Loi Bakani: The inclusion imperatives - advancing policies, targets
and plans
Keynote address by Mr Loi M Bakani, Governor of the Bank of Papua New Guinea, at the
AsiaPacific Financial Inclusion Forum on "The Inclusion Imperatives: Advancing Policies, Targets and
Plans", Tokyo, 27-28 June 2018.
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Acknowledgements
Chul Ju Kim, Deputy Dean of the Asia Development Bank Institute;
Nobuhide Hayashi, Chairman of Mizuho Bank and Co-Chair of the Finance and Economics
Working Group of APEC Business Advisory Council (ABAC);
Annmaree O'Keeffee AM, Chairperson, Foundation for Development Cooperation (FDC),
Michelle Curry, CEO of the FDC,
Senior Government Officials,
Industry Experts,
Distinguished Delegates of the APEC economies,
Development Partners & Ladies and Gentlemen;
Good morning,
Let me acknowledge the Foundation for Development Cooperation, and the co-conveners of this
summit, ABAC and the Asian Development Bank Institute (ADBI) for bringing us together, to
continue discussing financial inclusion in a holistic way.
Evolving Regional and Global Initiatives for Financial Inclusion
Distinguished guests, effective financial inclusion is critical to drive an inclusive development that
has a positive impact for people at the grassroots. As we all know, 2018 is Papua New Guinea's
year as APEC chair and there has been a need for APEC economies to cooperate to bring forth
policy outcomes that reflect the aspirations of APEC collectively and meet the high expectations
of the people in our economies. PNG's focus is on achieving increased understanding in APEC
towards advancing trade and economic policies that secure regional integration inroads; ease
connectivity bottlenecks and structurally promote more inclusive and sustainable growth. PNG
through the Finance Ministers Process has been able to champion financial inclusion. I see this
forum as an important opportunity to engage in high level dialogue to review current trends,
recent achievements, ongoing challenges and opportunities relative to financial inclusion and
inclusive growth for the region.
To complement our various national level financial inclusion initiatives, there have been a number
of global initiatives aimed at increasing financial inclusion. Over 40 countries have set targets for
financial inclusion in the past two years, through platforms like the G-20 Financial Inclusion Peer
Learning Program (PLP) and the Alliance for Financial Inclusion's (AFI) Maya Declaration.
Complementary alliances at the private sector level or topical level (such as alliances focused on
improving electronic payments systems) provide an additional engine for framing and motivating
countries to strive for high financial inclusion goals. The 2030 Agenda for Sustainable
Development recognises that eradicating poverty in all its forms and dimensions, including
extreme poverty, is the greatest global challenge and an indispensable requirement for
sustainable development.
The APEC Finance Ministers have set a clear objective for this Forum which is "to identify
the underserved. Now in its 8 year, the Forum is taking a distinctive approach by broadening
the view on financial inclusion as an enabler of inclusive growth and development with a strong
focus on implementation as reflected in this year's theme: "A Call to Action- Advancing Policies,
Targets and Plans."
Wealth Creation
You will recall, in August 2017, FDC hosted the Wealth Creation Roundtable in Port Moresby,
Papua New Guinea to discuss strategies for 'Wealth Creation' across the Pacific region. The
question addressed was the definition of Financial Inclusion to be broadened so that the demand
side needs are a more vital contribution to the supply side focusing more on the positive
contribution to people's lives, wellbeing and prosperity as opposed to what solution we want to
sell them. Essentially highlighting that financial inclusion needs to be more than just accessibility
and affordability, it is about achieving secure financial outcomes in the form of assets and
protections, where wealth building is the aim, and for wealth transfer the inflexion point in
sustainable poverty reduction inter-generationally. In PNG and in other economies, reports show
that access to a bank account does not drive usage however mere access to a bank account
'counts' as being financially included. After reviewing PNG's first national financial inclusion
strategy, two priority areas were added on, that is, the Informal economy including agriculture
and the Resources Sector, recognizing the need to leverage opportunities and advance financial
inclusion within the resources sector and enhance access to and usage of finance for
enterprises in the informal economy including agriculture.
