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03 Unlocking Financial Inclusion

Selection of medium-term recommendations and policy options

The COVID-19 crisis will likely have a transformative impact on the way societies conduct business and interact. There is potential for governments and private sector to leverage momentum and foster inclusion, innovation and resilience of the financial sector.

Our work provides a collection of recommendations based on discussions with relevant stakeholders across the region of both the public and private sector.

On the theme of Promoting electronic payments and banking services:

  • Facilitating verification of identity and customer onboarding through simplified / digital KYC – KYC regulatory requirements can become a significant barrier preventing lower-income segment to access financial services.
  • Promoting competition and reducing entry barriers across payments value-chain – The payment industry exhibits several characteristics that can result in anticompetitive practices and market structures, Increasing competition in payments value chain can contribute to greater innovation, lower costs, increased access and enhanced stability of the payment system
  • Easing adoption of mobile wallets / e-payments infrastructure: Development of robust and efficient payment systems is key to drive financial inclusion, as payments are the gateway to other financial services (e.g. savings, credit, insurance). Mobile money services are a powerful tool for deepening financial inclusion in emerging markets and moving away from cash

On the theme on Fostering access to credit:

  • Preserving and expanding access to funding for micro-finance lending – Microfinance institutions (MFIs) specialize in providing access to capital and financial services to micro/small enterprises and low-income households. They play a key role in financial inclusion and are often constrained by access to funding.
  • Ensuring quality of and access to credit risk assessment data – Insufficient and asymmetrical information on borrowers is a key obstacle for the provision of credit, as it prevents lenders from adequately assessing creditworthiness of borrowers
  • Leveraging suite of tools available to development banks to facilitate access to credit – Government intervention in credit markets through Development Banks can play an important role in fostering economic development and promoting financial inclusion in the presence of market failures

On the theme of Leveraging digitalization:

  • Developing digital infrastructure and fostering digitalization of internal processes – Digital infrastructure and technology is a critical enabler for the functioning and adoption of digital financial services and digitalization of internal processes can improve operational efficiency enabling scale-up and outreach to lower-income segments. Governments and regulators should champion the development of digital infrastructure, while at the same time ensure policy actions are suitable to the country’s current technological reality
  • Foster innovation in financial technology (Fintech) sector – Financial technology (Fintech) has the potential to provide greater financial inclusion, higher efficiency and safety, and enhanced transparency. Regulators and policy makers need to be proactive in responding to this fast-moving environment and actively promote activities around innovation and adoption of innovative technology

These recommendations, and corresponding policy options, should not be seen as isolated or mutually exclusive – on the contrary, they often complement each other and can be jointly implemented.

 

Categories: Publications of ASBA
Author: ASBA, Oliver Wyman