AFI Europe Office strengthens its global presence 

Félicitatiounen! Luxembourg government ministers congratulated AFI on the opening of its office in Europe on 5 October 2020, praising the institution’s decision to work together on aligned ambitious plans to promote green finance by leveraging the country’s status as a global financial hub.

AFI’s Europe Representative Office (ERO), co-hosted by Luxembourg’s Ministry of Finance and its Ministry of Foreign and European Affairs, will foremost enhance services for AFI members in Eastern Europe and Central Asia, and globally, while also expanding opportunities for greater peer learning and knowledge exchange among regulators in developing and developed countries, contributing towards a more equitable, inclusive and green economic recovery.

Speaking from the launch event in Luxembourg City, Minister of Finance Pierre Gramegna said that AFI’s new office reflected his country’s commitments to development aid and reputation for sustainable finance.

“Inclusive finance is a real enabler … to leapfrog technologies and bring financial services to populations and countries that are deprived of it,” Minister Gramegna said in answering questions from journalists on the benefits of cross-border cooperation to enhance financial services.

Also extending a hand of friendship was Minister of Development Cooperation and Humanitarian Affairs Franz Fayot who added that “the presence of AFI will enrich our ecosystem of inclusive finance, promote true impact and, thereby, stronger contribution of the financial sector to the Sustainable Development Goals”.

Due to the ongoing COVID-19 travel restrictions, the ministers were among a select few who were able to join the event in person, where they also conducted a symbolic handover of keys with Head of AFI Europe Representative Office Ilya Sverdlov. Movement constraints, however, did not deter the more than 800 participants in at least 45 countries who tuned in to watch the launch over digital platforms, including Facebook and YouTube.

AFI’s new regional office, its second after the Africa Regional Office opened its doors early last year in Côte d’Ivoire’s capital of Abidjan, is part of a wider push for greater decentralization and a stronger focus on providing tailored services and products that meet the needs of existing and potential members across the continent and beyond. AFI is also expected to unveil a regional office for Latin America and the Caribbean in San Jose, Costa Rica, in 2021.

From its strategic location, the ERO will act as a key focal point for the network’s expected growth in activities across the continent, with AFI member institutions in Eastern Europe, the Caucasus region and Central Asia. Regions further afield including Africa, the Middle East, Latin American and the Caribbean will also benefit from the organization’s latest office, which will enhance ties with the network’s Europe-based stakeholders, including partners, regulators and standard setting bodies.

“It is time to show that the fertile ground international cooperation can have”, said AFI Executive Director Dr. Alfred Hannig, who joined the launch event via digital feed. “The government of Luxembourg is a vital partner of AFI in strengthening linkages between developed and developing country policymakers to address issues of shared priority,” Dr. Hannig added.

“These include the opportunities and risks of digital financial services, financial inclusion of women, youth, forcibly displaced persons and other disadvantaged populations, and expanding green finance through policies that are inclusive and sustainable.”

Last month, Dr. Hannig told AFI’s membership at its annual general meeting that the board of directors had voted to create an observer status that allows for participation of regulators from developed countries, but as non-voting members. This will enhance engagement with new members and knowledge partners, creating a two-way learning opportunity with developed countries now able to gain knowledge from AFI and vice versa.

Equitable, inclusive and sustainable future

In building a more equitable and sustainable future, Minister Fayot drew attention to women and youth’s “crucial role” and the need to “provide opportunities to fulfil their potential”, during a high-level discussion on converging topics in financial policy and regulation.

Adding an additional layer of complexity, he noted how climate change had underscored the need to boost financial services among vulnerable groups, including smallholder farmers who needed to be given opportunities to strengthen their climate resilience and apply environmentally friendly practices.

Members from across the AFI network and beyond dialed into the virtual event to voice their expertise, including Central Bank of Lesotho Governor Dr. Retselisitsoe Matlanyane.

Dr. Matlanyane, the central bank’s first-ever female governor and former member of AFI’s Gender Inclusive Finance Committee, echoed Minister Fayot’s comments and underlined the potential of digitalization to foster sustainable growth.

“With the advent of financial technology (FinTech) and mobile platforms, we find that women – who are mostly involved in SMEs and heading households – are more financially included,” she said, adding that Lesotho was among the few countries that had reversed the gender gap to make more women financially included than men.

While FinTech has brought many benefits to the country – owing in part to a reliance on cross-border remittances – she explained that the central bank’s work with AFI was helping address relevant risks from cybersecurity and regulatory arbitration.

“Through peer learning, AFI’s flagship approach, we have been able to work with other jurisdictions, institutions and regulators that have knowledge in areas that we have not yet ventured to, as well as collaborate with service providers in other jurisdictions to compare notes and offer more efficient services,” she said

Balancing risks that come with promoting new innovations was also top of the agenda of Commission de Surveillance du Secteur Financier (CSSF) Director General Claude Marx, who urged participants to adopt a “flexible approach” that both bolster financial stability and consumer protection but also avoid the addition of bureaucratic processes.

Aiding this, he said was the creation of an innovation hub in Luxembourg that acts as a point of contact with market players to learn about new technologies and guide the mitigation of associated risks. CSSF is responsible for financial regulation in Luxembourg.

Also sharing her country’s experiences was Superintendencia de la Economía Popular y Solidaria de Ecuador (SEPS) Superintendenta Dr. Margarita Hernández, who reiterated FinTech’s capacity to reach more unbanked groups, particularly the youth. According to Dr. Hernández, 22 percent of Ecuadorians are aged between 20 and 36, and possess a greater familiarity with cell phones and internet that could act as a catalyst for greater financial inclusion. Furthering these objectives, she noted that SEPS had prioritized initiatives that complemented inclusive green finance and was currently developing a national climate finance strategy.

With members’ growing focus on policy innovation, more small businesses, women, youth and displaced populations were brought into the formal economy, AFI’s Dr. Hannig said. Additionally, by harnessing innovative FinTech and digital financial services to broaden financial inclusion and improve the affordability and quality of financial services, they were fulfilling their commitments under the Sochi Accord.

While members have already made important steps towards achieving the accord’s aims, COVID-19 had seen most accelerate their immediate and intermediate inventions to make their economies more resilient and inclusive. Among them were stimulus packages and policy interventions aimed at facilitating domestic demand and supply flows, supporting SMEs through credit guarantees and strengthening digital literacy.

Prof. Dr. Dirk Andreas Zetzsche from University of Luxembourg brought the day to a close by summarizing the discussions, during which he noted speakers’ emphasis on the opportunities and challenges presented by FinTech, as well as the need for proportionate regulation to advance the financial services industry. He also reiterated that shared learning and cooperation were crucial to reducing the risks and costs to society that come with developing and adopting new technologies.

“There’s no need to make the same mistake twice,” he said.

AFI’s office inauguration and high-level discussion launched four days of events that continues with a joint learning program on inclusive FinTech ecosystems and cybersecurity designed for members’ heads of institutions and technical experts.

Luxembourg’s Ministry of Finance signed a letter of understanding with AFI in September 2019 that helped launched a multi-donor collaboration framework designed to bolster financial inclusion across the African continent. Together with the French Development Agency (AFD) and the German Federal Ministry of Economic Cooperation and Development (BMZ), the Multi-Donor Financial Inclusion Policy Implementation Facility is helping AFI foster financial inclusion with a focus on gender equality, including digital financial innovation and financial technology, financial education and finance for small, medium-sized enterprises.