Honorable Douglas Rodriguez, President Banco Central de Reserva de El Salvador. Hazel González, Vice President Banco Central de Reserva de El Salvador. Miguel Kattan, Secretary of Commerce and Investments. Chair & Co-Chairs of the Digital Financial Services and SME Finance Working Group. Members of the Working Groups and AFI Team
¡Muy buenos días a todos! A very good morning to you all!
It is with great pleasure that I welcome you to the convergence meeting of the Digital Financial Services Working Group and SME Finance Working Group.
On behalf of the Executive Director, Dr. Alfred Hannig, and the AFI Management Unit, we would like to express AFI’s gratitude for being able to physically host these meetings after more than two years of global hardship and uncertainty due to the COVID-19 epidemic. Allow me, Honorable Rodriguez, to offer my heartfelt appreciation to you, the Banco Central de Reserva de El Salvador (BCR), and the organizing team for your outstanding support in co-hosting this first in-person working group meetings of DFSWG and the SMEFWG since 2019!
BCR El Salvador, which joined the AFI network in 2012, has made significant progress in harnessing digital financial services to advance financial inclusion for individuals and small businesses. El Salvador is the first country in the world to recognize Bitcoin as legal tender, which demonstrates the BCR’s commitment to balancing innovation with its basic mandates of stability, integrity, and inclusivity. We’d like to take this opportunity to congratulate BCR El Salvador and other key players on the introduction of the country’s national financial inclusion policy, which represents a watershed moment in the country’s efforts to increase unbanked people’s access to, usage of, and quality of financial services.
This meeting of the working group comes at an opportune time given the alignment between the main priorities of the policies and the objective of the meeting, which is to promote a digital ecosystem and financial innovations, provide greater support for micro, small, and medium-sized enterprises (MSMEs), women, and individuals with lower incomes, and improve the regulatory and supervisory frameworks for consumer protection. In addition, we would like to commend BCR for their efforts in developing a National Fintech Strategy, which, as I understand it, will be the subject of discussion and peer review during the working group’s deliberations.
BCR El Salvador has stood out for its commitment within the AFI network and our relationship has grown and strengthened overtime. I would like to emphasize that we are grateful for your support in hosting this Working Group meetings and the fact that you’ll be sharing your thoughts and lessons learned during your financial inclusion journey, contributing valuable insights to technical sessions, including those experienced during the COVID-19 period, is indeed a mark of commitment to the AFI network.
Over the past two years, AFI members have faced unique, unprecedented challenges in their respective financial ecosystems due to the global COVID-19 pandemic. The resulting impact has been more protracted for developing and emerging economies and has undoubtedly disproportionaltely affected vulnerable and disadvantaged populations. MSMEs, especially women-led MSMEs which make significant contributions to the developing and emerging countries are being hit hardest by the fall-out of the pandemic. During these difficult times, AFI members have responded appropriately with measures, policies, and interventions to ensure business continuity, market stability and consumer protection. AFI has provided a platform for its members to quickly learn from each other, allowing members to select appropriate measures in a timely manner.
While the global economy is showing early but very fragile signs of economic recovery, we need to take into account the fact that this economic recovery is uneven and the resulting global divergence will create tensions within and across borders which complicates the coordination needed to tackle common challenges including strengthening climate action. Yet, it is within this changed economic environment that we should intensify our efforts in identifying and creating new opportunities which will not only enable us to return to pre-COVID-19 financial inclusion levels but exceed those levels.
The DFS and SMEF working group meetings taking place this week are testimony of the progress made by AFI members in advancing financial inclusion. Digitalization becomes the main conduit in promoting financial inclusion and catalyse MSME’s productivity. For MSME, innovative technologies and digital financial services (DFS) could address one of the main challenges that impedes MSME growth, i.e MSME access to finance. AFI’s own work in this space indicates that although traditional financial institutions have undergone technological upgrades in operations and money transfers, the unique capabilities of FinTech have the potential to lower entry barriers, elevate the utility of sex and age-disaggregated data and other alternative sources of data, and promote new business models that might expand access to finance.
Digital Financial Services (DFS) has been a cornerstone of AFI’s work since its inception. Mobile money, branchless banking and other digital payment mechanisms have been critical in providing safe, convenient and cheaper payments and financial services to previously financially excluded populations. Furthermore, a number of technological advances has increased the scope of work in this space significantly. Proliferation of digital identity systems, open data and platform based services, central bank digital currencies, various blockchain applications, regtech & suptech all have immense potential for the member-base of AFI. As a result, DFS Working Group is currently the largest of all the working groups with 69 member institutions from 66 countries, producing a total of 32 knowledge products. Further – over the last 10 years we have seen 250 policy changes related to digital financial services that members have attributed to AFI services.
On the other hand, the SME Finance Working Group has been at the forefront in facilitating exchange of knowledge and in establishing a common understanding of policies that promote tangible access, usage and quality of financial services for MSMEs. . Late last year, the working group published the MSME Finance Policy Model to guide members through a set of principles on key elements to be considered in developing or reviewing their MSME finance policies. As we know – Micro, small and medium enterprises (MSMEs) are the lifeblood of many economies, particularly in developing countries. Globally, they represent about 90 percent of businesses and more than 50 percent of employment. As of today, SMEF working group has 62 member institutions from 61 countries. Further more the working group has published 28 knowledge products and members have reported 52 policy changes in this area.
Today, we also have a joint technical session that looks at the intersection of digital innovations and MSME finance that will set the tone for respective working group deliberations in the coming days.
I would like to thank everyone for taking their time to attend this meeting. It is exciting and pleasing to see close to 80 of the DFS and SME Finance WG working group members here today. Allow me to commend members of the respective working groups for demonstrating content leadership by contributing to the development of knowledge products and participating in peer learning/ knowledge exchange programs. It is thanks to you that we have achieved all the positive results and achievements despite the challenges posed by the lockdowns and travel restrictions.
BCR El Salvador is hosting a convergence of the DFS and SME Finance Working Group at an opportune time. Covid-19 has had a crippling effect on small enterprises and households. AFI member countries have taken focused policy measures to support MSMEs and vulnerable sectors such as rural poor, women, young, and the forcibly displaced. These SME- and digital finance-related initiatives have helped member nations alleviate the negative effects of the crisis and strengthen their resilience against future shocks, whether natural or man-made. I am hopeful that this working group meeting will provide a forum for participants to share their expertise and learn from one another in true AFI spirit!
I wish to end by thanking you for your participation and thanking Hon. Rodriguez, the supporting BCR team and my AFI colleagues for organizing this joint working group meeting. I wish you all a fruitful and positive deliberations and a successful week.