Global Policy Architecture
The policy environment can be the deciding factor in closing the financial inclusion gap for the financially underserved and unbanked. Policy does not just influence how many poor households can access financial services, but also helps determine the range and quality of formal financial services available to the poor – and at what cost. These factors have a huge effect on how many marginalized customers take up and use formal finance on an ongoing basis.
In recent years, a growing number of governments have made financial inclusion a policy priority; more than 50 countries so far have committed to financial inclusion under the Maya Declaration. Indeed, a strong political tailwind of support for financial inclusion is building. Country-level developments coincide with the emergence of new global actors such as the G20’s Global Partnership for Financial Inclusion (GPFI) and the appointment of the UN Secretary General’s Special Advocate of Financial Inclusion for Development. Global financial standard-setting bodies (SSBs) are increasingly engaged as well – moving to incorporate financial inclusion explicitly in their work, amid increasing recognition of the risks associated with financial exclusion.
Photo Credit: Tran Dinh Thuong, 2014 CGAP Photo Contest
Financial sector policymaking traditionally has focused on creating conditions that foster financial stability. Attention in recent decades has gone to consumer protection (particularly in the wake of the 2008-09 global financial crisis) and financial integrity, which focuses on preventing financial crimes such as money laundering and combating the financing of terrorism. While some still see financial inclusion as a trade-off against these policy objectives, there is growing understanding that inclusion, stability, integrity and protection are linked (the I-SIP objectives) and mutually reinforcing.
CGAP’s Global Policy Architecture initiative aims to increase understanding of the interdependence of the I-SIP objectives and to mainstream financial inclusion in the work of the relevant standard-setting bodies, informed by innovation from emerging market and developing economies. This calls for focusing policy makers at both the country and global levels to pursue all of the I-SIP objectives in a way that optimizes them. This means maximizing the synergies and minimizing trade-offs between them. It also calls for recognition that the innovation necessary for massive progress on financial inclusion – the digital finance revolution reaching scale in increasing numbers of countries – changes the nature, and often the level, of the risks with which policy makers must contend.
- CGAP Video: Benefits and Challenges of Digital Financial Inclusion
- GPFI Issues Paper: Standard Setting in the Changing Landscape of Digital Financial Inclusion
- CGAP Working Paper: Financial Inclusion: Linkages to Stability, Integrity and Protection in South Africa
- CGAP Working Paper: Inclusion, Stability, Integrity and Protection: Lessons for the I-SIP Methodology from Pakistan
- Bankable Frontier Associates Final Report: Financial Inclusion and the Linkages to Financial Stability, Integrity, and Consumer Protection: Insights from the Russia Experience
- CGAP Focus Note: AML/CFT and Financial Inclusion
- GPFI White Paper: Global Standard-Setting Bodies and Financial Inclusion for the Poor