Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa International Monetary Fund African Department Financial Development, Financial Inclusion, and Growth in Africa ECOWAS Regional Roger Nord Conference, Dakar, Deputy Director Senegal, African department IMF September 20, 2016 Outline 1. Financial development and growth a c a de e op e t a d g o t 2. Financial inclusion in Africa 3. The role of technology: Lessons from Kenya 4. Policy implications ECOWAS Regional Conference Dakar, Senegal 1
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa Financial development has supported growth and reduced its volatility in sub- g y Saharan Africa Long-Term Impact on GDP of Relaxing Financial Constraints 25 Reducing borrowing constraints Percent change in GDP Reducing participation costs 20 Increasing intermediation efficiency 15 10 5 0 Kenya Mozambique Nigeria Uganda Zambia CEMAC WAEMU Sources: Dabla-Norris and others (2015); IMF country staff reports; and IMF staff calculations. Note: CEMAC = Economic and Monetary Community of Central Africa; WAEMU = West African Economic and Monetary Union. 3 Access varies significantly across SSA Account used to receive Account at a formal financial wages (% age 15+), 2014 institution(% age 15+), 2014 Source: Findex. ECOWAS Regional Conference Dakar, Senegal 2
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa The Role of Technology: Mobile Financial Services have significant potential in sub-Saharan Africa Roughly 1 billion people have a SSA Africa leads the way fin Mobile banking helps reach the mobile phone but no bank account the adoption of mobile unbanked (CGAP) banking 70 Percent of population, age 15+ 60 50 40 30 20 10 0 Burundi Mauritius Togo Guinea Cameroon Congo, Rep. Benin Nigeria Burkina Faso Malawi Niger Madagascar Sierra Leone Senegal Gabon Congo, Dem. Rep. Namibia Mali Zambia Ghana South Africa Rwanda Botswana Zimbabwe Côte d’Iv oire Tanzania Uganda Kenya 5 The Role of Technology: Lower transaction costs Mobile money use has expanded rapidly… …thanks to low transaction costs. 6 ECOWAS Regional Conference Dakar, Senegal 3
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa Case study: Kenya The Rapid expansion of transfers … Kenya shows one of the highest share of …to a large extent because of the success in population with access to financial services after making mobile-phone payments available to its South Africa… population. Regional Comparison of Financial Access South Africa 2013 79 5 16 Kenya 2016 75 7 17 Namibia 2011 70 3 27 Zimbabwe 2014 69 8 23 Lesotho 2011 61 20 19 Botswana 2009 59 8 33 Tanzania 2013 58 16 26 Uganda 2013 54 31 15 Swaziland 2011 50 13 37 Nigeria 2012 Nigeria 2012 43 43 17 17 40 40 Ghana 2010 41 15 44 Malawi 2014 40 14 46 Zambia 2015 38 21 41 0 20 40 60 80 100 Formal Informal Financially Excluded 7 Case study: Kenya … was rapidly followed by other services The number of deposit accounts (million) and net loans and advances (Ksh billion) have increased too 8 ECOWAS Regional Conference Dakar, Senegal 4
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa Promoting financial inclusion through innovation … Leveraging IT to Expand Services E d S i ● New ● Mobile phone- Platform for new Customers can framework for products save, earn interest facilitated micro payments (insurance and access small payments (including taxes, products, loans utility bills, etc) consumer finance) 9 Promoting financial inclusion through innovation … Facilitation factors R Rapid expansion id i of mobile phone use Exploit technology for service improvement Willingness to penetrate new markets Design of government policies g g p • Allowed parallel payment system • Secured customers funds More financial products to low income HH 10 ECOWAS Regional Conference Dakar, Senegal 5
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa Promoting financial inclusion through innovation … Innovative Financial Instruments : Support Infrastructure Credit Reference Bureaus Credit Reference Bureaus Reducing cost of doing business - Build information capital, reduce information search costs and problems associated with information asymmetry; and extending credit based on financial identity. This allows change in the collateral technology in use. So far CBK has licensed 3 credit reference bureaus. Consumer Protection The missing link in financial inclusion and innovation – encouraging transparent disclosure, fair treatment, dispute i di l f i di resolution and financial education/awareness and costs. 11 Conclusions Financial inclusion: critical role in sustainable development, Financial inclusion: critical role in sustainable development, reducing poverty, boosting shared prosperity Technology offers significant scope for rapidly expanding access to financial services, notably for households and SMEs Governments should focus on providing a supportive regulatory framework, ensuring competition among providers, and educating & protecting customers. 12 ECOWAS Regional Conference Dakar, Senegal 6
Finance for All: Promoting Financial Inclusion September 20, 2016 in Central Africa Th Thank you! k ! www.imf.org ECOWAS Regional Conference Dakar, Senegal 7
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