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Asean urged to use financial literacy strategies
Publication Date : 11-09-2013
Asean can use the three I's; Innovation, Inclusion and Integration; to help build financial literacy strategies, according to Asian Development Bank's (ADB) vice president Stephen Groff.
Goff highlighted this as he underscored the importance of financial literacy to financial stability both in advanced and developing economies.
In his keynote presentation yesterday at the Asean Financial Literacy Conference, he emphasised the three 'I's', a vision promoted by ADB's president Takehiko Nakao for Asia-Pacific to achieve sustainable and inclusive growth, adding that all three I's are central to building financial literacy across the region, particularly for those still relying on informal finance.
Groff said that the ADB is committed to deliver comprehensive support to this process through financial inclusion, literacy, and education.
He added that ADB has extensive experience in financial inclusion in Asia, including capacity building and consumer protection.
"We have been very active in financial inclusion, which includes microfinance and SME finance and leasing. We have approved 121 projects amounting to US$2.59 billion for microfinance and 92 projects worth $1.5 billion for SME finance and leasing, which includes public sector loans, technical assistance, grants, and non-sovereign operations," he said.
"As innovation allows for more inclusion and better integration, clearly our experience in acknowledging financial literacy as a fundamental prerequisite for successful microfinance or micro insurance projects means our own approach is constantly evolving," Groff added.
Innovation is at the forefront of the drive toward financial literacy in the region, he said, whereby services must be offered outside traditional channels to reach a wider customer base.
"In many cases, it is non-bank innovation that has led the way in bringing the message across to traditional financial vendors," he said.
He cited examples of two mobile phone financial services introduced in the Philippines; the bank-based Smart Money and the non-bank based G-Cash system, which both received initial authorisation to launch from the Central Bank despite little regulation in place.
"The Bangko Sentral chose to allow a carefully controlled pilot phase to test different business models, and used the results to innovate relevant and effective e-money regulations. These now address the risks arising from new mobile channels and allow a variety of models to flourish, while maintaining the safety and soundness of the system," he said.
"The central bank maintains an open dialogue with industry and civil society to foster an environment conducive to innovation. Part of that is creating the right risk protection instruments for those new to financial access," he said.
He also said that the Philippine government, together with the ADB-administered Japan Fund for Poverty Reduction and German International Cooperation, are working to enhance financial literacy on micro insurance, especially for the poor.
"Unaffordable and inadequate insurance products, informal insurance schemes, and low appreciation of micro insurance are some of those hurdles Asean countries face," he added.
On inclusion, he said, the nine G20 Principles for Innovative Financial Inclusion together form a set of conditions conducive to drawing in those currently isolated from financial systems, while safeguarding financial stability and protecting consumers. Groff said that 70 to 80 per cent of adults in the region still remain outside the formal financial system.
"Encouraging banks to service rural and far-flung regions, continuing efforts to promote and expand microfinance, building outreach programs, working through local governments and community organisations are all ways to communicate the value-added of financial inclusion," he said.
On Integration, Groff said, cooperation continues through many global and regional forums, starting with the G20's response to the global financial crisis.
He cited examples such as the Alliance for Financial Inclusion (AFI), a global network of financial policymakers from more than 80 developing and emerging countries working together to increase access to appropriate financial services for the poor, as well as The Consultative Group to Assist the Poor, a consortium of 33 donors with the common goal of advancing access to financial services for the less privileged.