This post is part of our Closing the Gap: Financial Inclusion blog series, which shares the views of selected experts and practitioners on different financial inclusion topics.
Read this post in Spanish.
Recognizing this challenge, G20 Leaders created in September of 2009 an expert group to discuss key issues related to financial innovation and the financing of Small- and Medium-sized Enterprises (SME). As the basis of a concrete action plan to improve access to financial services, this expert group developed nine Principles for Innovative Financial Inclusion. In order to formalize and give continuity to those principles, the Global Partnership for Financial Inclusion (GPFI) was created in December 2010. The Partnership brings together a broader group of G20 and non-G20 countries, along with other stakeholders. The result is an institutional structure that actively participates in the work of financial inclusion.
In its capacity as President of the G20, Mexico has made strengthening the financial system and fostering financial inclusion a high priority. When you consider the coordinated efforts we have seen recently, the impact of inclusive financial systems on both economic activity and vulnerable groups, and the effects of the financial crisis on our financial systems, it is clear to see the importance of financial inclusion.
For the G20’s 2012 agenda, Mexico has proposed to continue the promotion of actions that foster financial inclusion, including measures supporting financial education and consumer protection. These measures are necessary components of financial inclusion, and essential to the development of healthy and stable financial systems.
Mexico’s G-20 Financial Inclusion agenda comprises three priorities:
• National Strategies for Financial Inclusion
• Financial Education
• Consumer Protection
I. National Strategies for Financial Inclusion
One of the initial objectives in the Mexico’s G20 agenda is for likeminded G20 and non-G20 countries to commit to creating a national platform that mandates financial inclusion. This includes developing an action plan to do so, reflecting their national circumstances.
A large part of the challenge is to strengthen peer learning and to create knowledge sharing platforms. This will require the active participation of both G-20 and non-G20 member nations, international organizations, and the private sector. The first objective must be to establish a dialogue that is as inclusive and open as possible.
In order to make this a reality, Mexico has proposed a “G20 Financial Inclusion Peer Learning Program.” This program would take into account the participation of countries from different regions, and at different stages in the process of establishing inclusive financial systems. The proposal covers three phases:
1) Engendering a national commitment to financial inclusion, and creating national coordination mechanisms or councils
2) Designing a national strategic action plan on financial inclusion
3) Implementing the action plan, and using the Peer Learning Program to share with other participant nations their experiences in the move towards financial inclusion
Countries participating in the Program will decide on which aspects of financial inclusion they want to focus, in accordance with their unique circumstances and objectives. An event is planned for the G20 Summit in Los Cabos to formalize the Program, and to gather commitments from participating countries.
II. Financial Education
In recent years, efforts to promote financial education have gained very strong momentum, both at the national and international levels. Within many countries, there are an increasing number of programs and initiatives, developed by different stakeholders. These include public entities, financial intermediaries, as well as educational and other non-governmental organizations. Given the diversity of stakeholders and the concomitant potential conflicts of interest, it is absolutely necessary to exercise proper coordination and guidance. Recognizing this, the Organization for Economic Co-operation and Development (OECD), in concert with the International Network on Financial Education (INFE), have been working on the development of High Level Principles on National Strategies for Financial Education. Such clearly-defined principles can be a powerful tool for countries working to develop national strategies. More importantly, the principles provide common ground for interested stakeholders, whose agendas may be similar, but not always identical.
In this regard, Mexico, in its capacity as President of the G20, is promoting the broad recognition of these High Level Principles on National Strategies on Financial Education that are currently being developed by the INFE and the OECD.
III. Consumer Protection
Consumer protection contributes to a healthy development of national and international financial systems, and leads to better and safer use of financial services by consumers. Such protections level the playing field for financial services providers and consumers, by increasing transparency and ensuring the best interests of all parties. Consumer protections complement financial education policies. More importantly, both contribute to the success of financial inclusion policies, particularly in less developed countries.
Mexico’s consumer protection agenda is twofold. First it calls for the formalization of the International Financial Consumer Protection Network (FinCoNet) as a global institution for financial consumer protection. The proposed FinCoNet would have a similar model and structure as other international organizations.
Second, the agenda mandates the development of effective approaches for the implementation of the G20 High Level Principles on Financial Consumer Protection, as endorsed in the Cannes Summit.The coordination of effort and the sharing of knowledge are key elements of this strategy. This is true for all three components, financial inclusion, financial education, and consumer protection, just as has been the case with Mexico´s domestic efforts on financial inclusion. The G20 has expressed a willingness support these efforts under conditions that take into account each country’s unique circumstances. This is the path most like likely to achieve results, since participating countries will have the freedom and the responsibility to design their own path towards financial inclusion. With that freedom comes the responsibility to be successful. It will be the role of the G20 to provide support in the form of crucial information and experience gleaned from all those engaged in this same effort.
According to the most recent annual report of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), about 2.7 billion adults still do not benefit from savings accounts, loans, insurance, payments, pension plans and remittance facilities. Obviously, on a global level, a great many people don’t have access to formal financial services. The world’s poorest communities are disproportionately affected. In sub-Saharan Africa, for example, only 19% of families have bank accounts.
- financial inclusion