Collecting relevant data to develop smart policies, measuring actual progress of financial inclusion, or setting measurable targets to develop national strategies remain a global challenge to overcome. Aware of this scenario, many international organizations, governments, and stakeholders have increased efforts and allocated resources to create indicators that allow measuring financial inclusion progress, and conduct supply and demand-side surveys with the aim of achieving greater financial inclusion.
Global actors, such as the World Bank, the International Monetary Fund (IMF), Global Partnership for Financial Inclusion (GPFI), and the Alliance for Financial Inclusion (AFI), have stressed the role of data in the policymaking process. Tangible actions and examples include the Global Findex and Financial Access Survey reports, among others.
AFI’s Financial Inclusion Data Working Group (FIDWG) has, for instance, raised awareness about obtaining demand-side surveys and, furthermore, come with core indicators that enables countries to set measurable goals regarding financial inclusion and monitor progress.
In Latin America and the Caribbean, AFI members have been quite engaged and in some cases have pioneered data collection and gathering. Examples of regional champions on data collection are the Comisión Nacional Bancaria y de Valores (CNBV) from Mexico and Banco Central do Brasil (BCB). Over the last four years both have regularly published national financial inclusion reports tracking indicators that go beyond AFI’s core set. Similarly, Banca de las Oportunidades of Colombia and the Superintendencia Financiera de Colombia have jointly launched a comprehensive report that includes sex-disaggregated data, SACCOs and NGOs coverage data.
Regional data policy developments are related to the adoption of national strategies and this is precisely the reason why many countries have devoted efforts to obtaining data before designing and implementing a national strategy. Indeed, very few countries have developed strategies without a previous collection of data (i.e. Paraguay). In this scenario, Mexico, Brazil, and Colombia can be considered as “early adopters” or advanced jurisdictions referent in the region on what concerns to data.
Other countries have looked upon this progress and have leveraged AFI’s leadership and services in order to take lessons from early adopters´ experiences to achieve a smart regulatory outcome to implement national strategies. An example of a financial regulator that has learned from their peers is the Banco Central de Reserva de El Salvador (BCR), which along with the Superintentendencia del Sistema Financiero de El Salvador (SSF), applied for and received an AFI policy grant with the aim of obtaining inputs to develop a national financial inclusion strategy for El Salvador.
Financial regulators from El Salvador conducted knowledge exchange visits in 2014 to countries in the region with the objective of obtaining the necessary input to develop policy reforms on data. The goal was to design a database and indicators to measure financial inclusion, and conduct national demand-side surveys. Currently, with the support of AFI, El Salvador has hired a consultant to develop indicators and coordinate the elaboration of a financial inclusion strategy in the country.
Moreover, El Salvador has endorsed the AFI Maya Declaration, committing to define indicators to measure financial inclusion. This institutional commitment is crucial and constitutes a first step that will encourage other countries of this sub-region to raise awareness and implement data policies informing smart national strategies.
In order to know in-depth about this regulatory process, as well as understand the main drivers that have encouraged El Salvador to follow lessons from other advanced policymakers in financial inclusion, we interviewed Otto Rodríguez, Head of Department, Development of Financial Inclusion, at BCR, and Silvia Arias, Manager at SSF, who kindly shared the lessons and experiences from this regulatory process:
1. In comparison to other countries in Central America, why do you think that El Salvador has prioritized policies on data at the top of the country financial inclusion agenda?
BCR: Financial inclusion is becoming increasingly important in El Salvador, but data for measuring financial inclusion by the supply side is so dispersed, hence it is essential to have regular and reliable information on national financial inclusion in order to have important inputs for the development of a national strategy for financial inclusion, which allow us to know where we are and have greater certainty where we want to address.
SSF: We have given priority to the collection of data needed for an accurate diagnosis of the level of financial inclusion in the country and weaknesses in this area, to ensure that the actions and measures to be incorporated in the national strategy that will be designed to succeed.
2. To what extent was articulation and coordination among the national financial regulators crucial to developing a working plan toward the adoption of a national strategy supported by data? Was inter-agency regulatory dialogue difficult?
BCR: In the case of El Salvador, the central bank is the regulator and SSF is the supervisory body. The database on the supply side is managed by the supervisor; which implies a high degree of coordination and working plans. This is an issue that is not yet defined, but it will be strategic for financial inclusion to have databases with common access to both institutions.
SSF: The coordination between regulators is undoubtedly an essential element in the definition of a financial inclusion strategy, because its success depends on creating a common agenda and objectives. In the case of El Salvador, coordination between financial regulators has not been difficult because the execution of our legal powers require it.
3. What are the most important lessons taken from the knowledge exchange visits?
BCR: The knowledge exchanges gave us a practical learning for the development of a database, and at the same time let us know first-hand the disadvantages or barriers encountered by the entities in the process of data collection, which help us to take them into account and avoid making the same mistakes.
SSF: Developed knowledge visits helped to identify the successes and failures experienced by our fellow countries in generating data, indicators and strategies of financial inclusion and capitalize on these experiences, without forgetting that our country has its peculiarities.
4. Which have been the most important challenges experienced so far to implement this policy reform?
BCR: Basically there have been two challenges:
- The complexity of procedures for recruiting the Pollster House, absorbing additional time for this provided in the working plans.
- The design and content of the survey, the diversity of topics addressed and the variety of opinions that are generated in this regard, due in part to the unprecedented content, leading to a number of discussion meetings.
SSF: Main challenges:
- Low levels of financial literacy and knowledge of new channels for delivery of services and products that promote inclusion, which has meant that some sectors of the financial system posed positions contrary to the inclusion;
- The resilience of financial institutions supervised to incorporate more actors in providing products and services that generate inclusion;
- The level of social insecurity in our country has created the temptation to increase information and documentation requirements for new products, such as e-money, which may affect demand-side survey results for financial services.
5. To what extent has your participation in the AFI FIDWG shaped your interest at a national level in adopting a policy strategy based on data before adopting a national strategy document?
BCR: The central bank’s participation in the AFI FIDWG has revealed the level of progress of other countries, not only in Latin America but also globally, regarding the measurement of financial inclusion. The information collected in an orderly manner becomes an important input for the development of a strategy. So, it should be noted that although the country does not have a database to measure financial inclusion, it has been able to obtain information that is scattered by the supply side and has been taken into account in the development of guidelines for developing a national strategy for financial inclusion. So the central bank plans to design a specific database for this purpose.
SSF: Participation in the working groups of AFI has had a significant influence in the initiative to define a national strategy for financial inclusion because it has allowed us to learn about the advantages of implementing a strategy to achieve ideal levels of inclusion in our country, as well as the lessons and experiences from other countries on that issue.
This interview shows financial regulators’ maturity in a way that those have learned that to achieve smart policies that foster a greater financial inclusion in the region, it is necessary to coordinate efforts at a national level in order identify needs and to set goals. Then, look and learn from regional and global experiences with positive outcomes, using existent networks that allow interactions among policymakers. A final takeaway of the El Salvador experience is that countries have raised an awareness that “data” is the missing link to develop an effective national strategy and, in this case, regulators are learning from each other with a collaborative model focused on knowledge sharing.
ABOUT THE AUTHOR
María del Rosario Moreno Sánchez is a policy analyst at the Alliance for Financial Inclusion. Follow her on Twitter @MarayaEmese.