95385 Coordination Structures for Financial Inclusion Strategies and Reforms Over 45 countries have made commitments to financial inclusion targets and strategies, including through the Alliance for Financial Inclusion (AFI) and the G20 Financial Inclusion Peer Learning Program. At the national level, countries must bring to the table a range of stakeholders in order to implement concerted and achievable policies around financial inclusion. And as Queen Máxima noted in her speech at the AFI Global Policy Forum in 2010, “countries that have been most successful in advancing financial inclusion have been those that have had strong leadership and subsequently good coordination.” Despite its importance, setting up a national coordination structure is seen as a challenging task by many countries. At the 2012 AFI Global Policy Forum, 50% of participants polled identified “coordinating 1 nationally” as the main challenge to developing and implementing a financial inclusion strategy. Drawing from a wide range of experiences that countries have had thus far, this note provides an overview of coordination structures used for financial inclusion strategies globally, by focusing on their mandate, institutional set-up, as well as operational plans and coordinating mechanisms. MANDATE AND LEADERSHIP relevant government agencies, as well as other relevant institutions (cf. Figure 1). The creation of a new coordination structure can be a  Political endorsement: The coordination strong demonstration of leadership at the government structure may gain legitimacy through high level level. Leadership is one of the G20 Principles for political endorsement, such as the case of Innovative Financial Inclusion, which appeals to Indonesia, where the government invested the “cultivate a broad-based government commitment to Vice President's (VP) office with promoting and financial inclusion to help alleviate poverty,” and calls achieving financial inclusion. for increased visibility among the various stakeholders and implementing agencies that touch on financial The United Kingdom has been an exception to these inclusion and poverty alleviation. In order to ensure three case scenarios, since its Financial Inclusion proper buy-in from these stakeholders, the Taskforce was launched as an independent body that coordination structure must make the case for why it advised Her Majesty's Treasury on financial inclusion is best placed to take the lead. This may come from: matters. The Taskforce included members from the private, public, and social sectors, serving on a  Historical legitimacy: If one agency has voluntary basis and in a personal capacity. historically been involved with promoting financial inclusion, then it may be best positioned to lead A coordination structure is the main body efforts in coordinating other government agencies responsible for promoting the discussion and and outside actors. This was the case for Brazil's debate regarding financial inclusion and Central Bank, which had assumed the promotion coordinating financial inclusion reforms. of the Financial Inclusion of the population as a Public implementing agencies are public strategic objective since 2004. sector bodies – such as financial intelligence  Representational legitimacy: In some units, labor and employment ministries, and tax cases, the coordination structure may achieve and customs agencies – involved in the implementation of financial inclusion programs. representational legitimacy by including relevant Private implementing agencies are private organizations and stakeholders as part of its sector actors – such as banks, finance member base. This was the case with the companies, credit unions – that deliver financial National Council for Financial Inclusion in products and services. Mexico, which consists of core members from all 1 AFI (2013), Financial Inclusion Strategy Peer Learning Group Handout. Financial Inclusion and Consumer Protection Service Line | 1 Sarah Fathallah & Douglas Pearce, October 2013 Figure 1. Membership Structure of the National Council on Financial Inclusion in Mexico CNBV = National Banking and Securities Commission; CONDUSEF = National Commission for the Protection of Users of Financial Services; CONSAR = National Commission for the Pension System; CNSF = National Insurance and Surety Commission. INSTITUTIONAL SET-UP coordination structure can help avert this situation by providing dedicated staff and budget to develop and The institutional set-up can vary from one country to implement a national financial inclusion strategy and another, depending on national political priorities, the reforms. In the case of Nigeria, the Central Bank existing level of financial inclusion, and other factors plans on deploying a team of at least three people to (cf. Annex 1). Generally, the coordination structure the newly created Financial Inclusion Secretariat could either be: within its Development Finance Department. In Kenya, the Financial Access Partnership (FAP) was  A new team or unit within