Good morning, good afternoon and good evening from wherever you are joining us for this Policy Leadership Dialogue on the theme of Financial Inclusion Beyond the Pandemic. We cannot meet physically, but we soon will, with travel already taking place in parts of the AFI network.
The coming three days and sessions are not the Global Policy Forum (GPF), our flagship event, because for the second year in a row, conditions did not allow us to have it. However, although we do not intend to substitute the GPF with this event, it an opportunity for us to engage again. We have developed a virtual platform for you, which is supposed to give us at least a flavor of the community feeling and social capital we are used to in the network. I am also very grateful to have Governor Fariz virtually next to me, who has generously maintained his invitation to all of us to come to the first post-pandemic side-by-side GPF in Jordan. The Governor is with us today to deliver remarks as well. Thank you for that.
I am grateful to you all for taking the time to connect and attend this important event. The global pandemic we have endured together has spilled over into all segments of our lives, also impacting the most vulnerable. There is no doubt that many places in the Global South cannot not benefit from the cushion of a comfortable social safety net. Extended lockdowns are just not an option over longer periods and comprehensive social distancing as practiced by advanced economies is oftentimes practically not even thinkable given the conditions of living and working in some places. The disproportionately excluded parts of our societies have been therefore the most affected by both the health impact and the economic impact: women, youth, forcibly displaced, older persons, disabled, as well as economic sectors, such as MSMEs.
Having witnessed the role financial inclusion can play in mitigating crisis, alleviating poverty and supporting economic growth and financial stability, these recent global developments have encouraged us to organize this one-of-a-kind, high-level event to support our members in implementing effective, sustainable and inclusive financial inclusion policy reforms geared towards a COVID-19 recovery. We are honored to host you all in our virtual space.
AFI members swiftly countered the adverse effects of the pandemic with appropriate and proportionate policy responses in order to protect the gains of financial inclusion. In many AFI member countries, we are witnessing unparalleled collaboration between the public and private sectors, as well as between policymakers and regulators internationally in their work to curb the negative impacts of the pandemic.
Allow me to share three important lessons from the AFI network and beyond that are contributing towards a post-pandemic recovery and rebuilding:
First: Crisis management preparedness is instrumental in mitigating the severity of the pandemic on financial inclusion
- Most emerging and developing economies are experienced in mitigating crises, ranging from natural disasters to the shocks of the 2007/8 global financial crisis. The global financial crisis conversely ushered in opportunities to discuss and deliberate on the urgent need to address the challenges of financial exclusion. It was also at around that time that AFI was born, amid skepticism that financial inclusion was not an ideal solution in times of crisis. Twelve years later, we have all witnessed how the AFI network has disrupted this narrative and improved the global discourse on financial inclusion. Nowadays, we are even getting used to a convergence around issues and solutions in the financial inclusion space. And increasingly, we are witnessing a genuine desire from developed country regulators to learn from the multifaceted experiences of emerging and developing economies in ensuring that populations do not only get continuous high-quality access to financial services, but also to prevent those who are already included from dropping out from the system again. To underpin what I just said, let me just report back to you on a bilateral meeting I had yesterday with the Head of a European Regulatory Body, who expressed so much appreciation for the financial inclusion lessons of the developing and emerging world. There was high interest in such financial inclusion policy and regulation that can help to sustain high levels of access and appropriately deal with emerging risks of technology. We heard similar statements from quite a number of advanced economy regulators in the past three years, are also very aware that there are important lessons for AFI members to pick up from regulators beyond the network, particularly in the developed world and that such dialogue is fruitful for all sides.
- Over the years, and I mentioned this at the Annual General Meeting, members of the AFI network have reported developing and implementing more than 820 policy and regulatory changes to enhance financial inclusion in their countries. In the past four years, members attributed over 100 policies and regulations annually, an indication that over a decade’s worth of preparatory work is gathering greater momentum. In 2020 alone, this figure rose to 137 policies and regulations, out of which 68 percent were COVID related.
- According to the 2017 Global Findex, 1.2 billion adults were brought into the formal financial sector between 2011 and 2017. 80 percent of these adults are from countries where AFI members are based. According to this data and policy attribution level of about 60 percent, the AFI network has contributed to about 634 million people gaining access to formal financial services.
- These reforms have encompassed various policy areas, such as digital financial services, SME finance, proportionate application of global standards, as well as consumer empowerment and market conduct. More recently introduced SDG-related policy areas, such as gender inclusive finance and inclusive green finance, are also becoming more relevant for members. Last year, the highest number of reforms introduced by members were macro and microeconomic policies that responded to the global pandemic.
- At the same time, digital financial services and FinTech were crucial in providing an infrastructure that played an important role in the current crisis.
Therefore, our first important lesson is that the adoption of conducive policies and regulations that support underlying infrastructure and financial services can enable countries to withstand the negative impacts of a crisis or shocks that could spill over into financial inclusion.
