Role of Financial Inclusion
Shifting Paradigms for Sustaining Equitable Economic Growth: Role of Financial Inclusion BNM-AFI Financial Inclusion Strategy and Data Programme Sansana Kijang, Bank Negara Malaysia November 25 – 28, 2014
The emerging promise of financial inclusion
Post-2015 Development Agenda
Financial Integration
Research and Data Insights
Post 2015 Development Agenda: Searching for new solutions to complement traditional approaches 1980/1990s: High growth with relatively low levels of inequality and rapid poverty reduction
Late 1990s: Asian Economic crisis
2008/2009: Global economic crisis Now: Growth rates significantly lower and inequality has risen sharply
The New Normal: Significant % of the population globally remains situated just above the poverty line
Emerging public policy concerns within developing countries The sharp rise in inequality will lift fewer people out of poverty
Governments are being asked to do more with fewer resources
Governments are under pressure to find new solutions to real economy problems for the many and not just the few
There is growing vulnerability to poverty in the face of diverse unpredictable shocks
Opportunities to reap the demographic dividend through healthier and educated young people risk turning into a liability
There is less confidence in assumptions about drivers of growth and in traditional approaches leading to search for new forwardlooking policy instruments
The consequence of sub-national inequalities need to be carefully managed
Financial inclusion as a complementary policy of choice to promote growth with equity Extending the reach of the state in building human capital
Enabling social mobility
Turning infrastructure corridors into economic corridors
Creating an income and consumption ladder out of vulnerability
Leveraging the smallest economic agents for national saving and investment
Leveraging remittances for growth, rural development and redistribution
New data for the potential of financial inclusion to address some of the key policy concerns for governments Sharp rise in inequality Growing vulnerability to poverty
Demographic dividend could be a liability Sub-national inequalities
Income and consumption ladder
Building human capital
Social mobility
National saving and investment
Governments with fewer resources Remittances New solutions to real economy problems Less confidence in traditional approaches
Economic corridors
Broadening the “bottom of the pyramid”: More than half of all credit in Myanmar is sourced informally National saving and investment
Governments with fewer resources
Trillions of Kyat (K) Outstanding K1
K2
K3
K4
Total Debt Outstanding
K0
K5
K 5.4 trillion
Millions of loan clients
K4.86 trillion
Regulated financial services
9.2 million loan clients 6.28 million loan clients 0
2
4
6
8
Millions of adults
Unregulated financial services
10
12
14
Tapping into informal savings for national growth Account at a formal financial institution (% age 15+)
Loan from a financial institution in the past year (% age 15+)
Saved at a financial institution in the past year (% age 15+)
GDP per Capita**
100%
60,000
90% % of population age 15+
70%
40,000
Informal usage
60% 50%
30,000
40%
20,000
30% 20%
GDP per capita (US$)
50,000
80%
10,000
10%
0%
0 Myanmar*
Cambodia
Lao PDR
Vietnam
Philippines
Indonesia
Thailand
Malaysia
Singapore Source: Findex (2011) *Source for Myanmar: FinScope (2013) **Source for GDP per Capita: World Bank (2014)
Responding to the “New normal”: MAP Myanmar finds 5 million farmers experienced agri-related risks and 42% used credit to cope with the impact of those risks and 10% used savings Growing vulnerability to poverty
Income and consumption ladder
Financial services usage 12.1m Farmers
Credit
Payments
Insurance
Savings
12.1m adults
Regulated
Unregulated
Family, friends and self
Excluded
Exploiting the “demographic dividend”: MAP finds that in Thailand and Myanmar adults use savings and credit to invest in their human capital Building human capital
Demographic dividend Percent of total adult population
Myanmar
Thailand
28%
30% 25% 20% 15%
17% 11%
10%
13%
6%
6%
7%
6%
5% 0% Save for a medical emergency
Use credit for a medical emergency
Save for education expensense
Use credit for education expenses
Convergence of growth and financial inclusion policy approaches Broad-based growth Human capital and innovation Export- led growth Investment-led growth
Financial inclusion approaches
Equitable growth policies
Microfinance Financial Access
Financial Usage Financial Inclusion and the real economy
Economic growth approaches
CONNECT WITH US
Feisal Hussain Senior Regional Technical Advisor, Inclusive Finance (Asia) and SHIFT Programme Manager UN Capital Development Fund Asia Pacific Regional Office [email protected] www.uncdf.org/shift
