February, 04 Thursday 2021

Opening remarks by Dr. Alfred Hannig

Warm greetings to all and welcome once again to to this virtual Leaders PPD Roundtable, thank you for joining us.

We are grateful to AFI Leaders, as well as the Leaders of our private sector partners, for being with us today and for your institutions’ active involvement in the Public-Private dialogue initiatives still to come.

Start with where we were just one year ago and how the duration of the current crisis, nor the extent of its impact, hardly could have been predicted even such a short time ago.

In short time, the crisis revealed numerous gaps, bottlenecks, and weaknesses that before were either neglected, or underestimated. Healthcare systems were unprepared for servicing so many patients at a time. Outdated cash-based social assistance payment systems undermined efficiency of financial aid distribution at time of “stay-home” restrictions. Many business models (i.e. based on charging cash-in/cash-out operations, group-lending, and others) became less sustainable in light of policy measures imposed to counter fight COVID-19.

The evidence is also mounting up that COVID-19 has exacerbated inequalities. Those on low incomes and in informal work, women, youth, less-skilled workers, forcibly displaced communities, micro, small and medium enterprises (MSME), have neither the safety nets nor financial resilience to fall back on. They face mounting risks.

Developing and emerging countries are among the hardest hit by the economic consequences of the COVID-19 crisis in the medium to longer term, with negative affects likely to last longer than in developed economies.

The international architecture has been considerably less successful in forging a coordinated global response to the pandemic, compared to the higher levels of international cooperation in response to the global financial crisis of 2007-8, which has created additional challenges.

Yet, AFI quickly responded with targeted, needs based and member driven COVID-19 Policy Response, developed and shared through AFI’s cooperation model with its open, transparent, bottom-up approach.

However, the pandemic also led to a number of positive consequences. During  2020, digital transformation accelerated faster than we could have imagined. We also observed a growth of account ownership across the Network – for example, the number of new accounts in BCEAO member states increased about four-fold, with similar levels being seen regarding mobile money usage in Rwanda. Overall, the crisis made it obvious that financial inclusion is not only about access to a bank account but also about strengthening financial resilience.

AFI members have been and continue to be at the forefront of the technological transformation. What we have learned and achieved over the past decade allowed us to implement the responses, with a hope and belief that we can master the outcomes of this crisis. These lessons already provided a silver lining of opportunities that are put to work to tame negative effects on our hard-won gains in inclusion. Many policymakers have introduced policies and regulations to both mitigate the immediate impact of the COVID-19 crisis and to support an inclusive and sustainable recovery. For example:

1. The Bangko Sentral Pilipinas reduced rates and took special measures to expand liquidity in the banking sector in order to ensure a continued flow of credit to the real economy and to MSMEs, as well as encouraging the use and adoption of digital payments for transactions.
2. Members such as the Bank of Thailand and SBS Peru, which had invested in interoperable digital payments platforms, were able to leverage these to deliver large scale emergency social transfer programs, with special measures taken to ensure reach into the informal sector.
3. Recognizing the adverse impact of the pandemic on gender equality, the Bank of Ghana employed digital means of cash transfers to women and other vulnerable groups under the Livelihood Empowerment Against Poverty program, which uses biometric e-switch cards and mobile money interoperability platform.

These innovative policy responses by AFI members have already had profound impact on the lives of the unbanked populations in their countries. We have seen that innovative financial inclusion policies which harness the transformative potential of digital technologies have played a key role in the crisis response by facilitating large scale digitally delivered social welfare and providing a lifeline for MSMEs. Developing countries which have invested in recent years in digital payments infrastructure such as Digital IDs and interoperable payments systems, coupled with targeted incentives and flexibilities enacted after the onset of COVID-19, have reaped the benefits in terms of catalytic growth in digital financial services.

Unfortunately, the COVID-19 is not over yet, and travel and movement restrictions remain. While the pandemic continues to generate shockwave after shockwave prolonging and deepening respective economic crisis, a year-long COVID-19 experience gives us sufficient substance to make strategic and thoughtful reflections and outline practical guidance for 2021 and beyond thus unfolding the initial meaning of the term “crisis”. The term “crisis” was derived originally from Greek verb κρίνω {pronounce – krinō}, which means “distinguish, choose, decide”. Indeed, we need to distinguish practical insights and the best practices that appeared in 2020, choose the best options and opportunities that crisis revealed, and decide how to approach these opportunities together to ensure an inclusive and sustainable recovery.

Though the role of technology for the future of financial inclusion and broader recovery is obvious, let us deliberate with a bit more depth and keep in mind the following three observations:

1. First, it is evident that the brunt of the effects of demand and supply disruptions will continue to have effect on our economies and mostly the disproportionately financial excluded population. However, it is important to note that men and women have been impacted by the crisis in different ways and we need to ensure that the recovery efforts that are put into place take these differing needs into accounts as a one size fits all approach will not be effective.
2. Second, to mitigate the impact of the pandemic and accelerate economic recovery, we need a holistic, coordinated, and practical actions by policymakers and private sector partners instead of simplistic conclusion.
3. Third, challenges brought by the pandemic are unprecedented and extremely costly, but they resulted only in 8 percent reduction of greenhouse gas emission worldwide. Climate change crisis would be much worse, longstanding, and painful than COVID-19 because there is no “vaccine” against it.
4. Fourth, while digital technology has a significant role in the broader recovery and sustaining financial inclusion, challenges still exist on digital divide affecting the disadvantaged and disproportionately financial excluded population, who need access to basic financial services. The movement restrictions during the pandemic worsen them as they heavily relied on cash transactions. The challenge also applies to some MSME’s with low investments space for technology. These challenges require our concerted efforts through policies and regulations that focus on bridging the digital divide.

Dear Leaders of AFI members and private sector partners, COVID-19 is an unprecedented challenge for everyone. At the same time, it is a unique chance to build a ‘new economy’ that will be more inclusive, green, and resilient. To turn opportunities into efficient actions, there is need to distill and learn the lessons brought by COVID-19 in 2020. We need to further strengthen and leverage likeminded partnerships, including with private sector innovators who are with us at this event, to shape the future today.