Opening Remarks — IMF-CGD Event on “Financial Inclusion: Macroeconomic and Regulatory Challenges”

IMF News, April 11, 2016

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Published: April 11, 2016

Introductory framing

Event opened by Christine Lagarde, Managing Director, IMF.
Jointly organized with the Center for Global Development (CGD); CGD recently launched a report on regulatory challenges that impede financial inclusion.
IMF partnerships noted with the World Bank, the United Nations, the Gates Foundation, the Alliance for Financial Inclusion, the Financial Stability Board, and others.
Central questions posed:
- Is financial inclusion macro-relevant?
- What are trade-offs and synergies between financial inclusion, growth, and stability?
- Are there risks of “too much finance?”

Data and measurement

IMF Financial Access Survey:
- Launched in 2009.
- Covers 189 countries for 11 years.
- Described as a key source of high-quality, publicly available data on financial inclusion.

Trends in financial inclusion (selected factual points)

More than 60 governments across the world have set financial inclusion as a formal target.
Examples highlighted:
- 15 economies in Sub-Saharan Africa where the number of mobile money accounts exceeds the number of depositors in commercial banks.
- Deposit accounts at commercial banks in India have grown by half a billion over the past five years.
- India has made universal access to basic banking services a key national priority with an agenda envisaging universal access by 2018.

Macroeconomic impact (findings from IMF staff analysis)

IMF staff analysis (cited as “Financial Inclusion: Can it Meet Multiple Macroeconomics Goals?” (SDN/15/17))—key findings summarized:
- Greater financial inclusion is associated with tangible economic benefits, including higher GDP growth and lower income inequality.
- Access to accounts, credit, infrastructure, women and low income users helps make growth more inclusive.
- No evidence that increasing basic access to financial transactions (receiving wages and subsidies or making payments) threatens financial stability.
- Financial stability risks can arise when broadening access to credit to a wide section of the population.
- Using information on supervisory quality from the Financial Sector Assessment Program in about 100 countries:
- When supervision is of high quality, broadening credit access actually leads to an increase in financial stability.
- Implication: high-quality supervision can mitigate stability risks associated with expanded credit access while supporting higher growth and reduced inequality.

New technologies and regulatory implications

Digital finance and new technologies present significant opportunities to extend financial services and connect businesses globally.
Example imagery used: a farming cooperative in Bangladesh selling rice directly to an industrialist in Chile.
Regulatory and complementary policy needs emphasized:
- Solid enabling regulatory environment.
- Advancement of financial education.
- Measures to prevent cyber fraud.

Policy conclusions and recommendations

Financial inclusion should not be siloed as only social policy; it must be integrated into macroeconomic and financial policy frameworks.
When financial systems become more inclusive:
- They broaden financial markets.
- They can make monetary policy more effective.
- They broaden the effects of fiscal policy (both tax and expenditures) by bringing more of the population into the formal sector.
Promoting financial inclusion can help raise aggregate demand by increasing incomes of the low income population and arresting hollowing out of the middle class—offering a path away from “the new mediocre” of anemic growth.

Source: Opening Remarks — IMF-CGD Event on “Financial Inclusion: Macroeconomic and Regulatory Challenges”, April 11, 2016, Christine Lagarde, IMF Communications Department.