This initiative is supported by the Australian Government
The emerging promise of financial inclusion
Post-2015 Development Agenda
Financial Integration
Research and Data Insights
Post 2015 Development Agenda: Searching for new solutions to complement traditional approaches 1980/1990s: High growth with relatively low levels of inequality and rapid poverty reduction
Late 1990s: Asian Economic crisis
2008/2009: Global economic crisis Now: Growth rates significantly lower and inequality has risen sharply
The New Normal: Significant % of the population globally remains situated just above the poverty line
Emerging public policy concerns within developing countries The sharp rise in inequality will lift fewer people out of poverty
Governments are being asked to do more with fewer resources
Governments are under pressure to find new solutions to real economy problems for the many and not just the few
There is growing vulnerability to poverty in the face of diverse unpredictable shocks
Opportunities to reap the demographic dividend through healthier and educated young people risk turning into a liability
There is less confidence in assumptions about drivers of growth and in traditional approaches leading to search for new forwardlooking policy instruments
The consequence of sub-national inequalities need to be carefully managed
Financial inclusion as a complementary policy of choice to promote growth with equity Extending the reach of the state in building human capital
Enabling social mobility
Turning infrastructure corridors into economic corridors
Creating an income and consumption ladder out of vulnerability
Leveraging the smallest economic agents for national saving and investment
Leveraging remittances for growth, rural development and redistribution
New data for the potential of financial inclusion to address some of the key policy concerns for governments Sharp rise in inequality Growing vulnerability to poverty
Demographic dividend could be a liability Sub-national inequalities
Income and consumption ladder
Building human capital
Social mobility
National saving and investment
Governments with fewer resources Remittances New solutions to real economy problems Less confidence in traditional approaches
Economic corridors
Broadening the “bottom of the pyramid”: More than half of all credit in Myanmar is sourced informally National saving and investment
Governments with fewer resources
Trillions of Kyat (K) Outstanding K1
K2
K3
K4
Total Debt Outstanding
K0
K5
K 5.4 trillion
Millions of loan clients
K4.86 trillion
Regulated financial services
9.2 million loan clients 6.28 million loan clients 0
2
4
6
8
Millions of adults
Unregulated financial services
10
12
14
Tapping into informal savings for national growth Account at a formal financial institution (% age 15+)
Loan from a financial institution in the past year (% age 15+)
Saved at a financial institution in the past year (% age 15+)
GDP per Capita**
100%
60,000
90% % of population age 15+
70%
40,000
Informal usage
60% 50%
30,000
40%
20,000
30% 20%
GDP per capita (US$)
50,000
80%
10,000
10%
0%
0 Myanmar*
Cambodia
Lao PDR
Vietnam
Philippines
Indonesia
Thailand
Malaysia
Singapore Source: Findex (2011) *Source for Myanmar: FinScope (2013) **Source for GDP per Capita: World Bank (2014)
Responding to the “New normal”: MAP Myanmar finds 5 million farmers experienced agri-related risks and 42% used credit to cope with the impact of those risks and 10% used savings Growing vulnerability to poverty
Income and consumption ladder
Financial services usage 12.1m Farmers
Credit
Payments
Insurance
Savings
12.1m adults
Regulated
Unregulated
Family, friends and self
Excluded
Exploiting the “demographic dividend”: MAP finds that in Thailand and Myanmar adults use savings and credit to invest in their human capital Building human capital
Demographic dividend Percent of total adult population
Myanmar
Thailand
28%
30% 25% 20% 15%
17% 11%
10%
13%
6%
6%
7%
6%
5% 0% Save for a medical emergency
Use credit for a medical emergency
Save for education expensense
Use credit for education expenses
Convergence of growth and financial inclusion policy approaches Broad-based growth Human capital and innovation Export- led growth Investment-led growth
Financial inclusion approaches
Equitable growth policies
Microfinance Financial Access
Financial Usage Financial Inclusion and the real economy
Economic growth approaches
CONNECT WITH US
Feisal Hussain Senior Regional Technical Advisor, Inclusive Finance (Asia) and SHIFT Programme Manager UN Capital Development Fund Asia Pacific Regional Office [email protected] www.uncdf.org/shift
This initiative is supported by the Australian Government
