Governors, Presidents, Superintendents, and Deputies, Ladies and Gentlemen

A warm welcome to this second AFI Leaders’ Virtual Dialogue Series. These are unique times necessitate new forms of engagement with our membership. The Virtual Leaders Dialogues have been organized to ensure that both AFI’s immediate response to the COVID-19 pandemic, and our longer-term outlook, benefit from the strategic guidance of Leaders within the network.

Building on AFI’s existing mechanisms for Regional Initiatives such as the Financial Inclusion Initiative for Latin America and the Caribbean (FILAC) the Virtual Dialogue Series has been organized as a series of high-level regional consultations, to take inputs from all the geographies represented in AFI, recognizing that although we are dealing with a global challenge, the response to this challenge also needs to recognize distinct regional level impacts and priorities.

The Current Operating Environment: The Impact of COVID-19

The COVID-19 pandemic has disrupted business as usual around the world. What has begun as a health crisis quickly snowballed into an economic crisis that threatens to reverse many years of gains in economic growth, poverty reduction, and even financial inclusion. Even those countries that have acted fast to contain the spread of the virus have not been spared from these economic impacts as remittances and tourism have dropped sharply, investment has dried up, and trade supply chains have been affected.

The economic downturn caused by the pandemic has reached emerging and developing economies and analysts and observers assume that the negative effects of this crisis will be more severe than for the developed world. Recently, the IMF has updated its world economy outlook and lowered its global growth forecasts shrinking it by 4.9% for this year. The outlook for developing and emerging economies has also been corrected downwards. In LAC region for instance, the Economic Commission for Latin America and the Caribbean (ECLAC) estimates that GDP could fall in region by 9.1% in 2020. The contraction is driven by expected fall in export; decline in remittances and lower demand in the tourism sector. Furthermore, the crisis has not affected all equally. For instance, women are heavily affected as they are overrepresented in informal sector and the service sector employing about 78% of them in this labour market. Likewise, the MSMEs, youth, migrants, forcibly displaced and other disadvantaged populations have been particularly impacted, as they are often employed in the informal sector and may fall outside the scope of government economic support packages. These disadvantaged groups are characterised by limited savings, capacity to cope with periods of inactivity, and lack access to income substitution mechanisms such as unemployment insurance.

These are the very groups that the AFI network committed to include in adopting the Kigali Statement on the Financial Inclusion of Disadvantaged Groups just last September at the GPF in Rwanda. These groups are more exposed to the virus as many experience living conditions that do not allow them physical distancing, as practiced in many advanced economies. The poor will feel the economic impact of this crisis even more than others.  Poor countries have smaller financial resources to fight dramatic events such this pandemic. The poor are often employed in the informal sector and may fall outside the scope of government economic support packages. As a result, we are facing a real emergency and now more than ever, we have the responsibility to show each other solidarity.

Yet, it has also been heartening to see an extremely proactive response to the COVID-19 crisis by our members in the LAC region. For example:

• The financial sector regulators (central banks, superintendencias and commissions) responded almost immediately to the crisis with: monetary policy interventions; adjustments of policies and regulation; provision of stimulus packages; adjustment of loan provisioning and moratoriums; to ensure the continuing flow of credit to the real economy and to small businesses.
• Many AFI members leveraged digital channels to supply economic support packages of unprecedented scale to workers and small businesses to mitigate some of the worst impacts of this crisis.
• We have also seen specific measure that fully take advantage of digital financial services in the context of lockdowns and social distancing, such as reducing fees for mobile money services, utilizing e-KYC and digital identities for remote onboarding, and removing transaction limits on e-wallets.

Parts of Latin America and the Caribbean have become hotspots of the COVID-19 pandemic. Recovery from the pandemic should be an occasion to transform the development model of Latin America and the Caribbean while strengthening financial inclusion to maintain the stability and health of the economy as well as the well-being of the population.

