G20 targets financial services for the poor

There was plenty of news out of Toronto June 26 to 27, 2010, when finance leaders and central bankers from the 20 largest economies gathered to map out strategies for addressing financial crises around the world.

If you were just following general news reports, however, you may not have learned that the Group of 20 (G20) also cast a set of principles it expects to underlie new and emerging initiatives to boost access to financial services among the world's poor.

The G20 consists of central bankers and other finance leaders from all of the major developed countries, as well as several nations with aspiring economies, such as China, India, Korea and South Africa. Its new principles offer a foundation for policies and regulations that promote financial inclusion through innovative uses of technology, like mobile phones.

"The G20 Principles for Innovative Financial Inclusion encourage policymakers to harness the potential of new approaches, such as branchless banking to reach the more than 2.7 billion people globally who are unable to open a bank account, get insurance or receive loans that would help them to save for the future and invest in their homes or businesses," said Alexia Latortue, Acting Chief Executive Officer at Consultative Group to Assist the Poor, in a statement endorsing the G20's efforts.

CGAP, a Washington-based policy and research center focused on banking the unbanked, helped to lay the groundwork for the G20's policy considerations regarding microfinance.

Nine central objectives

The document sets out nine core principles that G20 members agree must be at the heart of successful financial inclusion initiatives:

1. Leadership in the form of broad-based government commitments
2. Diversity in terms of products, competitors and delivery channels
3. Innovation at both the technological and institutional levels, especially in addressing infrastructure weaknesses
4. Protection in the form of comprehensive rules that balance the needs of governments, providers and customers
5. Empowerment through both financial literacy and financial capability
6. Cooperation within and between government, the private sector and other stakeholders
7. Knowledge in the form of evidence-based policy and test-and-learn approaches acceptable to regulators and service providers, alike
8. Proportionality, in other words, a regulatory framework that places equal emphasis on reducing risks and the benefits of innovations, and recognizes gaps and barriers in existing regulatory structures
9. A framework that reflects international and domestic standards, incorporates efforts to control money laundering and a clear regulatory regime for electronically stored value, and market incentives to support long-term goals like interoperability and interconnection

In issuing a communiqué regarding the principles, the G20 explained that the principles are not "a rigid set of requirements but are designed to help guide policymakers in the decision-making process." The G20 said it will now formulate concrete action plans for consideration at the next G20 Leaders Summit in Seoul, Korea, in November 2010.

Editor's Note: Editor's note: This story was published by InsideMicrofinance.com June 29, 2010, reprinted with permission. © 2010 InsideMicrofinance.com. All rights reserved.

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