AFI E.D. Alfred Hannig Presentation at the 40th anniversary of the Banco de Moçambique

Bringing smart policies to life

The Role of Financial Inclusion on Economic

Growth: Challenges and Perspectives

May 17, 2015


Executive Director

“Financial inclusion can be a

powerful agent for strong and

inclusive growth by empowering

individuals and families to cultivate

economic opportunities.”


Executive Director

—Christine Lagarde,

Managing Director, IMF


What we mostly know….


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


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

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:


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 CreationPoverty

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)


What is less known to us…


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

0

2000

4000

6000

8000

10000

12000

14000

16000

0 20 40 60 80 100

N developing countries = 94

Countries’ level of financial inclusion is positively correlated (0.6) with GDP/capita

Financial inclusion and GDP/capita growth

Countries’ level of financial inclusion appear to be negatively correlated (-0.13) with GDP/capita growth

y = -0.0364x + 3.5508R² = 0.0189

-30

-20

-10

0

10

20

0 10 20 30 40 50 60 70 80 90 100

GDP/capita growth in 2014 (yoy, %)

y = -0.0361x + 4.1198R² = 0.0071

-30

-20

-10

0

10

20

0 10 20 30 40 50

y = 0.2172x - 15.219R² = 0.163

-30

-25

-20

-15

-10

-5

0

5

10

15

50 60 70 80 90 100

GDP/capita growth in 2014 (yoy, %) 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%.


Financial inclusion and growth

Some correlation exists between financial inclusion and change in GDP

in SADC countries.

FI % Change GDP % Change

Angola -26.6% 19.3%

Botswana 62.4% -3.8%

DRC 194.6% 26.5%

Malawi -2.4% -34.2%

Mauritius 2.6% 6.0%

Tanzania 9.8% 31.0%

Zambia 46.3% 13.0%

Zimbabwe -56.7% 23.1%

South Africa 28.4% -12.1%

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.


Member engagement and financial inclusion

Source: Data from World Bank Global Findex, compiled by AFI; AFI Member Engagement Index 2014

0.5

1.5

2.5

3.5

-20 -10 0 10 20 30 40

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


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)

9.58.9

0

5

10

Median

Adopted Maya declaration No Maya Declaration

N Maya = 48

N No Maya = 42


Measurable targets and financial inclusion


13.4

8.5

0

4

8

12

16

Median

Measurable targets No targets

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


National strategies and financial inclusion

10.910.1

0

4

8

12

16

Median

National strat. No national strat.

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



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

2012 2013 2014


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%


Digital delivery channels making savings products more accessible: M-Shwari/Kenya

19


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….


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

21


Is financial inclusion a

mandated objective for your institution?

Source: GPF 2013 electronic voting results for the session, Driving Policies for Optimal Impact

30%

18%

46%

5%

1%

Mandated objective

A mandated objective, butsecondary to others

Not a mandated objective,but recognized as important

Not recognized as anobjective

Other


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


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


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


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


[email protected]

www.afi-global.org

AFI E.D. Alfred Hannig Presentation at the 40th anniversary of the Banco de Moçambique

Economy & Finance

Transcript of AFI E.D. Alfred Hannig Presentation at the 40th anniversary of the Banco de Moçambique