Financial inclusion: A factor in economic growth and stability

ALFRED HANNIG

Participants at the 2012 Global Policy Forum look at various publications.

Participants at the 2012 Global Policy Forum look at various publications.

The potential of financial inclusion to combat poverty and support economic growth is widely recognized, but making progress on this front requires strong leadership and coordination

Central banks and other policymaking bodies from across the globe are increasingly pursuing financial inclusion because of its contribution to financial stability, a strong financial sector, overall economic growth and poverty reduction. However, financial inclusion is a cross-cutting national economic development issue that requires the participation and cooperation of many government ministries, the private sector and civil society players.

Stakeholder coordination 
Given the multiplicity of government actors involved in financial inclusion policy, leadership and a single coordinating body are key to setting a common direction. Although countries have taken different approaches, it is becoming common for the central bank to take a leadership role in coordination, often by chairing a council that unites private and public stakeholders. The central bank is well placed to take on this role of coordination as it typically has the respect of other government agencies and greater political independence, allowing it to overcome barriers and steer activities towards shared goals. A survey of 30 Alliance for Financial Inclusion (AFI) member institutions on organizing for financial inclusion found that 21 institutions had created a specific financial inclusion unit within the central bank and four had a national coordination mechanism for financial inclusion led by the central bank.

‘Leadership’ is the first of the G20 Principles on Innovative Financial Inclusion and it encourages policymakers to cultivate a broad-based government commitment to financial inclusion and alleviating poverty. AFI compiled 11 case studies showing how countries are bringing the G20 principles to life, and leadership emerged as an essential foundation for implementation of these principles. In these case studies, the most effective approaches to financial inclusion were backed by leadership at the political and regulatory levels, as well as a will to bring about change with the complete commitment and capacity of all players.

This is a portion of an article that originally appeared in a recent G8 UK Summit publication. To access the entire article, please click here.

ABOUT THE AUTHOR
Alfred Hannig heads the AFI management unit in Bangkok which implements activities and provides services for members. His responsibilities also include taking an avid role in representing AFI to various stakeholders, and serving as a member of the Steering Committee.

 

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