Speech by Princess Máxima
Moskou, Russia, 14 November 2007
at the VI National Conference "Microfinance in Russia: Building an All-Inclusive Financial System".
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 the Russian Government, the Russian Microfinance Center and the National Partnership of Microfinance Market Stakeholders, for inviting me to share some thoughts with you as a member of the United Nations Advisors Group on Inclusive Financial Sectors.
Ladies and gentlemen, as an economist and former banker myself, I am convinced that a sound financial sector is an essential part of the development process. By now, research has convincingly shown that 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, world financial systems are not inclusive today: well over two billion people do not have access to basic financial services.
Having said that, I must stress that microfinance is not the only solution to the poverty problem. Nor is a small loan always the best way to help a person without resources. Savings, insurance, remittances, grants or other direct support are sometimes better solutions. This is important to remember in the determination of financial policies.
In Russia alone, 60 million people are underserved by the financial system. Nevertheless, the tremendous growth rate of the sector is impressive. The Russian microfinance market has doubled in size over the last year! This means that there is a lot of potential and thus a lot to be done by all parties. The efforts of the Russian government to enable this sector to grow is indeed laudable.
The UN 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. This advisory group is formed by a broad international group of experts from the private and public sectors, practitioners, NGOs, 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 to support, not replace, existing initiatives. I am therefore inviting all organisations and government entities in Russia to work with us and share their concerns, experiences and solutions. In this field, as in many others, combining and coordinating our efforts is the key to increased efficiency…and that is one of our main tasks.
For me, it is reassuring to see that the Advisors Group, with its broad and diverse composition, did not waste a lot of time getting started. We quickly developed some plain and simple Key Messages for governments, regulators, development partners and the private sector. I'll briefly take you through them now.
For Governments, we believe that the key role is to create a helpful policy environment to allow for the development of a financial system that enables all citizens to access the financial services they need. There are great examples of enabling governments providing the right environment and removing obstacles for private initiatives. However, governments should resist the temptation to become direct providers themselves.
For Regulators, we recommend 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 innovations in the microfinance industry, and sometimes, cutting red tape is the most useful thing to do. An all-inclusive financial sector, should be designed carefully so that it meets the expectations of both market players and their clients.
For public and private 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 and Development Agencies should find their niche in supporting technological development, or go to those remote areas where the private sector cannot go. Their participation should ensure that the financial sector becomes strong, competitive and sustainable. Capacity building is key!
And to the Private Sector we say: if we want to reach scale in a sustainable manner, we have to think out of the box about innovative partnerships and collaborations. I have seen many examples of innovative partnerships around the world. In India, banks and MFIs work together to deliver financial services to those in most need. In Brazil, we can see fruitful cooperation between banks and local retailers - such as pharmacies and lottery kiosks - to reach remote areas. In the same way, South African banks have partnered with supermarkets and mobile phone companies to facilitate financial transactions. The potential for mobile phones in particular has been seen already in places as diverse as the Philippines, European Union countries, Southeast Asia and Japan. One of my favourite examples comes from Mexico, which uses cement distributors as a point of access. Certainly, the possibilities are endless given the incredible creativity and imagination of those working on the ground to reach people whose only alternative is hiding their hard-earned cash under a mattress.
This means a wide variety of private sector participants should be engaged in building inclusive financial sectors. I feel that not only traditional providers of financial services, but also ICT providers, post offices and other retail companies can contribute more to improving access to financial services, working in cooperation with financial institutions.
As I mentioned earlier, it is crucial that regulators help, not hinder, these innovations in the sector. Laws and regulations should allow for original partnerships and unexpected models to grow.
One final key message is this: what is not measured cannot be managed. World Bank research suggests that financial sector deepening reduces poverty. That is good news, indeed very good news, but we can do more. We need in-depth financial data to determine the right interventions and policy choices. We need to compare impact over time and across the globe. With better data we can better prove our case so that businesses get involved, governments maintain a supportive role and funders invest strategically.
Ladies and gentlemen, on behalf of my fellow Advisors to the UN, I ask you, gathered here, to challenge yourselves to make a much larger dent in poverty and help reach the Millennium Development Goals that our countries committed to together.
Thank you very much and I wish you a very fruitful two days of discussion.