Digitalization as a powerful and transformative enabler to accelerate financial inclusion was underscored by the heads of central banks and other financial regulators at the 8th African Financial Inclusion Policy Initiative (AfPI) Leaders’ Roundtable on 20 August.
Prof. Florens D.M.A Luoga, governor at the Bank of Tanzania, which co-hosted the virtual event, praised technological innovations – from internet banking to mobile money – for bringing formal financial services to the unbanked, as well as the experts and policymakers who created enabling environments for real change.
“Technology is one of the clear enablers since none of what we have seen emerging in the last 10 years would have been possible without it,” he said. “Financial innovations and digital technology have provided solutions for overcoming a number of barriers for advancing and accelerating financial inclusion by making it easier for individuals to access credit, make purchases and pay bills, as well as send or receive remittances”.
While outlining some of the key recent initiatives adopted in Tanzania, he spotlighted a financial services registry that maps existing financial access points and serves as a national system for tracking their growth and distribution. Furthermore, he said that the achievement of interoperability in peer-to-peer mobile money transactions had made mobile money more accessible and affordable, especially among rural and low-income households.
Despite these milestones, Governor Prof. Luoga emphasized that women remain disproportionately excluded from formal financial services. In response to these challenges, he said that the central bank had formed a committee to identify financial inclusion and policy challenges facing women with the aim of slashing the gender gap by 2022. Among the targeted solutions mentioned was the design of products, services, policies, legal and regulatory strategies.
Macro, small and medium size enterprises (MSMEs) are another major group pursued for their economic importance , which the governor said was currently the focus of a policy review designed to ensure easy access to financing. Despite being the backbone of many economies, MSMEs typically struggle to gain access to funding, particularly in developing countries. He added that efforts were being made to improve financial infrastructure, collateral registry, alternative financing instruments, and monetary and fiscal interventions across the country.
Nearly 100 participants attended the annual AFI event, including more than 20 governors, deputy governors and board members from member institutions of the regional initiative, many of whom reiterated the importance of peer exchange in aiding the recovery from the COVID-19 crisis.
Among them was Banque Centrale de la République de Guinée Governor Dr. Louncény Nabé, who encouraged regional approaches as a means of bolstering the fight against the ongoing coronavirus crisis.
“A coherent approach clearly defining emergency and economic recovery measures with a sustainable development perspective is of paramount importance in resource mobilization, to help the continent mitigate macroeconomic shocks caused by the pandemic,” he said.
Governor Dr. Nabé added that in order to strengthen the use of electronic payments, the central bank put into place measures aimed at simplifying the opening of electronic money accounts, in particular in remote areas. It also encouraged a reduction in the fees and commissions paid by customers of electronic money institutions for account-to-account transfers and merchant payments.
Also sharing his experiences was Central Bank of Kenya Governor Dr. Patrick Njoroge, who listed several actions taken to shore up the financial system by encouraging digital transactions, offering flexible loan repayments and suspending negative credit listings.
Switching to a global view, he said that the crisis had adversely affected progress towards achieving Sustainable Development Goals (SDGs), which are vital in transitioning towards sustainable development and economic recovery.
“Sustainable finance will continue to be at the forefront of economic recovery as SDGs directly impact the pandemic response to enhance the resilience of the lives and livelihoods of our global citizens,” he said.
Looking ahead, he highlighted three areas of focus for the “post-COVID period”: more and better data to drive better accounting of SDG-related risks; reduced transaction and intermediation costs; and innovative digital business models for financing sustainability and responding to growing demands of citizens.
AFI Executive Director Dr. Alfred Hannig also reiterated that there was much work left to be done, but also commended members for the steps taken so far in mitigating the worst of the crisis.
“Without the strides AFI members have made in advancing financial inclusion, the situation could have been worse. Initiatives in digital finance, mobile money, agent banking, e-KYC and SME finance have played a critical part in mitigating impact of the current crisis. The crisis is not over, and we are on this road together,” he said.
This sentiment was echoed by AFI’s Deputy Executive Director, Norbert Mumba, who delivered a presentation that drew attention to key policy interventions for addressing the impact of COVID-19 on financial inclusion, as well as in-country implementation support available for members.
Outlining lingering challenges was Bank of Zambia Deputy Governor – Operations Dr. Francis Chipimo, who noted that despite efforts to help banks support small businesses, uptake rates remained low. He also noted resistance by some private sector players in terms of boosting interoperability, owing to concerns over competition.
Central Bank of Lesotho Governor Dr. Adelaide Matlanyane also spoke of inflexibility but from insurance providers. She added that while the central bank had imposed relief measures, including premium holidays and lower digital transaction fees, such measures must be temporary.
“As we lower the rates and transaction costs for digital, financial institutions are hit in income from interest and fees … [now] financial institutions are experiencing stress and there’s a point that we have to stop,” she said.
National Bank of Rwanda Deputy Governor Dr. Monique Nsanzabaganwa noted complications in coordinating and mobilizing stakeholders to ensure that people have transactional accounts. She also took the opportunity to run through some of the measures being implemented by the central bank to support disadvantaged groups, including guarantee funds that help the youth, the digitalization of social welfare programs and special identity documents for the forcibly displaced, which allow them to bank and access financial services, including loans. Reflecting on the new opportunities presented by the crisis, AFI’s Dr. Hannig underscored that many could prove transformative for financial and social inclusion, particularly for the most vulnerable in society.
““We’re always talking about the SDG lens, but I think the items that we have chosen – gender inclusive finance, inclusive green finance, looking after the disproportionately affected people and groups in our countries – these really stand for the opportunities that we see ahead of us when we move forward to mitigating the impact of the crisis and starting recovery programs,” AFI’s Executive Director said.
Launched in 2013, AfPI is the primary platform for AFI members in Africa to support and develop financial inclusion policies and regulatory frameworks, and to coordinate regional peer learning efforts. From AFI’s regional office in Abidjan, Côte d’Ivoire, AfPI brings together high-level representatives from African financial policymaking and regulatory institutions to enhance the implementation of innovative financial inclusion policies across the continent.
This event is partially financed through AFI’s Multi-Donor Financial Inclusion Policy Implementation Facility, with participation of the French Development Agency (AFD), German Federal Ministry of Economic Cooperation and Development (BMZ) and Ministry of Finance of the Grand Duchy of Luxembourg.