an existing authority, formed in 2005 as a public-private partnership, such as a Central Bank or Ministry of Finance, managed jointly by the Central Bank of Kenya and  A newly created structure. Financial Sector Deepening Kenya. FAP receives financial support by these organization as well as The former model is seen in Brazil, where the additional members. Financial Inclusion Project was created within the Central Bank in 2009 and also in India, where the Targets and Monitoring Reserve Bank of India (RBI) created a Financial In order to create a workplan as well as reasonable Inclusion Advisory Committee under the deliverables, data should be gathered in order to form Chairmanship of RBI's Deputy Governor. Likewise, appropriate targets. That data can be collected either the Philippines Central Bank created its Microfinance by the coordination structure directly or through the Unit, which it then transformed into the Inclusive implementing agencies. Finance Advocacy Staff in 2007. On the other hand, the National Council on Financial Inclusion was For instance, the Financial Inclusion Secretariat in created in Mexico as a separate entity whose Nigeria does not gather primary data, but instead objective is to organize the different entities working relies on various regulators to collect and provide the on financial inclusion in the country. data needed to monitor their work and progress towards financial inclusion goals. The contributing The creation of a new and separate structure then organizations provide monthly data updates and the poses the challenge of determining the appropriate Secretariat then collates and analyzes that legal status for its establishment and functioning. information on a bi-annual basis. On the other hand, the Financial Inclusion Project at OPERATIONALIZATION the Central Bank of Brazil is responsible for the collection, organization and analysis of data and Resources research on various issues related to financial Since financial inclusion is a cross-cutting, it bears the inclusion (such as the expansion of correspondent risk of potentially "falling through the cracks." A strong banking across regions in Brazil). Coordination Structures for Financial Inclusion Reforms and Strategies | 2 COORDINATION MECHANISMS Cooperation is an important aspect in creating an institutional environment with clear lines of accountability. Coordination itself is another G20 Principle for Innovative Financial Inclusion that calls for partnerships across a variety of government, business, and social sector stakeholders. There are a variety of ways to enable cooperation, not all of which are mutually exclusive. In fact, some of them may create a greater impact when combined (Cf. Box 1). Consultative Model In the consultative model, the coordinating body comprises of or is structured in the form of a taskforce or steering committee composed of representatives from different implementing agencies and other relevant actors drawn from the private and social sectors, including donors. The steering committee of the Financial Inclusion Program in Pakistan comprises of members from the State Bank of Pakistan and the Government, but also of representatives from the UK Department for International Development (DFID). The coordination structure can also convene periodic events that allow different agencies to update each other and advance agendas in unison. The Bangko Sentral ng Pilipinas has created a Financial Sector Forum as a coordination mechanism for relevant financial sector regulators. Mandate-based Model Through the mandate-based model, the coordination structure is tasked with ensuring that targets are met and that financial inclusion reforms are implemented by the relevant agencies. In Russia, the Ministry of Economic Development, responsible for financial inclusion, leads projects aiming to improve the financial and credit system in Russia, and works with the Ministry of Finance to develop enabling financial services legislation, as well as with the Central Bank is to ensure the stability of the banking system and protection of consumers. Partnership Model In the partnership model, formal or informal relationships are formed between the coordination structure and the implementing agencies. For example, the Brazilian Central Bank has established several institutional partnerships, including with government agencies such as the Ministry of Agrarian Development, the Brazilian Micro and Small Business Support Service, the Ministry of Labor and Employment, and the Ministry of Justice. Box 1. Coordination Mechanisms deployed by the Central Bank of Nigeria In Nigeria, the Central Bank has put in place various mechanisms to ensure coordination, including:  Financial System Strategy 2020, an initiative designed to promote collaboration among all stakeholders in the financial system. The steering committee includes members from the Central Bank, Federal Ministry of Finance, Nigeria Deposit Insurance Corporation, National Insurance Commission, National Pension Commission, Nigeria Securities and Exchange Commission, and the Nigerian Stock Exchange.  