Address by Princess Máxima
Londen, England, 19 June 2007
Financial Inclusion Conference.
Excellencies, ladies and gentlemen,
It is a great pleasure for me to be able to address this special group of people today. I would like to thank my hosts DFID and the Treasury, for inviting me and allowing me to share some thoughts with you as a member of the UN Advisors groups on Inclusive Financial Sectors.
Ladies and gentlemen, by now, research has convincingly shown that a sound financial sector is an essential part of the development process. Financial development and improving access to finance not only accelerates economic growth, but also reduces poverty and income inequality.
Access to a wide variety of financial services and products, such as loans, savings, insurance products and remittances can be a powerful tool to generate income, build capital and protect people against risk. However, as we all know, world financial systems are still not inclusive today. Well over two billion people do not have access to basic financial services and we are here to change that.
Having said that, I must stress that microfinance is not THE solution to the poverty problem. Nor is a small loan always the best way to help a person without resources. Grants and other types of direct support are sometimes better solutions. This is important to remember in the determination of development policies.
The Advisors to the Year of Microcredit, recommended in 2005 that the UN should appoint a group of experts to see the work they had begun through to completion. As a result, the UN Advisors Group on Inclusive Financial Sectors was established last June. This advisory group is formed by a broad international group of experts from private and public sector, practitioners, NGO's, donors and academia.
The key role of the Advisors Group is to advise and guide the UN and its member states on building financial sectors that enable wide access to a diverse range of financial services. Our Advisors group aims also to support, not replace existing initiatives. I am therefore inviting all individuals, organisations and governments to work with us and share their concerns, experiences and solutions. In this field, as in many others, combining and coordinating efforts is key to increase effectivity…and that is probably one of our main tasks.
For me, it is reassuring to see that the Advisors Group, with its broad and diverse composition - some of them here present - did not waste a lot of time agreeing on the direction we wanted to go. We developed plain and simple Key Messages for governments, regulators, development partners and the private sector. I'll quickly take you through these Key Messages displayed on the screen.
For Governments, we feel that their key role is to create a helpful policy environment to allow for the development of a financial system that enables all citizens to buy the financial services they need. Governments should resist the temptation of becoming finance providers themselves. No government scheme has ever reached true sustainability and efficiency, and certainly has not assured greater access. There are however great examples of enabling governments, providing the right environment and removing obstacles. One of those obstacles is interest rates ceilings. We strongly advise governments to invest in a level playing field and consumer education rather than imposing an artificial interest rate. It does not solve the problem, rather destroys the solution.
From Regulators we ask that they establish an enabling environment with the appropriate regulatory framework where a diverse range of institutions can provide financial products and services and where technological innovations can be fostered. Regulators must keep pace with the innovations in the microfinance industry. Sometimes, cutting the red tape is more useful than trying to regulate a moving target like this new financial industry.
For Development Partners, the key message is "do no harm." Their key role is to provide appropriate interventions without crowding out the local private sector. Donors should find their niche in supporting technological development, or go out to those remote areas where the private sector cannot go. Their participation is to ensure that the financial sector becomes strong, competitive and sustainable. Capacity building is key!
And to the Private Sector participants, we say: if we want to reach scale in a sustainable manner, we have to think outside the box about innovative partnerships and collaborations. Local banks have a major task here and can be supported by multinational companies. I have seen many examples of innovative partnerships around the world. In Brazil, banks are working together with pharmacies and lotteries to expand local presence. In South Africa, banks have partnered with supermarkets to facilitate financial transactions. In the Philippines and Kenya, mobile phones are extensively used for banking, Mexico uses cement distributors, etc.
So, a wide variety of private sector participants should be engaged in inclusive financial sectors. Not only direct providers of financial services, but also telecom, technology, rural organizations, retailers, and other companies that support the financial services industries.
Like I said before, it is crucial that regulators closely follow these innovations in the sector. Laws and regulations should allow for original partnerships and unexpected models to grow.
One last thing I want to draw your attention to is the following key message: what is not measured cannot be managed. World Bank research has gathered empirical evidence that suggest financial sector deepening reduces poverty. That is good news, indeed very good news, but we can do more. We really need in-depth financial data to determine the right interventions and substantiate the right policy choices. With reliable and fundamental data we can make a case for businesses to get involved, for governments to stick to the right path and for funders to keep investing in financial sectors.
On behalf of my fellow Advisors to the UN, I ask you, gathered here, to challenge yourself and join us on that extra mile to inclusive finance. We need to make a dent in poverty and help reach the Millennium Development Goals that we all have set together.
Thank you very much.