G20 leaders emphasize financial inclusion as driver for social and economic growth

28 June 2010:  G20 presents financial inclusion principles. Leaders at the G20 Toronto summit emphasize financial inclusion as driver for social and economic growth.

Leadership, coordination and innovation central to a comprehensive response

At their Toronto Summit, leaders from G20 nations underlined their commitment to increasing financial inclusion as a policy priority towards ensuring ambitious goals of social and economic growth, presenting a set of Principles for Innovative Financial Inclusion they have developed as a basis for continued, concrete action to improve access to financial services for the poor.

Leaders made commitments at the Pittsburgh Summit in September 2009 to improve access to financial services through supporting the safe and sound spread of new modes of financial service delivery capable of reaching the poor. In the 2010 communiqué the leaders stated: We have developed a set of principles for innovative financial inclusion1, which will form the basis of a concrete and pragmatic action plan for improving access to financial services amongst the poor. This action plan will be released at the Seoul Summit2.

The “Principles for Innovative Financial Inclusion” provide guidance for policymakers  and regulatory bodies on approaches to innovative financial inclusion that will: (i) foster the safe and sound adoption of innovative, adequate, low-cost financial service delivery models, including the use of mobile phone financial services; (ii) help provide a framework of incentives for the various bank, insurance, and nonbank actors involved, while ensuring fair conditions of competition between all financial service players; and (iii) foster affordable financial services that respond to customer’s needs in both quality and range.

Built around nine action areas to guide the creation of the policy and regulatory environment to enable increased financial aspects, the Principles are hinged on the importance of leadership and broad based government commitment to financial inclusion, diversity in the services delivered and the range of service providers, and innovation in the use of technology as well as with regards to new institutional approaches. The Principles draw on the experiences of countries already pioneering policy and regulatory responses to market innovations that open space for new approaches to the delivery of financial services.

Other Principles, of financial consumer protection and empowerment, have been derived from the lessons learned during the global financial crisis. Cooperation among authorities is necessary to maximize the growth of innovative services. Knowledge is important and can be built by collecting data to support evidence based policy and implementing a test and learn approach. The policy and regulatory framework should be proportionate to the risks involved with innovative products and services. It is also important that there is a regulatory framework that supports changes.

The Principles derive from the experiences and lessons learned from policymakers throughout the world, especially leaders from developing countries. Throughout the development process, input and comment was sought from a wide group of stakeholders including extensive input from non-G20 countries.

The development of the Principles was supported through the work of the ‘Access through Innovation Sub-Group’ (ATISG) of the G20 Financial Inclusion Experts Group (FIEG). The ATISG was co-chaired by Australia and Brazil. In preparation for the discussions on innovative financial inclusion, the ATISG prepared a report for the G20 Leaders which provides additional information on the principles, including selected case studies.

AFI, together with CGAP, served as advisors to the ATISG team that worked on the Principles, Supporting the input of developing country perspectives into the drafting of the Principles, AFI facilitated dialogue with leaders of developing country central banks and financial regulatory bodies. Findings from AFI’s survey of financial inclusion policy in developing countries – carried out among its network during 2010 – also informed the development of the Principles. The draft principles were discussed with a wide range of stakeholders, including the G24, OECD, UN and the Windsor Group.

Building on the developed and endorsed guidance, the G20 will now accelerate efforts to transform the principles into practical and concrete actions which will improve access to financial services for the 2.5 billion people currently financially excluded. This plan will be announced by Leaders at the next Summit in Seoul, Korea, in November 2010.

Through the ATISG, AFI will continue to facilitate dialogue, provide advice and act as a platform to leverage the developing country voice within the debate.

[1] G-20 Toronto Summit Declaration 2010, paragraph 33

[2] G-20 Toronto Summit Declaration 2010, paragraph 33, Annex III Paragraph 22