-19, say FILAC experts

Digital financial services (DFS) are proving essential to the survival and recovery of small businesses and women as persistent economic uncertainty threatens the livelihoods of vulnerable groups, expert members from AFI’s Financial Inclusion Initiative for Latin America and the Caribbean (FILAC) said on 16 July.

William Orie, deputy governor  Centrale Bank van Suriname, which co-hosted the meeting with AFI, opened the bi-annual gathering of FILAC’s Experts Group for Financial Inclusion Policy (EGFIP) by emphasizing how technology was shaping responses to the ongoing pandemic.

“We are witnessing more than ever the importance of DFS and the significant role it plays in stimulating financial inclusion for vulnerable groups, especially micro, small and medium-sized enterprise (MSME) and women,” he said at the 7th meeting of the FILAC EGFIP.

“DFS has indeed become indispensable,” he told experts from Latin America and the Caribbean.

The central bank has made significant inroads in Suriname by promoting digital payments and innovation with its new national electronic payment system and the introduction of an innovation hub and regulatory sandbox. Most recently, it helped launch a national awareness and behavioral change campaign designed to boost financial inclusion and digital payment usage. Currently, the central bank is working with AFI to develop its first financial inclusion and education baseline study, the results of which will guide policy formulation.

Orie also highlighted the significance of the peer-to-peer meeting as a platform for learning and exchanging vital shared experiences in the region, particularly as widespread movement restrictions continue to curtail travel and physical interactions.

“Most countries in our region share specific characteristics and face similar challenges, he said. “As policymakers, such meetings give us the opportunity to share context-based experiences and knowledge among each other”.

With many countries in the region home to a large informal market José Armando Fallas, general intendent at Superintendencia General de Entidades Financieras de Costa Rica (SUGEF) and chair of FILAC, noted how DFS could be used to trigger an influx of workers into the formal sector. While the move, he added, would extend the reach of government assistance programs, it would also require significant long-term backing and tailored solutions.

“Transitioning MSMEs from the informal to the formal sector requires much more than just facilitating access to technology platforms,” Fallas said citing financial inducements, simplified procedures and training programs as possible incentives.

Echoing the push for more investment in digital channels was AFI Deputy Executive Director Norbert Mumba, who said that “the future of financial inclusion, as well as broader recovery from the global emergency, will continue to be shaped by technology”.

“The insight drawn from the deliberations will make clear the need for foster the use of digital payments, taking into consideration consumer protection and market conduct frameworks to engender consumer confidence in this time of crisis and beyond,” he said.

The first of two days of meetings was attended by 25 participants from 10 institutions in 10 countries where discussions focused on COVID-19 responses, recovery plans for MSMEs, policy solutions and interventions on priority policy themes in the region, with a specific focus on DFS, MSME finance and gender inclusive finance.

Among those representing FILAC members was Dr. Margarita Hernández, superintendente of Superintendencia de Economía Popular y Solidaria de Ecuador, who delivered an in-depth presentation into the financial inclusion efforts being implemented by the Superintendencia. She underscored the importance of Ecuador’s national financial inclusion strategy (2020-2014), the collection of data disaggregated by sex and youth, and developments in DFS, including mobile agents, regulatory frameworks and risk management.

Since the last meeting of FILAC’s experts in Rwanda in 2019, El Salvador made several major milestones in financial inclusion. Banco Central de Reserva de El Salvador’s Clemente Blanco provided updates about the launch of a national council for financial inclusion and financial education, as well as ongoing progress towards the development of a national financial education strategy.

Financial education was also a major theme in presentations by Comisión Nacional de Bancos y Seguros de Honduras, Superintendencia de Banca, Seguros y AFP del Perú, Comisión Nacional Bancaria y de Valores de México and Banque de la Republique d’Haïti, Haiti recently introduced a National Financial Education Plan, which was developed and launched with AFI’s support.

Highlighting the upcoming nationwide launch of its digital currency FILAC’s newest member, Central Bank of The Bahamas, shared its COVID-19 responses and efforts to raise  financial literacy and collection of financial inclusion data.

Focusing on guidance was Banco Central del Paraguay, which updated members of revisions to regulations on e-money, microinsurance and credit.

Meanwhile, SUGEF’s Jose Alvarez underscored the importance of collecting sex-disaggregated data, explaining that gender surveys could reveal a range of findings, including the savings habits of women, their financial literacy levels, how they manage their expenses, their access to credit and cultural expectations. Reiterating this sentiment was the Superintendencia’s Christian Vega, who highlighted that financial inclusion policies must directly address the financial inclusion gender gap, which remains unchanged at nine percent worldwide.

Mastercard will lead the second day of regional initiative meetings by delivering member training on engaging and enabling MSMEs with digital financial literacy and technology solutions. Deliberations are exploring critical themes around MSMEs, ranging from digital financial literacy, enabling solutions to policy challenges and opportunities.

The multinational financial services corporation is a long-standing partner of AFI through the network’s Public-Private Dialogue (PPD) platform, where regulators, policymakers, private sector, development and other key players engage and share technical expertise on financial inclusion issues to develop informed policy and encourage innovation and investment.

FILAC is the primary platform for AFI member institutions in Latin America and the Caribbean to support and develop their financial inclusion policy and regulatory frameworks and to coordinate regional peer learning efforts.