1. Bringing smart policies to life The Role of Financial Inclusion on Economic Growth: Challenges and Perspectives May 17, 2015

2. Bringing smart policies to life Executive Director “Financial inclusion can be a powerful agent for strong and inclusive growth by empowering individuals and families to cultivate economic opportunities.”

3. Bringing smart policies to life Executive Director —Christine Lagarde, Managing Director, IMF

4. Bringing smart policies to life What we mostly know….

5. Bringing smart policies to life GDP per capita (USD) Access indicator Composite Access Indicator vs. GDP/capita Source: Demirgüç-Kunt, Beck, and Honohan (2008); World Bank “Finance for All” access data; World Bank World Development Indicators). Countries’ level of financial inclusion positively correlated (0.55) with GDP/capita

6. Bringing smart policies to life A World Bank analysis of Mexico’s drive to increase financial inclusion shows… 6 Financial inclusion has made a difference 10% increase in financial inclusion leads to Source: World Bank – “The Economic Impact of Banking the Unbanked: Evidence from Mexico” 5% increase in new businesses 7% increase in employment 3% increase in GDP

7. Bringing smart policies to life 7 Source: Innovations for Poverty Action: Prina, S. 2013. “”Banking the Poor via Savings Accounts: Evidence from a Field Experiment.” Working Paper, Brune, L., J. Goldberg, X. Giné, D. Yang. 2013. “Commitments to Save: A Field Experiment in Rural Malawi.” Working paper Financial inclusion has made a difference IPA analyses show:

8. Bringing smart policies to life Executive Director Improving access to Finance for SMEs supports job creation and employment Relieve Access to Finance Constraints Entrepreneurship Capital Investments Risk Management Indirect Effects Job Creation Poverty Reduction A sample of 100 MSMEs that had obtained loans from Sri Lanka’s largest private bank created 2,650 permanent jobs between 2009 and 2012, showed an annual job growth rate of 12%. It was estimated that they may have created between 140,000 and 340,000 jobs over three years. The study estimated that between 10-31 jobs were created for every $100,000 of loans provided to MSMEs. Source: International Finance Corporation, IFC Jobs Study: Assessing Private Sector Contributions to Job Creation and Poverty Reduction (2013); Global Partnership for Financial Inclusion, SME Finance: New Findings, Trends and G20/GPFI Progress (2015)

9. Bringing smart policies to life What is less known to us…

10. Bringing smart policies to life Percentage of adults with formal accounts (ppt) in 2014 GDP/ capita in 2014 (%) Financial inclusion and GDP/capita Source: Data from World Bank Global Findex, compiled by AFI Countries’ level of financial inclusion is positively correlated (0.6) with GDP/capita

11. 11 Financial inclusion and GDP/capita growth Countries’ level of financial inclusion appear to be negatively correlated (-0.13) with GDP/capita growth GDP/capita growth in 2014 (yoy, %) However, GDP/capita growth is positively correlated with the level of financial inclusion for countries with level of financial inclusion above 50%.

12. Bringing smart policies to life Financial inclusion and growth Some correlation exists between financial inclusion and change in GDP in SADC countries. Source: World Bank Global Financial Inclusion Database, 2011 & 2014; World Bank Data Catalogue, 2011 & 2013. No Findex data available for Lesotho, Mozambique, Namibia, Swaziland, Seychelles.

13. Bringing smart policies to life Member engagement and financial inclusion Source: Data from World Bank Global Findex, compiled by AFI; AFI Member Engagement Index 2014 The increase in financial inclusion is positively correlated (0.35) with members’ level of engagement with AFI AFI Member engagement index Increase in percentage of adults with formal accounts (ppt) N AFI members = 65 *Cambodia, Mauritius N/A

14. Bringing smart policies to life Maya Declaration commitments and financial inclusion Source: Data from World Bank Global Findex, compiled by AFI; AFI Maya Declaration Report 2014 AFI members that have adopted Maya Declaration increased financial inclusion by 9.5 ppts, compared to 8.4 ppts for AFI members without Maya Declaration Increase in % of adults with accounts from 2011-2014 (ppt) N Maya = 48 N No Maya = 42

15. Bringing smart policies to life Measurable targets and financial inclusion Source: Data from World Bank Global Findex, compiled by AFI; AFI Maya Declaration Report 2014 AFI members with measurable targets increased financial inclusion by 13.4 ppts, compared to 8.5 ppts for those without measurable targets Increase in % of adults with accounts from 2011-2014 (ppt) N members targets = 13 N members no targets = 16