Second: The polylateral collaboration approach is imperative for effective policy responses that alleviate the effects of a crisis on financial inclusion
- Why do we call it polylateral? It is a combination of two words: poly a Greek word which means many. Many, like in a polypoly, a market with many participants which unlike in a monopoly, where one actor cannot have a dominant influence on others. Or in polyphony, where many sounds or voices can be heard. On the other hand, lateral, the Latin word for sideways, meaning that horizontality allowing for significant outreach. This combination of two words characterizes the nimble and multifaceted way in which AFI is working: We bring everyone to a table which is round, and not rectangular.
- AFI’s collaborative approach has been instrumental in facilitating peer learning in the network and encouraging a sharing of rich experiences among AFI members, particularly as countries look to one another for guidance on how to build a sustainable and resilient post-COVID-19 societies.
- AFI’s well-tested leadership forums, regional initiatives, working groups, capacity building, technical and other knowledge sharing offerings, as well as newer platforms, such as the COVID-19 Policy Response Dashboard and gender-sensitive policy response tracker, are enabling members to absorb vital knowledge from their peers in around nearly 90 countries as they continue to respond to economic challenges created by COVID-19.
- Effective collaboration also means that here at AFI we want to stay away from ranking our members. We do not rank, but we do appreciate. We have not done it, and we do not foresee that it is going to be our approach in future. What we do is that we facilitate peer reviews and technical advice among members. This has been impactful and allows many to champion proven solutions, to follow suit what others have successfully been doing.
- Collaboration with strategic private sector partners, knowledge partners and funders is assisting AFI to support members through external practical knowledge and funding resources to counter the effects of the pandemic.
- Finally, working together on converging topics quickly became more important than ever. The role of digital technology in the provision of financial services requires cross-pollination of ideas and policy solutions globally in order to address topics, such as cybersecurity, AML/CFT, data protection and consumer protection.
The second lesson is that we encourage policymakers to continue sharing, deliberating and deepening their knowledge and expertise of key financial inclusion issues through peer exchanges and balanced dialogue as we strive to rebuild an inclusive and sustainable society.
Third: The mandate of financial policymakers and regulators is continuing to expand, allowing them to respond to contemporary challenges
- Current global and regional trends stemming from socio-economic factors, climate change and dynamic technological changes are increasingly asking financial regulators to adjust and respond with policy interventions that protect, maintain and – to some extent – expand their traditional public policy mandate of price and financial stability, economic growth as well as financial inclusion.
- Regulators and policymakers have been gradually addressing these challenges. However, it is especially regulators from the emerging world who have started early to incorporate broader development issues into their mandate. Nowadays, we see many central banks globally starting to address the issue of green finance, for example through the Network for Greening the Financial Sector (NGFS) or the topic of Inclusive Green Finance (IGF) in AFI. We are also becoming aware of a research project that was conducted by the University of Michigan that looks into Central Banking of the Future, which obviously collected much evidence on how central banks are expanding on their mandates.
- We at AFI call this emerging trend contemporary financial regulation. I remember listening to the former Governor of the Central Bank of Kenya, Njuguna Ndung’u who used to explain to the audiences that he saw the role of the regulators as “agents of development”. We also witnessed an increasing number of members taking financial inclusion into or closer to their mandate over the past decade, and nowadays, several members are putting much focus on Gender Inclusive Finance (GIF). To give you just one more example, I was literally struck when I participated in this year’s AFI-G24 High-level Policy Roundtable that we hold back-to-back with the World Bank/IMF Spring meetings, when I witnessed how far emerging economy financial regulators have already come in taking care of Sustainable Development Goals related policy issues.
- However, across the AFI network and in other jurisdictions, we also need to be aware that there are disparities in the ability to successfully manage or respond to expanded agendas. Therefore, from a financial inclusion perspective, the following tenets are important to consider-
- Awareness and understanding of the global risks and changes that are increasingly building pressure on the effectiveness of implementing financial inclusion objectives.
- Institutional capabilities to manage and adapt to the changes, through enhancing human skills, improved regulatory and supervisory systems and tools, and financial resources to implement policies and programs; and once again
- Peer collaboration to accelerate practical learning and reinforce efficiency in adapting to proven solutions from peer regulators.
To conclude, the third lesson is that mandates of financial regulators are expanding with the increase of global challenges. AFI wants to support its members in building a dynamic taxonomy of the contemporary challenges facing financial regulators.
With financial inclusion high on the 2030 Sustainable Development Agenda, we are also holding this leadership dialogue to harness ideas and insight from you and together shape our sustainable and inclusive future.
On Day 1, only AFI leaders will gather for peer learning on effective policy responses for inclusive and green COVID-19 recovery. Day 2 will see multi-stakeholder dialogue on central bank digital currencies and financial inclusion, while day 3 is reserved for public private dialogue on COVID-19 recovery.
Over the next three days, we will also reflect and integrate contemporary financial regulation into financial inclusion, inclusive and sustainable economic recovery, rebuilding and finally growth:
- We will explore how regulators can be proactive with regards to the opportunities and risks presented by technological innovation and the emergence of new financial actors;
- We will deepen our understanding of the role of the financial sector in addressing climate risks and promoting green financing; and
- We will be attentive to the role of central banks and regulators in addressing socioeconomic challenges and inequalities that have been exacerbated by the pandemic.
We are excited to enter this recovery phase and start rebuilding with a wealth of practical solutions and experiences that will help us ensure no one is left behind