6 July 2020

CBSL-AFI Virtual Member Training on Implementation and Monitoring of National Financial Inclusion Strategy – Opening Remarks by Professor W. D. Lakshman, Governor of the Central Bank of Sri Lanka

It is my pleasure and honor to welcome you, on behalf of the Central Bank of Sri Lanka, to this AFI Virtual Member Training on Implementation and Monitoring of National Financial Inclusion Strategy (NFIS). Given the time zone difference between member countries, the programme will be repeated during 08-10 July 2020 for members in Africa and Latin America. As I understand, about 80 participants representing 38 institutions from 35 countries will be participating in the program, spread over the two groups. Today we have 26 participants. The repeat programme will have 54. The original plan was for the Central Bank of Sri Lanka to co-host and to conduct the programme here in Colombo. The programme was converted to this virtual format because of the COVID-19 pandemic, but retaining the timeframe as originally envisaged.

This three-day programme is being conducted in pursuit of the core mission of AFI, namely to encourage inclusiveness in financial policies of developing and emerging economies. I am sure it will provide an active platform for participants to exchange their knowledge, views and more importantly, their hands-on experiences, in the area of Implementation and Monitoring of NFIS which, undoubtedly, would facilitate improvement of the standard of living of those remaining excluded from the formal financial system.

For the Central Bank of Sri Lanka, this would be a valuable opportunity, as we are at the springboard of our first ever NFIS. The key objective of our National Strategy is to create an enabling environment where people get fair and equitable access a range of high-quality, appropriate, secure, and affordable financial products and services. Consumer empowerment via financial education is vital in that regard.

Over the years, much has been done to make Sri Lanka more financially inclusive. Because of those efforts, the access to financial products and services in the country has moved to relatively higher levels. Sri Lanka has a high level of bank branch penetration compared to our peers in the region. We have a wide range of financial service providers, offering high levels of physical access. The bank branch density is at 16.5 branches per 100,000 adults. Bank branches are spread relatively equitably throughout the country. Moreover, 88 percent of adults have accounts in a financial institution. In terms of this measure, there is no significant difference between men (89 percent) and women (87 percent). The relevant measure in rural areas also is at 88 percent (National Financial Inclusion Survey, 2018). The percentage of account ownership for women and for rural population in many countries, overall, is lower than that of ours.

Financial inclusion does not only entail providing affordable access to financial products and services. It also implies that people are able to effectively utilise these financial services. The Central Bank of Sri Lanka has been conducting awareness and capacity building programmes covering financial literacy in segments of the economy where literacy levels are lower. In these programmes, there was special focus on youth, women and grass root level entrepreneurs. Going beyond, the CBSL has implemented a special awareness campaign to educate the general public on Formal Financial Institutions and Affordable Financial Services, emphasising the disadvantages and risks associated with informal financial services such as unauthorised deposit taking and pyramid schemes. The Central Bank’s policy of improving payments and settlement systems and encouraging the use of electronic and mobile payment systems is expected to assist in increasing financial inclusion. The Road Map for Sustainable Finance in Sri Lanka launched by the Bank in June 2019 aims at providing guidance and support to Financial Service Providers (FSPs) for effective management of environmental, social, and governance risks associated with projects financed by FSPs.

Financial inclusion is indeed a challenging objective. While considerable advancement has been made, there exist several bottlenecks in going forward toward higher levels of financial inclusion.  The available potential to increase the usage of available financial products and services has to be utilised to overcome the obstacles faced by people in to accessing credit products. The prevalence of digital payments has improved substantially but there is still room for further growth in the digitalisation of payment systems.

Accordingly, the implementation of NFIS is a timely initiative to connect all key stakeholders for achieving more complete financial inclusion in Sri Lanka. The Sri Lanka NFIS is a multi-stakeholder effort led by the Central Bank, with technical and financial assistance coming from the International Finance Corporation (IFC).

The strategy focuses mainly on four (04) policy pillars: (I) Digital Finance and Payments, (II) MSME Finance, (III) Consumer Protection, and (IV) Financial Literacy & Capacity Building. Financial Education, identified as an important catalyst in the process of financial inclusion, occupies a prominent place in the implementation process of the NFIS.

As a nation, Sri Lanka has overcome the threat of COVID-19, better than most countries, thanks to focused and effective leadership and commitment of all stakeholders. Being the apex financial institution of the country, the Central Bank has provided its full scope of essential services during the lockdown period. Addressing COVID-19 challenges, we have observed the importance of digital technology to ensure uninterrupted and smooth functioning of the financial system, including currency operations and payments and settlements.  I am glad that we were able to drive the financial sector through this unprecedented crisis with the commitment and cooperation of the entire banking system.

Banks have been encouraging people to use alternatives to physical presence at the local bank branch for their financial needs. Most financial institutions have been providing information and educating their customers through all possible channels. Many have also increased their remote support options to help with day-to-day banking transactions and offering fee waivers and, in some cases, deferred payments for credit cards, mortgages and auto loans.  Fundamental needs were met, but gaps were seen in financial literacy among the public, especially digital literacy, which hindered gaining maximum benefit from digital adaption.

COVID-19 experiences taught us the critical need to be prepared with an appropriate financial tool kit to face and manage crises. Strategies for financial inclusion are thus needed as it would support vulnerable people to survive crises. As the mere national level strategy is unable to guarantee success, continuous monitoring of developments at the grassroots level is of paramount importance. Monitoring and evaluation would thus acquire importance to ensure implementation of cross-cutting actions and reforms, through multi-stakeholder coordination. I believe this peer learning opportunity would enable our participants to establish a dynamic network to interact and to exchange knowledge and experience. Without doubt this training would assist participants in achieving the targeted objectives of National Financial Inclusion Strategies.

I would like to thank Mr. Alfred Hannig, Executive Director and Mr. Norbert Mumba, Deputy Executive Director of AFI for the opportunity extended to the Central Bank of Sri Lanka to co-organise this webinar with the AFI. My thanks also go to the organising team of AFI and the team of workers on my side in the Central Bank’s Departments of Regional Development, Training and Development and Information Technology as well as all others from the Bank involved in this programme.  I wish the seminar a great success and hope participants will be able to share experiences and learn new things to be able to effectively contribute to financial inclusion efforts of their respective countries.

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