The 2012 Alliance for Financial Inclusion (AFI) Global Policy Forum (GPF) brought to the fore two main challenges in financial inclusion policies: consumer education and the impact of financial inclusion on poverty alleviation and the bigger picture of economic development.
Consumer education remains a challenge both in terms of implementation and the identification of a good model. Questions of who or what institutions should take up this intervention remain unanswered, but there is a clear realization that regulators cannot take up or coordinate consumer education interventions effectively. Reliable data and performance measurements for effective consumer education also have yet to be established, making it difficult for members to monitor and report on the impact of policy interventions.
An interesting consumer education intervention was mentioned, albeit in passing, by both the Pacific Islands Working Group (PIWG) and a panelist (Tilman Ehrbeck, CEO of CGAP) in the “Supporting the Maya Declaration Session”: the embedding of consumer education in Germany’s school curricula. The Pacific Islands Working Group mentioned that this was also one of its interventions.
Financial inclusion policies are long term in nature. The impact of many policy interventions can only be gauged after a long time. Yet, to date, much of the impact data relates to quick gains or ‘low-hanging fruit’, such as numbers of new entrants into the financial system. This is of course an important measure, but may not be useful for interventions such as consumer education. It is instructive, therefore, that the GPF adopts the lessons and experiences of consumer education interventions from countries such as Germany. The peer learning method may not be appropriate for this type of policy initiative.
Another perspective on consumer education came from the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, who highlighted the need to educate banks on financial inclusion, asking, “Who needs education more – banks or consumers?” This in turn raised other interesting questions about what consumer education should entail. Should it just focus on educating consumers about conventional banking products and how to conform to conventional banking practices? Or should it also educate banks to innovate, change, or adopt their practices and products to meet the demands of the unbanked? This is a very interesting perspective that AFI should explore further. In response to Governor Sanusi’s question, a participant made a suggestion that is worth exploring further: urge respective member institutions to promote, hold, or sponsor financial inclusion awareness and education workshops for banks.
The impact of financial inclusion on poverty alleviation and economic development was another major challenge addressed at the GPF. As noted several times in discussions, and perhaps best explained by the Governor of the Central Bank of Kenya, Njuguna Ndung’u, “Financial inclusion is not an end in itself and must focus on economic development.” There is no question that AFI and the GPF will very soon be called to account for this as this issue continues to attract attention and grow in visibility. This challenge was well-articulated by a panelist in a session on financial inclusion’s impact on the real economy: “We are operating on belief as opposed to evidence and do not have the tools with which to evaluate actual impact on the real economy.”
While most members strongly believe that financial inclusion policies can pull the real economy forward, some believe that it is necessary to have other, non-financial interventions to deal with poverty. In other words, an ethos of social responsibility is needed to support policies that offer a good business case.
All of these observations point to the need to develop impact assessment tools that will arm AFI members with good data that they can use to demonstrate the impact of financial inclusion on poverty alleviation and economic development. They also highlight the need to identify linkages with other poverty alleviation policies and strategies.
ABOUT THE AUTHOR
Kimanthi Mutua was Chief Executive Officer of K-Rep Group, an organization focusing on microfinance in Africa. He is currently an Alliance for Financial Inclusion (AFI) Associate.