ABA Position Paper on Improving Affordability for Inclusion

Multiple Stakeholder Engagements for Making Financial Services Affordable for Inclusion

  1. The financial services landscape is rapidly changing globally in the light of major economic, social, technological development. This is particularly visible in the Asian context where the engine of economic growth in the last two decades have surfaced a growing demand for greater financial inclusion requirement with Asia contributing to almost 50% of the global population and majority of them earning less than USD 2/- a day.


  1. Despite the two decades of awareness creation, policy advocacy, north/south, south/south dialog as well as political desires to create a mechanism for financial inclusion to empower the people at the bottom of the pyramid, there seems to be a widening gap between the demand and the supply.


  1. There are numerous challenges faced by the Banks and Financial Institutions responsible for the supply of financial services as well as the people at the bottom of the pyramid, who have created a huge demand for the financial services. The key challenge faced by the Banks and Financial Institutions is the commercial viability and the business sustainability in servicing this sector. The key challenge faced by the demand side is convenient and easy accessibility of the financial services and affordability of financial services to make meaningful linkages and partnerships with Banks and Financial Institutions.


  1. The solution for the financial inclusion cannot be provided only by collaboration of demand and supply side alone but greater engagement of the multiple stakeholders are required. Global multilateral agencies like the World Bank, IMF, IFC, IDB, ADB etc., the respective Governments, Regulatory institutions like the Central Banks, Ministries of Finance and the private sector corporate entities have a significant role in the engagement of capacity building and market creation.


  1. The stakeholders mentioned above need to see the big picture and eye to eye in recognizing poverty alleviation, empowerment of the rural community. The people at the bottom of the pyramid can only be facilitated seamlessly by creating collaborative efforts and programmes in the demand side and by their strong intervention and engagement.


  1. The flow of international capital and investment, technical support and capacity building collaboration that can be propelled by institutions such as the World Bank, IMF, IFC & ADB who can collaborate and partner with respective Governments are crucial for financial inclusion. In turn the Governments have to install mechanisms and processes from the context of the legal frame work, administrative and bureaucratic processes that can be friendlier towards financial inclusion (ex. Some countries have not even issued National Identity Cards to their citizens and as a results of that, the people are unable to approach formal financial institutions – this is essentially the responsibility of respective governments).


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  1. In the last decade, we have seen significant and rapid changes in the Information Communication Technology, the digital world and social media. These changes and innovations have opened up new frontiers to make financial services accessible to more people in more places and also affordable to people from top to bottom. The private sector corporate entities who are involved in digital based solutions, mobile phone based solutions, point of sales solutions and social media need to strongly collaborate with the Banks and Financial Institutions on win-win partnerships.These private sector institutions have already made their solutions more accessible and affordable to all segments of the society from the poor to the rich and from the economically marginalized to the economically affluent. Multiple stakeholder collaboration with the Banks and Financial Institutions on a strong framework created by the Governments and the Regulators can ensure reaching of financial services to this sector faster than before.


  1. There are a number of private and public sector as well as international and national level Non- Government Organizations now than before. They are greatly engaging in capacity building in the area of financial education, entrepreneurship skills development, market creation for micro level entrepreneurs through the value chain. This collaborative engagement between the public and private sectors will ensure commercial viability and business sustainability in servicing the people at the bottom of the pyramid for Banks & Financial Institutions.


  1. Globally, the time has never been this right to move fast and create strong collaborative efforts, partnerships and linkages. Practical measures are available in the light of the maturity of each stakeholder’s will, capacity for innovation and the cost effectiveness of creating more viable and pragmatic financial services, products and solutions measures to empower nearly half of the world’s population. Therefore, ensuring to take meaningful steps towards poverty alleviation by enhancing the capacity, empowering through effective delivery and enriching them economically is only a matter of time and genuine effort by multiple stakeholder engagement.


12 September 2013, Ulaanbaatar

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