It’s a match! Why FRC Mongolia wants to pair green finance with DFS
Mongolia is embarking on a quiet revolution. Despite the challenges of a tough and sparse terrain, the landlocked country has achieved near-universal financial inclusion and a rare negative gender gap in account ownership. Never resting on its laurels, it is onto the next big thing: green finance.
Amid efforts to pursue a low-carbon economy, the country’s top regulator and long-time AFI member – the Financial Regulatory Commission (FRC) of Mongolia – is exploring the use of digital financial services to accelerate climate action.
At the institution’s helm is Dr. Davaasuren Sodnomdarjaa, who recently told AFI during an interview about plans to promote green start-ups and climate risk insurance, with the latter providing a major tool in “comprehensive climate risk management systems, prevention models and risk reduction”.
The benefits of so-called green insurance are well-documented. Coverage can help shield individuals and small businesses from the financial damage caused by immediate extreme weather events and contribute to longer-term preventative disaster risk reduction strategies.
Those who stand to gain the most are groups that financial inclusion tries hardest to reach; more specifically, marginalized populations that frequently find themselves excluded from formal financial services, such as women and low-income households.
“Climate-induced disasters as well as illnesses will ensure social, economic and psychological uncertainties for many individuals, households and small businesses,” she said. “If they collapse, it will be very difficult for them to survive and we will no longer be able to reach our financial inclusion goals.”
But for green insurance to take off nation-wide, Dr. Sodnomdarjaa said that it must make use of innovations in digital financial services, including mobile money (e-money) and blockchain.
“Digital finance is a necessary condition for financial inclusion, but it is not sufficient. That is why digital financial services plus green finance could be the ultimate perspective for financial inclusion,” she said. “If these two can join together, it would be very important and help in the provision of affordable, accessible and ecological products to those who are excluded.”
Marrying the cross-cutting thematic areas has significant merit in Mongolia. The country is pushing ahead with its pioneering National Sustainable Finance Roadmap while the take-up of technology-based financial services is relatively widespread.
According to Dr. Sodnomdarjaa, most working adults -- roughly 60 percent -- already use mobile or internet banking. These figures are roughly stable across rural and urban areas thanks to nonbanks increasingly offering digital financial services (e.g. mobile lending, e-money, electronic payment and remittance services) that can be performed without having to travel to a physical bank.
While in the early stages of its transition to a sustainable financial system, Dr. Sodnomdarjaa said that any campaign for greater financial inclusion must be supported by a solid regulatory framework as well as buy-in from stakeholders in both the private and public sector.
“We will unite all … that work in the private sector in the financial market as well as government supporters,” she said.