Clinton Global Initiative Finance Dinner
Ladies and Gentlemen, Good evening. First of all, Matthew, my former colleague, thank you very much for your words.
Allow me to say that I am thrilled that this is my first speech as the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development. A mouthful of a title. I would like to thank the Clinton Global Initiative for giving me this opportunity to speak to you tonight.
When talking about access to finance around the world, the challenges are huge. Despite some important developments over the past 10 years, over 2 billion people still do not have access to financial services, services that none of us can imagine living without. This of course means credit, which is vital for helping people to generate income. But it also means lack of access to other financial products and services that help to reduce life's uncertainties, and to protect families from unforeseeable shocks.
This is why, where we used to talk mainly of "microcredit" or "microfinance", we now speak of "inclusive finance". Inclusive finance means universal access, at a reasonable cost, to a range of financial services, provided by a variety of sound and sustainable institutions. In addition to credit, this range of financial services includes savings, mortgages, insurance, local and international money transfers, and so on.
Inclusive finance is a powerful tool, one that will help reduce poverty, empower women and contribute to the achievement of many of the Millennium Development Goals. But the question is, how can we achieve it? Or, in the spirit of the Clinton Global Initiative, who needs to do what?
That is why we are here tonight, to discuss the answers to these questions, in particular the role of innovations. But while I believe innovations are absolutely necessary, I also believe we need to focus more deliberately on some of the basics.
The first one is: poor people need vastly improved access to simple savings accounts. For a variety of reasons - despite being an obvious service - savings has not received the same level of attention or resources as credit. But research shows that it is equally as important - if not more so.
Credit instruments may not be optimum vehicles for everybody. Savings, on the other hand, affords a debt-free way to buffer against life's risks, build assets and provide opportunities for the next generation. Despite the important role of savings, only 20% of the world population has a formal savings account, meaning that 80% do not have a safe place to put their money.
We must leave behind us the myth that poor people cannot save. They just need good saving products to do so. For instance, in Rwanda, more than half a million small new savings accounts drew $40 million into circulation in 2001 when people had access to these products. Think about what this means for domestic capital growth. Think about the multiplier effect this has on the availability of credit. Think about less dependency on international capital flows and foreign aid.
Therefore, I urge all of us here today to give "access to savings" the time and attention it deserves. This case needs to be made forcefully, and in many countries, regulatory frameworks need to be adapted accordingly. Remember that much of banking regulation and supervision focuses on deposit-taking institutions.
The other "basic" issue is, that in any given country, financial inclusion needs a widely shared vision and an agreed strategy for getting there. This vision and strategy must engage the government, the country's regulators and supervisors, financial institutions (including NGO's) and even telecom providers and retailers.
This means: That the rules and regulations that act as barriers to access to finance are evaluated and removed; That potential ways to streamline processes and create effective tax structures are examined; That the legal vehicles needed to promote growth in the sector are established; and That the needed financial infrastructure investments are realized.
It seems rather obvious that I speak about having a vision and a strategy. Yet this basic building block is lacking in far too many of the world's developing countries. Therefore, I urge you to consider how you can contribute helping individual countries establish sound visions and strategies for inclusive finance. As a guideline, I leave with you these Key Messages to determine what role you could play.
Now, having made my pitch for a couple of "basics", let me now turn to the important issue of innovations.
Here, let me focus on the concept of "integrated microfinance" and the innovations necessary to reach the poorest, especially in rural areas where the challenges of poverty are the most severe.
"Integrated microfinance" means linking microfinance with other products that are strongly demanded by poor people. The most obvious and well known case involves mobile phones. Clearly, linking financial services to the rapid spread of mobile phones offers excellent prospects for increasing financial inclusion, particularly for those living for away.
Yet there are other promising examples of "integrated microfinance" helping to service poor people better. Many of the examples offer sound business opportunities for the private sector.
Just to cite an example, through microenterprise loans, BRAC in Bangladesh promotes solar energy for rural households who live in the 50,000 villages outside of the national power grid. This allows villagers to have light at night and even charge their mobile phones.
What could be more powerful than linking financial products with activities that will keep people healthy, put children in school, reduce poverty and empower women? And what could be more important than doing so in rural areas, where needs are often the greatest?
I can cite similar examples of microfinance integrated with water irrigation systems, healthy and efficient cooking stoves, water filtering systems, etc. Such solutions call for innovative "out of the box" thinking. I hope we can return to this topic in our table discussions.
Ladies and gentlemen, in closing, my mandate as Special Advocate is to guide governments, legislators, supervisors and international institutions on key issues in the development of inclusive financial sectors.
As you can imagine, a lot of work needs be done but I trust that many of you here present will play their part in achieving the ambitious goal of inclusive finance. After all, shared understanding and concrete commitments to take action are the very essence of the Clinton Global Initiative. And therefore I very much look forward to hearing your views tonight.
Thank you very much.