‘Financial Inclusion and Access to Financing’
Thank you very much.
It is a pleasure to be here today and talk about financial inclusion.
Financial inclusion is critical in the fight against poverty, yet too many people have no access to financial tools or credit.
An estimated 2.5 billion people in the world do not have access to formal financial services linked to account. This includes 80 percent of the people living on less than $2 per day. Up to 200 million small businesses globally lack the financing which they need.
Financial development matters because it not only promotes growth, it is also a catalyst for ensuring that prosperity is widely shared. So the deficit in financial access can hold people back from moving out of poverty and increasing inequality.
People who are “unbanked” find it difficult to save, plan for the future, start a business, or recover from crisis or loss.
Access to financial services improves access to health and education - through cheaper payments or remittances, better savings options and access to credit.
Without access to affordable financial services or credit small businesses are constrained in their ability to invest, grow and create jobs.
Emerging evidence indicates that access to financial services can enable individuals and firms to smooth consumption, manage risk, and invest in education, health, and enterprises.
For example:
- In Kenya, access to a basic savings account led to an average 38-56% increase in productive investment and 37% higher personal expenditures at household level.
- In India and Mexico the expansion of bank branches and other access points has been linked to reduced rural poverty, increased incomes and employment.
- In India, bribe payments went down by 47% as a result of more efficient and better targeted social transfers to the poor, made through accounts rather than in cash.
- In Brazil, similar measures lowered administrative costs by 82%.
Women still face more severe constraints to accessing and using financial services than men.
Women in developing economies are 20 percent less likely than men to have an account and 17 percent less likely to have borrowed formally in the past year.
Women also have less access to safe, regulated, savings services. Too often legal barriers prevent them to open bank accounts or get credit for their businesses. They are therefore more likely to use informal – and often riskier and more expensive – mechanisms.
Women entrepreneurs in developing countries are more likely than men to cite access to finance as a primary constraint, which constrains productivity and economic activity.
If women had better access to the formal financial system it would increase asset ownership and serve as a catalyst to greater economic empowerment.
Even a basic financial tool such as a deposit account at a formal financial institution can be of great value. A formal account provides a safe place to save and creates a reliable payment connection with family members, an employer, or the government.
But most importantly, when women earn money and have more control over household spending, they spend in ways that benefit children by investing in education and health.
It is therefore our goal at the World Bank Group to achieve universal financial access - by 2020.
We want both women and men globally to have access to a bank account or an electronic instrument, like a mobile phone, to store money, send and receive payments.
This is a basic building block for people to manage their financial lives. It can be the stepping stone to full financial inclusion, providing a pathway to accessing a broader range of responsible financial services provided through stronger and more diverse financial sectors.
Increasing financial inclusion in ASEAN will be critical for achieving universal access.
ASEAN countries represent 12.3% of the world’s unbanked[1], with Indonesia accounting for 5.9% and Vietnam for 2.1%, given their relatively large populations.
Small and medium size enterprises make up 96% of all firms in ASEAN countries overall, and contribute between 23%-58% to GDP.
Yet less than 15% of those firms are estimated to have sufficient access to credit.
There is impressive progress to expand financial access and to tackle these constraints, across the ASEAN region.
ASEAN central banks and governments have taken the lead in setting ambitious goals for financial access and inclusion. The national commitments by Indonesia, Malaysia and Philippines are notable examples.
Moreover, in 2014 ASEAN adopted the Yangon Outcomes making financial inclusion a key policy objective for all its member countries.
At the World Bank Group we are looking forward to support the execution of this agreement, including the work program of the new Financial Inclusion Advisory Group for ASEAN.
It is of critical importance that the private sector is providing more and more innovative financial services.
National authorities can enable and encourage the private sector to invest more in financial services by following through with their commitments to create a more conducive regulatory and policy environment.
One of the key benefits for government will be more effective ways to deliver services to their people.
Better access to accounts, linked to the digitization of cash payments can help governments and firms to better target subsidy and benefits programs.
It will also reduce leakages thereby increase public expenditure savings.
The World Bank Group is therefore scaling up its financial, technical, and knowledge support to national authorities and to the private sector.
We have agreed to assist ASEAN in:
- Measuring levels of financial development;
- Monitoring compliance with core international standards for financial sector supervision;
- Upgrading financial infrastructure development, such as payments, remittances, and credit information systems; and
- Building capacity for the application and enforcement of financial sector laws and regulations to give the unbanked access to low cost and safe financial services.
The World Bank Group is supporting financial inclusion strategies in very practical ways:
We convene donors and other international financial institutions to address financial inclusion barriers in ASEAN countries.
For example: We support authorities in Indonesia and Vietnam to bring low income people into the financial system through digitizing social transfers. We have launched a new program of technical support with Indonesia to expand access points for financial services through agent networks, raise levels of financial awareness and capability, and strengthen regulation and supervision of non-bank financial institutions.
In the Philippines, Vietnam, and Indonesia we are providing technical support for financial education and consumer protection. While in Myanmar we are designing a comprehensive new program of financing and technical support that covers payments infrastructure, supervisory capacity, and the expansion of access points.
We are very pleased that as chair of ASEAN in 2015, Malaysia has made financial inclusion one of its top priorities and has requested the support of development partners, including the World Bank Group, to achieve further progress in ASEAN.
We are scaling up a partnership with Malaysia, including through a new World Bank Group office, to mobilize Malaysia’s expertise to assist countries in ASEAN and other regions of the world to scale up financial inclusion. Malaysia has world-class expertise on critical areas for financial inclusion, including Islamic finance, payment systems, mobile financial services, prudential regulation and supervision, corporate governance, small and medium size enterprise finance, capital markets, and development finance.
Malaysia has made notable progress towards universal financial access. The long-term vision and leadership of Bank Negara Malaysia and the Ministry of Finance have played a critical role in achieving this.
Let me highlight that we are also developing new guidance and models which harness the potential of innovative financial services which leverage digital payments, data, and technology, including through the G-20 and Standard-Setting Bodies.
I want to make one final point before I take your questions:
We are very concerned about the so called de-risking by banks and the affects it may have on the cost of remittances, global trade, and financial crime.
Take for example remittances. They are an important source of revenue for lower income countries, including in ASEAN -- Philippines 9.8%, Vietnam 6.4%.
We worry that more people will be driven into unregulated channels. Our message is that risks should be managed, not avoided altogether.
We are working with the G20 Global Partnership for Financial Inclusion to collect data on the phenomenon of de-risking so that we can have a better understanding of the problem and how to address this issue.
I look forward to hearing from you how we can further support you to meet your financial inclusion priorities in each ASEAN country, and in the region as a whole.
[1] according to Global Findex survey data
