Her Majesty Queen Máxima of the Netherlands: Financial inclusion and
education - issues for central banks
Speech by Her Majesty Queen Máxima of the Netherlands, United Nations
SecretaryGeneral's Special Advocate for Inclusive Finance for Development (UNSGSA), at the All
Governors' Meeting, Bank for International Settlements, Basel, 9 November 2015.
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Thank you Mr Caruana and Governor Weidmann for inviting me to participate in this
important gathering at the Bank for International Settlements (BIS), and for your kind
welcome.
Esteemed governors, ladies and gentlemen, I am pleased to be back at the BIS and to speak
about the opportunities and challenges of advancing financial inclusion with central bank
leaders from around the world.
I was last here in October of 2014 to participate in the third highly productive engagement
with the financial standard-setting bodies around financial inclusion. Their commitment to
promoting financial inclusion has never been higher, and their many actions have been
documented in a draft paper that will be presented to the upcoming G20 summit in Antalya,
Turkey. This is the second white paper from the G20's Global Partnership for Financial
Inclusion, for which I am pleased to serve as Honorary Patron.
It has been produced in collaboration with the standard-setting bodies and it takes stock of
the evolving financial inclusion landscape; it documents their individual interests, activities
and cooperation in the area of financial inclusion; and sets out priorities for further work.
What do I mean by the term "financial inclusion"? Financial inclusion is about providing
affordable, responsible and sustainable access - which ensures usage-to formally and
professionally regulated and supervised financial services to those who are excluded.
In the past few years it has become increasingly clear that providing individuals and small
businesses with financial services has a powerful role in fostering equitable growth and
furthering vital development goals such as poverty reduction, gender equality, and food
security. This was clearly recognized by 193 UN member states when they adopted the new
2030 Sustainable Development Agenda in New York in September.
We have also seen an increasing recognition of the positive connection between financial
inclusion and financial stability.
A World Bank Global Financial Development Report background paper noted that financial
inclusion can enhance stability through direct and indirect channels1 (2014). More recent
evidence outlined in an IMF staff note - which I have asked to be shared with you today -
shows that greater financial inclusion contributes to financial stability in countries with strong
supervision. This is noteworthy because it does provide us with a fresh perspective on the
long-held view that the risk of financial instability increases when access to financial services
is expanded.
Since 2011, 700 million adults have gained more access to an account at a financial
institution or through a mobile device, according to the 2014 Global Findex report. While this
20% improvement in access in 3 years represents significant progress, there are still 2 billion
unbanked adults - primarily among women, those living in the developing world, and the
poorest 40% of households.
The current business models of mainstream financial institutions are generally not geared to
offering the kind of small-scale savings, payments, lending and insurance services that are
tailored for these excluded households and still profitable for providers.
But this is beginning to change at a rapid pace, driven by digital and other technological
innovations. Individuals in the most remote and poorest regions of the world are becoming
increasingly connected thanks to basic mobile phones. And it won't be long before
smartphones become available to larger numbers of people, even those of very low income,
bringing with them the power of the Internet along with other capabilities hard to imagine
even just a few years ago.
These and other digital technologies are being used more and more to deliver financial
services to people who have been excluded. For example, in many African countries the
percentage of adults who have a mobile money account is already very significant: 58% in
Kenya, 32% in Tanzania, and 35% in Uganda2.
These impressive numbers don't tell the whole story. Mobile money helps local economies
and spurs economic growth, for example by allowing for faster, cheaper and safer domestic
remittances, which are an important economic contribution to rapidly urbanizing developing
countries.
The digitization of retail financial services also enables a broader range of services to be
delivered at far lower cost. Mobile payment histories can be used for data-driven credit
underwriting for self-employed entrepreneurs, small businesses or individuals who lack
traditional collateral. And low-cost, mobile retail payment systems can also enable
smallticket crop insurance or the micro-leasing of, say, residential off-grid solar energy units.
These would not be economically viable with the traditional transaction cost structure of a
cash-based business model.
These developments and other nascent technologically based but largely unregulated
financial innovations - such as fin-tech or crypto currencies - could have a significant impact
on both the financial system and the wider economy, subjects of great interest to central
banks, regulators, and policy makers.
They could affect the ability of the payments infrastructure to accommodate large numbers of
small transactions as well as the emergence of new payment network operators. They could
introduce new competitive dynamics with implications for the efficiency of payment services,
and both opportunities and challenges in pursuing interoperability. And, of course, new
technologies have implications, positive and negative, for financial stability.
Rapid changes clearly point to the need for good banking supervision, regulation and other
measures such as close market monitoring. That will help ensure financial stability as well as
progress on financial inclusion, as successfully demonstrated by many countries whose
central banks are represented here today.
However we have recently witnessed some setbacks in the quest for greater financial
inclusion. The Financial Action Task Force and the standard-setting bodies housed here at
the BIS have called for banks to engage in careful risk assessments. But, as many of you are
already aware, some banks are engaging in what they call "de-risking" - simply ceasing to
engage in lines of business that are seen as potentially high risk relative to their profitability.
The term "de-risking" is problematic because, by cutting off certain clients and thereby
increasing financial exclusion, de-risking can actually increase the risk of money-laundering
and terrorist financing, as FATF has acknowledged. The problem is of particular concern
because of its potential impact on cross-border remittances from migrants to family members
- sums that in many countries dwarf official aid flows. De-risking, if not addressed in a
nuanced fashion, could also negatively impact the ability of small firms to obtain export
finance, or other entities to carry out development activities.
The right balance calls for a proportionate, risk-based approach advocated in the standards
and guidance of the bodies housed here at the BIS.
It is also important to recognize that the potential new customers for these fast-evolving
financial services are, by definition, inexperienced with these tools. While the poor need to be
financially savvy to manage uneven and unpredictable income and expenses, this doesn't
necessarily translate into the capability to make informed decisions about the full array of
financial products.
Many are illiterate or innumerate, giving rise to significant consumer protection challenges
especially in emerging but also in advanced economies.
Again, central banks and other financial regulators and policy makers, have very critical roles
to play to ensure that sound market practices are accompanied by robust consumer
protection and financial education. It is vital that we encourage responsible financial
inclusion.
Furthermore, to understand these fast moving developments and adopt the right policies to
address financial exclusion, we need more and better data. In this regard the influence of
central banks-alongside a growing number of other bodies such as telecommunications
authorities - is vital for highlighting existing data and encouraging the collection of new
indicators to keep us ahead of unfolding developments.
Financial innovations are evolving before our eyes, and we are being challenged to keep up
with them and to manage them properly.
But with the balanced approach their impact on the world's financially excluded could be
tremendously positive.
I look forward to discussing these and other issues highlighted in the note that the BIS staff
has kindly produced for our meeting today.
I hope to hear a lot today from the many leaders around this table, who have made great
strides in financial inclusion. Thank you.