Financial Inclusion: Bridging Economic Opportunities and Outcomes

IMF News, September 20, 2016

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Remarks by Deputy Managing Director Mitsuhiro Furusawa for the Conference on Financial Inclusion in West Africa, September 20, 2016.
Theme: how financial inclusion supports development, growth, and the link to financial stability amid challenging global conditions.
Context: IMF engagement through advice, research and technical assistance in the region; collaboration with BCEAO and Senegal.

"About two billion people worldwide currently lack access to basic financial services."
"In Senegal, the share of the population with a bank account more than doubled to about 12 percent between 2011 and 2014."
"Even with mobile banking, only one in three adults in sub-Saharan Africa has access to banking services; in WAEMU we are talking less than 18 percent."
"We are experiencing a period of disappointing global growth that is expected to continue into 2017."
"Slower demand from the advanced and emerging economies has hit Africa hard since 2014, particularly the natural resource exporters."
Kenya: "the proportion of Kenyans lacking access to financial services has fallen to 17 percent from 41 percent."
Côte d’Ivoire: "the number of mobile accounts has exceeded traditional bank accounts."
South Africa: "after five years, 42 percent of those [no frills] accounts were inactive."

Financial inclusion is closely intertwined with financial sector development; inclusion implies access to deposit-taking, payments, microfinancing, mortgages, insurance.
Central banks' role:
- Create an enabling environment for financial access.
- Balance access to financial instruments with protection from instability and risks.
- Play a key role in regulations related to innovations and entry of new products (e.g., Sharia-compliant products).
Governments' role:
- Provide laws and regulations that encourage financial sector development and inclusion.
- Address documentation requirements that may exclude potential customers (e.g., fixed address or proof of employment).
Multisectoral involvement: private sector and civil society are essential partners alongside government and central banks.

Technological advances lower costs and extend services where branches may not exist; can accelerate access beyond traditional banking.
World Bank Findex finding: "Sub-Saharan Africa has the highest proportion of mobile bank accounts" among regions.
Mobile banking examples:
- Kenya: M-PESA integral to market economy; mobile savings schemes offering consumer credit.
- West Africa: mobile banking has foothold but less coverage than East Africa.
- Côte d’Ivoire: mobile accounts exceed traditional bank accounts.
Operational models vary: some systems develop with telecommunications companies (Kenya), others operate through the banking sector.

Expanding access can raise risks if credit is extended to unproductive projects or unfit clients; borrowers can face debt distress.
Inclusion does not imply indiscriminate lending: "Inclusion does not mean lending to everyone at any cost."
Importance of regulations and supervision:
- Durable and efficient financial inclusion requires balancing innovation with safeguards for financial soundness.
- Well-designed financial regulations—including strong prudential oversight—can ensure loans are channeled to productive uses.
Many countries have increased inclusion while maintaining financial stability through appropriate oversight.

Access ≠ active participation: illustrative example from South Africa where "no frills" accounts increased account numbers but "after five years, 42 percent of those accounts were inactive."
Need for active efforts to help newly included users:
- Training in record-keeping, budgeting, and planning for small businesses.
- Complementary policies to address unemployment and underemployment so people have incomes to save and invest.

Financial inclusion supports consumption smoothing, investment in education and health, business expansion, job creation, and inequality reduction.
Policy priorities:
- Integrate financial sector development and inclusion into growth-sustaining policies.
- Design regulations that facilitate access while preserving financial stability.
- Promote technology-enabled solutions (mobile banking) with appropriate regulatory frameworks.
- Implement consumer protection, financial education, and capacity-building programs to encourage active use.
IMF commitment: continue expanding knowledge, develop and share best practices, and provide reforms and technical assistance in collaboration with the World Bank and regional institutions.

Source: Remarks by Deputy Managing Director Mitsuhiro Furusawa, September 20, 2016.