The National Microfinance Policy Consultative Committee , chaired by CBN, coordinates on issues related to microfinance. It includes representatives from the Federal Ministries of Finance and Agriculture, National Planning Commission, National Poverty Eradication Program, Small and Medium Enterprises Development Agency of Nigeria, Bankers’ Committee, National Association of Microfinance Banks, Niger ia Association of Small and Medium Enterprises, and Nigeria Deposit Insurance Corporation.  The Central Bank also hosts a Microfinance Advisory Board (MAB). MAB includes mainly donors such as GTZ, DFID, UNDP, USAID, Ford Foundation, European Union, AFDB, the World Bank, National Association of Microfinance Banks, as well as other government agencies and NGOs.  The Financial Inclusion Secretariat has a broad membership that includes the National Insurance Commission, National Pension Commission, Nigerian Communications Commission, GIZ, National Identity Management Commission, Federal Ministry of Education, National Planning Commission, Bankers Committee, apex associations as well as other affiliate members. Coordination Structures for Financial Inclusion Reforms and Strategies | 3 Box 2. Mzansi Accounts in South Africa and the UK Remittances Task Force The Mzansi Account was an initiative launched in 2004 through South Africa’s Financial Sector Charter to bring basic saving accounts to all South Africans. The process involved major South African banks working collectively to develop an account that is affordable and available. Today, at least one in ten South African adults currently owns an Mzansi account; and one in six banked people are active Mzansi customers. The engagement of banks in developing and implementing this new product has been essential, and allowed for a significant increase in access to saving accounts in South Africa where close to 80 percent of the population is within reach of transactional banking savings. However, some banks are also attracting clients into less rigid basic bank account products. The question remains whether the impact of this initiative would have been even greater were the parameters of the Mzansi accounts more flexible for financial providers to adapt to their clients’ needs. In the UK, the Remittances Task Force was set up and funded by the UK Department for International Development, recognizing the importance of remittances to developing countries. The Task Force was comprised entirely of private sector membership, with members including major money transfer operators (MTOs), banks, trade associations, SWIFT, Visa, Post Office, and consumer representatives. The Task Force was able to engage both private sector and public sector in identifying ways to reduce remittance costs and barriers, through:  Research projects to review statistics, establish consumer preferences and use of remittances to encourage financial inclusion;  A review of regulatory issues;  A Remittances Customer Charter, as a major effort to make consumers aware of their rights, to raise transparency on prices and service levels and to improve standards in the industry. INVOLVING THE PRIVATE SECTOR evaluation. It is also important for the coordination structure to look at different venues for cooperation The private sector delivers financial products and and coordination that fit the needs of the financial services, and should consequently be involved in the inclusion agenda within the country, especially if there financial inclusion strategy design and target-setting are a wide range of stakeholders involved. Lastly, the stages alongside the coordination structure. The coordination structure should bring relevant private objective is to financial institutions to have shared sector actors to the table in order to make sure that ownership of targets and actions, in order to perceive financial inclusion reforms are aligned with their their achievement as part of their own interest rather technology and business models, while ensuring that than as an imposition, as well as to ensure that targets are sufficiently ambitious and that reforms do regulators and policymakers are providing sufficient serve the broader financial inclusion agenda. space for innovation and the piloting of new products and delivery mechanisms (cf. Box 2), while not compromising the focus on financial stability, More Information And Resources consumer protection, and financial integrity. For AFI. 2013. “A Timeline of Achievement.” Available instance, in Russia, the Ministry of Economic at: http://bit.ly/TimelineAchievement Development has been working with private sector stakeholders such as the Russian Microfinance AFI. 2011. “Lessons Learned for Financial Centre, e-money associations, and banking Inclusion Strategy Development.” Available at: associations to collaborate and ensure the http://bit.ly/PIWGLessonsLearned development of a proportionate regulatory framework. Global Partnership for Financial Inclusion. 