16. Bringing smart policies to life National strategies and financial inclusion AFI members with national strategies increased financial inclusion by 10.9 ppts, compared to 10.1 ppts for those without national strategies Increase in % of adults with accounts from 2011-2014 (ppt) N members with strat. = 8 N members without strat = 20 *Angola N/A Source: Data from World Bank Global Findex, compiled by AFI; AFI Maya Declaration Report 2014

17. Bringing smart policies to life Executive Director Financial Inclusion in Mozambique Commitment to develop national financial inclusion strategy Strategy published by Council of Ministers Update strategy to include quantifiable targets On track to increase financial inclusion to 25% by 2019 201220132014

18. 18 AFI members with e-money increased financial inclusion by 12.8 ppts, compared to 8.1 ppts for those without e-money Increase in % of adults with accounts 2011-2014 AFI members with agent banking increased financial inclusion by 10.6 ppts, compared to 8.1 ppts for those without agent banking Increase in % of adults with formal accounts 2011-2014 AFI members with tiered KYC increased financial inclusion by 8.5, compared to 14.0 for those without tiered KYC AFI members with financial literacy increased financial inclusion by 10.6 ppts, compared to 4.4 ppts for those without financial literacy Increase in percentage of adults with formal accounts from 2011-2014 Increase in % of adults with formal accounts 2011-2014 Policy interventions and financial inclusion

19. Bringing smart policies to life Financial inclusion growth Source: World Bank Global Financial Inclusion Database, 2011 & 2014; World Bank Data Catalogue, 2011 & 2013. No Findex data available for Lesotho, Mozambique, Namibia, Swaziland, Seychelles. Of the five countries with the largest financial inclusion increase in percentage of population included, four of them are AFI members: Kenya:32.3% Uganda:24% El Salvador:23% Tanzania:22.5%

20. Bringing smart policies to life Digital delivery channels making savings products more accessible: M-Shwari/Kenya 20

21. Bringing smart policies to life Dramatic Mobile Money growth: Tanzania Source: Bank of Tanzania Mid-2014: 12.3 million active mobile money accounts…. reaching 55% of the population …..via 138,000 agents….

22. Bringing smart policies to life Financial inclusion becoming part of regulators’ mandate Financial inclusion is no longer only a development concern but a cornerstone of economic development framework and model Financial inclusion is a policy goal complementary to stability, integrity and consumer protection Financial inclusion is understood in a broad framework including access, usage and quality of a range of financial services. No. of Countries Have dedicated financial inclusion strategy 31 Created a dedicated financial inclusion unit 22

23. Bringing smart policies to life Is financial inclusion a mandated objective for your institution? Source: GPF 2013 electronic voting results for the session, Driving Policies for Optimal Impact

24. Bringing smart policies to life SADC and financial inclusion “Financial inclusion is no longer something nice to do, but is now an essential part of the global economic development agenda. It is a public policy issue that regulators cannot shy away from” Professor Njuguna Ndung’u, Former Governor CB Kenya and AFI Chair, September 2011

25. Bringing smart policies to life Executive Director “We recognize the critical importance of financial inclusion for inclusive growth and development that places shared prosperity at the center of development in developing and emerging economies. We concur policy and regulatory bodies must include financial inclusion in their mandate.” —Dili Consensus on Financial Inclusion in the Pacific Islands, 8 May 2015 Financial inclusion becoming part of regulators’ mandate

26. Bringing smart policies to life Effective financial inclusion policy reforms Improved Knowledge & Institutional Capacity High-level Commitment National & Global Policy Coordination National Progress Maya Declaration Capacity Building Grants Working Groups Knowledge Exchanges Peer Advisory Trainings & Workshops Joint Learning Programs Knowledge Products Global Advocacy G20 GPFI SSBs Peer Learning on Global Standards Global Policy Forum Community & Partnership Building Regional Initiatives Public Private Dialogue Global Policy Forum Online Member Zone AFI Services

27. Bringing smart policies to life Executive Director “Financial inclusion is important to the economy, it improves the welfare of the poor and contributes to financial stability” — Professor Benno Ndulu, Governor, Bank of Tanzania, AFI Vice-Chair December 2013

28. Bringing smart policies to life info@afi-global.org www.afi-global.org