AFI welcomes Timor-Leste’s new financial inclusion report

Congratulations to Banco Central de Timor-Leste (BCTL) on the launch of its latest financial inclusion report on 17 June 2021, which showed how boosting financial services access through digitization buoyed a rise in bank account ownership among Timorese adults.

The report, the third developed by the central bank to accelerate financial inclusion in Timor-Leste, outlines key achievements in the country’s financial inclusion agenda. This includes a 200 percent increase in access points, greater uptake among financial services, a complete set of quality indicators, key results of a demand-side survey and financial literacy activities.

Speaking at the launch event, BCTL Governor Abraão de Vasconcelos drew attention to how the modernization of the national payment system led to financial institutions, including e-wallet services, being connected to the interoperable national switch.

Outlining the benefits to consumers, Governor de Vasconcelos said that the move had allowed customers to transact digitally between service providers and had facilitated transfers between bank accounts and e-wallet accounts. In the future, he expects that all Timorese will be able to use their debit cards in other countries in the region.

“We, at BCTL, believe financial inclusion brings positive change for the people’s life, the development and stability of the financial sector, and the country’s economy as a whole,” Governor de Vasconcelos wrote in the report.

“For this reason, BCTL keeps its commitment to champion and advocate for inclusive finance in Timor-Leste through innovative approaches to increase access points, modernize payments systems, enhance the usage of financial services and intensify financial literacy programs in the country”.

According to the report, bank account ownership increased four percent to 61 percent by the end of 2020 compared with 2018. Of the total, 65 percent were woman compared with 57 percent men. Other deposit taking institutions saw their share of the market inch up to seven percent from six percent, non-regulated financial services to three percent from two percent, and electronic wallets (e-wallets) to 13 percent compared with just few clients using the service in a pilot project.

AFI Executive Director Dr. Alfred Hannig welcomed the report as an “essential read”, adding that it would help local authorities and other network members better inform their own financial inclusion policies and strategies, particularly those targeting specific groups and thematic areas, such as women and inclusive green finance. Timor-Leste’s approach to women’s financial inclusion has been particularly striking with a positive gender gap of eight percent, bucking overall global trends of negative seven percent.

“Indeed, the AFI network has a lot to learn from Timor-Leste,” he said in a pre-recorded address, before adding that the country’s “meteoric” rise in digital financial services to advance financial inclusion also brought about the need for greater levels of protection for consumers and the integrity of financial services.

“I would also encourage BCTL to leverage AFI’s various services, such as working groups, regional initiatives, capacity building and peer learning exchanges and in-county implementation mechanisms, in its journey of advancing financial inclusion,” he said.

BCTL published its first financial inclusion report in 2016, followed by its second two years later. As part of efforts to achieve an inclusive and sustainable financial sector its, BCTL helped launch the country’s national strategy for financial inclusion (NFIS) in 2017, a six-year initiative that runs until 2022.

BCTL has been an active member of AFI since joining the network in 2010 and has completed nine of its 12 Maya Declaration targets. In 2015, the central bank hosted the launch of the Pacific Islands Regional Initiative and is part of the vibrant initiative that is at the forefront of innovations, such as regional regulatory sandbox, de-risking and inclusive green finance.

AFI has supported the central bank through various initiatives, including the development of its NFIS and the development of finance for small and medium enterprises that led to the implementation of a credit guarantee scheme.