2011. “The G20 Principles for Innovative Financial CONCLUSION Inclusion. Bringing the Principles to Life: Eleven Country Case Studies.” Available at: In order for any coordination structure to be http://bit.ly/G20Principles successful, it must have a legitimate mandate and strong leadership. While its institutional set-up can World Bank. 2012. “Financial Inclusion Strategies vary, it is important to have the right resources, both Reference Framework.” Available at: http://bit.ly/FIStrategiesReferenceFramework in terms of funding and human resources, as well as appropriate mechanisms for monitoring and Coordination Structures for Financial Inclusion Reforms and Strategies | 4 Annex 1. National Coordination Structures in Selected Countries The National Bank of the Republic of Belarus spearheaded the financial inclusion agenda since 2010 by Belarus drafting a state strategy on microfinance for 2011-15. In 2013, it also drafted a National Financial Inclusion Strategy and developed a national financial literacy program. In 2009, the Financial Inclusion Project (FIP) at the Central Bank was created with the objective of integrating various stakeholders to develop effective policies for financial inclusion. In November 2011, the National Brazil Partnership for Financial Inclusion was launched, as a network of public and private actors engaged in financial inclusion. The network is coordinated by the FIP. The Ministry of Planning created a Financial Inclusion Unit on April 2011, which is leading the financial Chile inclusion agenda in liaison with government agencies (Ministry of Finance, Superintendence of Banks and Financial Institutions, Central Bank) and private sector actors. In October 2012, the Reserve Bank of India constituted a Financial Inclusion Advisory Committee (FIAC) to India spearhead financial inclusion efforts. The FIAC membership includes a few Directors from the Central Board of RBI and experts from the NGO and civil society sector. In 2005, the Central Bank of Kenya partnered with the Financial Sector Deepening (FSD) Kenya and other Kenya financial sector players under the Financial Access Partnership (FAP), to monitor and measure levels of access to financial services. The Financial Supervisory Commission is Korea’s lead agency for financial inclusion policy. It works closely Korea with other agencies such as the Small and Medium Business Administration. To facilitate coordination among different stakeholders, the National Council on Financial Inclusion was Mexico created in 2011 to coordinate proposals for financial inclusion policies and their implementation, as well as formulate guidelines for a National Policy on Financial Inclusion. Bank of Namibia (BoN) created a dedicated Division to coordinate financial inclusion activities, a fund to Namibia support these activities, an internal Financial Inclusion Forum, an inter-ministerial Financial Inclusion Council & Advisory Body, and other consultative workshops and meetings. The Central Bank of Nigeria (CBN) is leading the promotion of financial inclusion in Nigeria, particularly Nigeria through its Development Finance Department. It is under this department that CBN is deploying a team to the Financial Inclusion Secretariat to take on all coordination activities. The State Bank of Pakistan established a Financial Inclusion Programme coordination office, housed within its Pakistan Microfinance Department. The Bangko Sentral ng Pilipinas created a Microfinance Unit 2002 which was transformed into the Inclusive Philippines Finance Advocacy Staff in 2007. It has also established an Inclusive Finance Committee chaired by the Governor. The Ministry of Economic Development is responsible for the promotion of financial inclusion, but the strategy Russia is developed closely with the Central Bank, the Ministry of Finance, as well as other non-governmental stakeholders (Russian Microfinance Center, banking associations, etc.). The National Bank of Rwanda has established a Financial Inclusion Taskforce aimed at coordinating all Rwanda initiatives regarding financial inclusion. Solomon The Central Bank of the Solomon Islands set up national coordinating committee and secretariat to implement Islands financial inclusion actions. In South Africa, the National Treasury launched the Financial Sector Charter in 2004 to provide effective South Africa access to adequate financial services for all and improve racial representation in ownership. In 2013, the Ministry of Finance finalized a National Financial Inclusion Strategy and submitted it for cabinet Thailand approval. Turkey The Undersecretariat of Treasury leads the overarching financial inclusion strategy in Turkey. The Financial Inclusion Taskforce was an independent and volunteer-based body that advised HM Treasury United on financial inclusion. The Taskforce concluded its work in March 2011 with final recommendations to the Kingdom government and the private sector. Coordination Structures for Financial Inclusion Reforms and Strategies | 5