The 2017 Global Policy Forum for financial inclusion held in Egypt was a milestone for Arab countries. The first GPF in the region witnessed the launch of the Financial Inclusion for the Arab Region Initiative (FIARI) which aims to empower these countries on the path to sustainable development. Policymakers from the region, as from beyond, deliberated on the nexus of financial inclusion and SDGs, which they increasingly seek to strengthen.
Among many significant issues debated by the global and regional community at the GPF was the link between financial inclusion and the UN’s sustainable development goals (SDGs), a link first acknowledged by the UN General Assembly in 2015. The topic is particularly relevant given that all AFI member countries are among those that endorsed the UN SDGs and more than half of these countries either already have an effective national financial inclusion strategy (NFIS) or are currently developing one.
The panellists* in the session on the link between NFIS and the SDGs were diverse in their experience and institutional background. They corroborated the vital role of financial inclusion in facilitating the achievement of a number of the SDGs.** Inclusive finance is referenced in seven of the 17 SDGs. A better link of NFIS with SDGs would allow stakeholders to maximize financial inclusion outcomes and impact on sustainable development at the country level in a systematic manner – including through policy commitments, an enabling regulatory environment and infrastructure, product innovation, financial consumer protection and capabilities, and data.
The discussion revealed different perspectives on how NFIS can best contribute to achieving the SDGs; the challenges policymakers face in integrating the SDGs into NFIS, and how they can overcome them. The panellists pointed out guiding principles for countries committed to using financial inclusion strategies to advance sustainable development while balancing the objectives of a financial policymaker and regulator, i.e. inclusion, financial stability, protection of clients, and the integrity of the financial system.
- First, a NFIS needs to consider the interlinkages of different SDGs in its specific context and leverage on them. This may reinforce the impact of financial inclusion on sustainable development in the country. For example, the goals on economic growth, gender equality, climate action and elimination of extreme poverty may be the most relevant cross-cutting SDGs in the case of Jordan.
- Second, given that NFIS are about “choosing what to do and what not to do”, prioritization of goals and interventions are key. The SDGs represent a global agenda. Yet, there may be regional or national differences in terms of what merits priority. The allocation of limited resources also warrants a selective approach particularly at early stages.
- Third, “quality” often plays a more nuanced role. For example, instead of more employment, a vast majority of countries may want “more and better” employment as vulnerable employment still accounts for over 46% of total employment globally affecting nearly 1.5 billion people. This most likely is relevant for countries, like Jordan, that host large refugee communities.
- Fourth, data not only allows policymakers and market players to act meaningfully and sensibly in the financial inclusion of diverse segments with different needs, but also to measure progress and impact along the way. Impact should be the benchmark for success.
Linking NFIS and the SDGs is not a straightforward task. It tends to multiply the challenges of sustainable financial inclusion. Financial policymakers and regulators would have to coordinate with a diverse set of new stakeholders, with whom they have not had close relationships before. This may increase the challenges in inter-agency coordination. New and more public-private partnerships would be needed. New political economic issues could slow down the formulation and otherwise smooth implementation of NFIS.
The panel discussion made clear that there is a need in the current global, regional and national landscapes to link NFIS and the SDGs. Maximizing the contribution of financial inclusion to the SDGs may be a daunting task. Countries would have to put much efforts into innovative, yet prudent approaches to meet the new challenges that this task brings along; and to promote leadership committed to rigorous collaboration with a range of stakeholders. The reward, however, would be an impact on development that really matters.
By Dr. Nimal A. Fernando, Consultant, and Atilla Kaiser-Yuecel, Central Bank Advisor, GIZ Jordan