In this sense, we should consider not only what is the impact of the crisis on financial inclusion, but also what is the role of financial inclusion policies in responding to, and mitigating the effect of this pandemic? Furthermore, how do we grasp the opportunity that arises out of this crisis and move towards responsible and sustainable digital financial inclusion for all?

AFI’s Policy Response

In view of these challenges, AFI has initiated a COVID-19 response initiative to provide support for members, both to design high impact financial inclusion policy interventions, and to support the implementation of such policies.

Through our COVID-19 Policy Response framework and the In-country implementation program, AFI is committed to delivering systematic and effectively coordinated policy responses to help our members both mitigate the effects of COVID-19 on financial inclusion policy implementation in the short-term, and plan systematically for the recovery from the pandemic in the longer term. The Response framework will be presented to you right after this opening by AFI Deputy Executive Director Norbert Mumba and we encourage our leaders to take this opportunity the support the achievement of your financial inclusion goals.

In delivering this Initiative, AFI will also leverage our current partnerships, including funding and private sectors partners, as well as reaching out to new partners, to ensure the availability of sufficient financial and technical resources to support our members in this area.

I am pleased to report back that so far, we have been able to conduct more than 25 technical webinars, reaching out to the membership to provide technical support and receive peer learning inputs on policy responses to address the current challenges.

We are now seeking our members’ views on the key areas where member institutions require support within the scope of this initiative, particularly with regards to policies which target MSMEs and vulnerable populations.

However, we have also invited you to today’s meeting to benefit from your thought leadership for insights on AFI’s Strategic Outlook. This is also with a view on how the recovery phase could not only lead from a recovery to business as usual, but potentially to a more inclusive and sustainable future. Every crisis comes with opportunities, and it is our intention to identify those opportunities to secure our organization’s longevity.

Some commentators of this crisis have been very quick to define the current situation as a “New Normal”. We think that too little is known to justify speaking about the “new normal” at this stage. Too little is known about the virus itself, and there is lack of secured knowledge on how we will be able to manage the health crisis in the future. We recognize the severe nature of the crisis and we are fully aware that for now, we will have to live with insecurities. However, we also have an opportunity to draw the right conclusions from this crisis. One of the biggest opportunities today comes  from the fact that over the past decade financial inclusion has emerged as a tested and proven policy tool that has worked to alleviate poverty and reinforced monetary policy implementation in many countries in the world after the Global Financial Crisis, especially in developing countries. Exploiting this opportunity in a smart way, will allow us to aim for a “Better Normal”, compared not only to what we see right now at the peak of the crisis but also to what we have been used to before the outbreak. I suppose the point I am trying to make is that we should be brave to draw the right conclusions from what we have learned so far.

Today’s discussion on the strategic outlook will greatly assist the Management Unit to design AFI’s in-county implementation support in the most effective and efficient manner possible to support member needs, and usher the organisation to the higher strides as a member driven network. These two topics will therefore be the focus of our discussions in today’s dialogue.

I am pleased to report that our regional office in Costa Rica is expected to be operational in 2021. We express our gratitude to our member in Cost Rica the Superintendencia General de Entidades Financieras (SUGEF) and the Ministry of Economy, Industry and Commerce (MEIC) for accepting to host the regional office. This will be an important step for AFI to be able to efficiently deliver its programs to the region. We therefore look forward for a revitalised FILAC Leaders’ Roundtable with commencement of meetings that will steer escalation of achievement of regional financial inclusion goals.

Moving Forward Together

Following our discussion on the immediate and recovery policy response to COVID-19, and AFI’s Strategic Outlook; we will use the information to tailor in-country policy support and reach out to your technical staff to design the projects; and use the strategic insights for planning of intermediate strategic approaches that enhance members’ value and organisational sustainability; as well as better plan for AFI  Phase IV Strategy.

Thank you once again for taking the time to join us, and I am looking forward to hearing your views.