World Bank Has Goal of Universal Financial Inclusion by 2020 - Economist

The Global Policy Forum of the Alliance for Financial Inclusion (GPF) was held in Sochi last week. This year's event marked the 10th anniversary of the forum and focused on the latest technology innovations and progress that's been made in financial inclusion.

Sputnik talked to Dorothe Singer, an economist at the World Bank, who took part in the forum.

Sputnik: In your view, has the problem of financial accessibility become a part of the mainstream?

Dorothe Singer: Yes, I think we've seen financial inclusion certainly come to the fore of international policy forums such as here, the Alliance for Financial Inclusion. You saw that over 90 countries are members of the alliance; you also see that at the World Bank, where I work, financial inclusion is an explicit goal: the World Bank has the goal of universal financial inclusion by 2020.

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Financial inclusion is also an important goal for sustainable development goals, for example. So certainly, when we look internationally and globally, we see that it's become very important. Today, more than two-thirds of policymakers in the financial inclusion space are tasked with improving financial inclusion; so it's become very important.

Sputnik: How successful has this forum been in addressing the issue of financial accessibility?

Dorothe Singer: I think you've seen in the presentations that it's played a critical role in bringing people together from around the world, exchanging the experiences and really learning from each other in terms of promoting financial inclusion.

Sputnik: What are the key reasons for the World Bank to join the AFI forum?

Dorothe Singer: We think the AFI is a very important organization in terms of promoting financial inclusion and we at the World Bank believe that financial inclusion is important in terms of promoting development more generally. Financial inclusion is an enabler for promoting growth, providing ways out of poverty and in terms of that, we at the World Bank measure financial inclusion as part of the world's Global Findex database, but we also have the goal to help countries in their financial inclusion journeys.

Sputnik: The theme of the 10th-anniversary forum for financial accessibility is "innovation, inclusion, impact." In your opinion, what indicators in the field of financial accessibility will have a real impact? What's the optimal time to reach them?

Dorothe Singer: I think innovation has certainly been driving financial inclusion over the past couple of years. We've seen innovations in technology, such as mobile technology that allows easy access to financial services; we've heard talk about Asian banking which is also enabled by technology and access to data, we've talked about biometric IDs and how they enable access to financial services. There's a lot of things going on that help us increase financial inclusion.

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I think different countries are at different points of their financial inclusion journeys, so for some countries, such as India, that have pushed financial inclusion where account ownership is very high because it's enabled by biometric IDs, the challenge is now for people to actually use those accounts and to create cases where it makes sense for people to use those accounts; whereas we have other countries where account penetration is still relatively low.

The main focus is really how technology can be leveraged to increase account ownership. One example from sub-Saharan Africa is the success of mobile money in bringing financial services to rural populations, for example, that in the past have just been very hard to reach by traditional bank models.

Sputnik: Currently, what are the most effective measures in the field of financial accessibility, financial inclusion?

Dorothe Singer: I think we really need to talk about two measures: one is certainly account ownership, because accounts are an important financial tool for financial access, it allows people to store money and build up savings, but also to make payments and to send and receive money and to gain access if appropriate. The second measure is really account usage, as we talked about. Certainly having an account is important, because it allows you to use financial services, but if only you have an account and don't use it, then you can't really reap the benefits of financial inclusion. That's the next challenge going forward.

Sputnik: It seems like for governments, for states, it's better when people make their transactions on electronic platforms because it's much easier to control. But people are afraid of being cashless; what should we do? How do we keep a balance between these two issues?

Dorothe Singer: Data privacy and protection is very important. I think it's up to countries to make sure that people trust financial services, especially digital financial services; that they trust their data is protected, their data is secure. I think that's an important challenge going forward. I would also say that when we talk about digitizing payments, I think it's not an either or position, it's not either all digital or all cash; people will use financial services as they make sense.

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We've seen, for example, especially when we talk about, be it domestic or international remittances, because there's a lot of distance involved in sending money through digital channels makes sense. There might be added transactions, where it currently doesn't make sense to make them digitally. People need to trust the system in order to make transactions digitally, so that's a big challenge, to reassure people that their data is secure and safe.

Sputnik: What does the World Bank do for people to trust the financial digital services?

Dorothe Singer: We help our member countries enact regulations that will ensure that data privacy and data protection are ensured.

Sputnik: How can the development of digital financial services impact the dominance of traditional financial institutions?

Dorothe Singer: I think digital financial services, such as mobile money, have certainly been successful in serving parts of the populations that haven't been served by traditional banks before. In part, they're entering a market that hasn't been served before, in other parts they introduce another level of competition and competition is in general something good, because the consumer typically benefits from competition in the financial sector.

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I will also say that it's not always competition, often it is complementary; so we see, for example, once mobile financial services have moved into Kenya, for example, they then partnered with traditional  banks in terms of offering interest-bearing savings accounts, offering credit, for example, so I think it's very complementary. Both traditional financial service providers and new financial service providers have a lot to learn from each other and work together to serve people better.

Sputnik: How do you assess the Russian success in the field of financial accessibility in recent years?

Dorothe Singer: As I mentioned in my presentation, Russia is one of the countries that stands out in that there's gender equity in terms of financial inclusion as measured by account ownership. I think that really speaks to a financial inclusion strategy that pays attention to that, because we don't see that in a lot of countries. That's really one area where Russia has to be complimented.   

The views and opinions expressed by the speaker do not necessarily reflect those of Sputnik.