Private Sector Development

Advancing Digital Financial Inclusion in ASEAN

People standing in line at check cashing Malaysia — Photo credit: Shutterstock

How can digital financial services effectively support financial inclusion? To answer this question, the World Bank recently collaborated with the Association of Southeast Asian Nations (ASEAN) Working Committee on Financial Inclusion (WC-FINC) on a study titled “Advancing Digital Financial Inclusion in ASEAN: Policy and Regulatory Enablers.” This study analyzes a wide range of digital financial services (DFS) through a framework based on that of the Payment Aspects of Financial Inclusion (PAFI) report.

According to the use of the PAFI framework (see figure below), three foundations must be present to enable the spread of DFS: government and private sector commitment to DFS development, a sound legal and regulatory framework concerning DFS, and an enabling financial and information and communications technology infrastructure. Atop these three foundations stand four catalytic pillars that increase uptake and use of DFS: improving the design of DFS products (and of the regulations that govern them), expanding agent networks and other access points, spreading financial literacy, and shifting large payment streams to flow through digital channels.

In a surprising turn of events, a few weeks ago, Amazon canceled its plans to build a corporate campus in New York City after facing backlash from lawmakers, activists and union leaders voicing concern on the incentives offered as well as the impact the investment would have on the cost of living and the city’s identity.

Rifat, at her cosmetics shop and general store in Gujar Khan Town, World Bank Flickr

Entrepreneurship encompasses multiple dimensions, which is why it's always a pleasure to follow the NBER Entrepreneurship Working Group meetings – both for the high quality of papers and discussions as well as for the breadth of topics. This year's winter workshop was no exception, with topics ranging from start-up job creation, to corporate structure in Imperial Russia, to negative externalities of ride-sharing platforms.

Here are a few highlights:

Informality is the subject of many a report, study, intervention, policy brief, political agenda and fireside chat, and due to its prevalence, rightfully so. In emerging and developing economies, the informal sector accounted for 32% of GDP and 70% of employment in 2016. This is a concern because informal firms tend to be less productive than formal firms and pay workers less than their formal counterparts. Reversing informality is enticing and promises rewards in the form of potential tax revenues, productivity gains, and poverty eradicating capabilities. But the quest to bring more firms and workers into the formal sector has proven to be complex.

"Risk & Time: A Data Sculpture on Nature, Disasters, & Finance."
*Photo Credit The World Bank*

The way disasters impact people’s lives can be difficult to comprehend and so can the data around disaster risk.

Does the gravity of risk data resonate with people if they are only interacting with it through numbers and two-dimensional charts on a page? Can the scale of impacts be conveyed through such flat media? Will data in this format drive the level of action and innovation necessary to address growing risks in a warmer world?

In the face of these challenges, art can play an increasingly important role in risk communication. Art gives life and emotion to numbers, allowing for the communicator to more powerfully convey data that represent significant threats to people’s lives and livelihoods.

South Africa currency — Photo: Shutterstock

In a new World Bank report on the Market for Remittance Services in Southern Africa, we outline the binding constraints that appear to be holding back the digital remittances revolution in the countries that make up the Southern African Development Community (SADC).

Digital disruption in international person-to-person remittances is well underway. New research estimates that international digital remittances will exceed US$300 billion globally by 2021, making up 44% of total formal international remittances, and up from 36% in 2018. Thanks to high rates of mobile phone penetration and growing internet access, digital players are not only gaining ground, but they are also forcing “traditional” incumbents to expand their digital footprint.

Also available in: Français

Brainstorming session at the Bamako Policy Hackathon. Photo: World Bank

What would happen if you put all the relevant players for the entrepreneurial ecosystem — startup founders, policymakers, developers, students, investors — into one room and facilitated an open dialogue on improving the business environment? This is exactly what is taking place in West Africa through a series of policy hackathons supported by the World Bank.

“We all have a stake in development and this multifaceted process – local, top-down, bottom-up – is a great example of African innovation. Civic engagement in policymaking is not happening elsewhere so it’s not just about importing knowledge and best practice but generating lessons we can export to the rest of the world,” said Sebastian Molineus, World Bank Director of the Finance, Competitiveness and Innovation (FCI) Global Practice about policy hackathons taking place in West Africa, at a recent World Bank Brown-Bag Lunch in January.

So what is a policy hackathon?

Also available in: Français

Niger Digital. — ***Entrepreneurs participating in the e-Takara competition to address specific challenges expressed by Nigerien public administrations. Credit: Niger Digital***

“The training has completed my knowledge about open innovation. I can now go and talk to potential clients to identify their needs and show what we can offer them.” -- Mariem Kane, Hadina RIMTIC incubator

Distributive, participative and decentralized, open innovation programs can pave the way for start-ups to access larger markets and business opportunities. They also allow corporate partners to respond quickly to changing market dynamics and test out new products or target new audiences.

Photo credit:Tatyana Dzemileva, Shutterstock

The financial system is going through a period of rapid innovation that is disintermediating the financial services value chain. This can have significant benefits for financial inclusion- providing access to, and enabling active usage of, affordable financial products and services to all individuals while supporting a diverse and competitive marketplace.

Financial regulators around the world are looking for more flexible ways to engage with fintech companies while being mindful of the inherent risks. Although the importance of interacting with this sector is widely accepted, the most appropriate instrument to do so is still being determined.

A tool that has become increasingly popular and synonymous with innovation is the ‘Regulatory Sandbox’. While nuances exist, they are fundamentally a regulator-controlled environment that allows participants to test their products, services and business models. However, Sandboxes are only one of several tools that regulators can use and have both benefits and challenges associated with them.

The authentic travel experience should be a boon for Africa, but its missing the mark.

Since 2016, tourism market trends have shifted away from “get-a-way” travel to traveling for ‘authentic’ experiences. This transformation is driven by the world’s largest consumer group—millennials—and amplified by digital platforms and social media but is also echoed across other segments.

African countries, with their abundant wealth of natural and cultural assets, are perfectly positioned to capitalize on this shift, just as the rise of digital platforms are reducing market access barriers for such products. However, in our new World Bank Group report, we found that

Standards: Africa’s market share lags other regions, and many products are not of sufficient standard.
Exclusion and the digital divide: Marginalized groups, often best placed to deliver the product, are at risk of further exclusion.
Community Impact: Bringing tourism into communities also brings other risks which need to be managed.

Advancing Digital Financial Inclusion in ASEAN

Cents and sensibility: three takeaways on investment incentives from Amazon HQ2

What’s new: In start-ups, SMEs, and sharing platforms?

Re-thinking informality: It’s all in the details

Giving life to numbers: Communicating risk through art

What’s holding back digital disruption in remittances in Southern Africa?

Policy hackathon explained: How an all-society approach can engage entrepreneurs and governments to develop better policy in West Africa

What did 200 African incubators learn from our webinar on open innovation?

Sandbox or Quicksand?

Does the digital economy provide tourism opportunities for local communities in Africa?

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