As such, the need for 'Asset Building' policies and programs as an extension of the focus on
financial inclusion of the poor, was highlighted in that 2017 roundtable forum. A means to
generate Wealth Creation can be to define the investment opportunity for superannuation funds
into the micro banking sector. There is currently estimated to be over USD 30 billion within
superannuation/provident and sovereign wealth funds in the Pacific countries, making these
funds some of the largest financial institutions in the region. Well leveraged, these funds can
offer significant potential for long term and sustainable economic growth; however, many
countries struggle to realise the opportunity latent within this financial base.
Structural Reforms
Creating the structural and institutional environment in terms of economic policy that addresses
pathways to optimise the investment and utilisation of these funds is important. Utilising and
leveraging better financial returns to support and direct Asset Building outcomes requires
cooperation across an interdisciplinary eco-system but the benefits - economically, socially and
morally - make the undertaking worthwhile. For example, in most developing countries, the
informal sector represents between 30-35% of GDP, while it is estimated that the "dead capital"
residing in untitled poor dwellings globally is worth more than USD10 trillion.
To address this, policy reforms are often considered as ways to strengthen markets and
stimulate growth. Throughout the forum, you will look to develop mechanisms in creating the
structural and institutional environment in terms of economic policy that achieve financial and
economic inclusion and addresses pathways for the vulnerable or unserved community to
accumulate productive assets.
While these topics contain several key issues for which reforms are necessary to stimulate
growth within the finance sector, they often lack enough consideration of the necessary actions
which will have the greatest impact on marginalized population segments; namely low income or
rural communities and those operating outside of the formal financial sector. While discussions
on reforms for government securities and capital markets have in the past included specific
reference to the informal sector, reforms or actions that would specifically address this core
group of stakeholders have been limited.
This situation highlights the opportunity to revisit how Wealth Creation or Asset Building can
effectively be applied to the informal economy. As the host of APEC and on behalf of all Pacific
island countries, PNG would like to accentuate the issue of Wealth Creation as a driver for
economic development calling for high-level policy dialogue and stakeholder cooperation and
reforms in key areas such as government capacity, collection of consumer data and creating an
enabling environment for the development of online or digital financial products and services.
These issues should be further aligned with broader reforms related to the investor base,
regulatory frameworks and market infrastructure focused on the goal of accelerating inclusive
economic growth.
Women's Economic Empowerment
If we agree with the adage that "a rising tide will lift all boats", then a deeper focus on programs
and policies that increase the participation of people in the informal economy to build productive
assets, and portfolios of financial securities through products such as savings and insurances, is
vital. Women are critical part of the informal economy and make enormous contributions to the
economy. Investing in women's economic empowerment sets a direct path towards gender
equality, poverty eradication and inclusive economic growth. While I have been encouraged by
our progress in Papua New Guinea of women led micro-businesses, increased women with
bank accounts and increased women recipients of financial literacy training - but more must be
done. It is not just about having a gender specific numerical target of additional bank accounts -
it's important that structural reforms enhance women's roles and contribution to the economy.
Development Finance, SDGs and Financial Inclusion in the Region
Let me draw your attention to the links between development finance, the Sustainable
Development Goals (SDGs) and financial inclusion in the region. Global experience shows that
financial inclusion has a significant impact on lifting the ultra-poor and poor out of poverty in a
number of countries, and the Asia-Pacific is no exception. Financial inclusion plays a critical role
across a range of sectors vital to sustainable development. The Pacific Forum Leaders SDGs
Roadmap, seeks to ensure that member countries and development partners are able to deliver
on the SDGs. Central to the success of the Roadmap is country ownership and a specific focus
on SDG 17, which looks at the means of implementation - including partnerships and secure
development finance for the attainment of the SDGs as a whole. The key tenets of financial
inclusion overlap significantly with the current regional agenda on financing for development.
Development financing, which includes climate and disaster finance, combined with financial
literacy and financial empowerment is crucial to mobilise finance for development and adaptation
initiatives across the region. Pacific Island Countries require additional finance for long-term
development, on top of the required resources to address sudden economic shocks and
extreme weather events. Distinguished guests will note for instance that recent cyclones in the
Pacific region in Fiji, Samoa, Tonga and Vanuatu, have on average wiped out around 30-60 % of
the national economy. A devastating impact by anyone's measure.
In recent years, Forum Economic Ministers have decided to look at innovative financing solutions
for regional and national initiatives - including the use of resources within the region, such as our
superannuation funds and excess liquidity in the banking sector. Of course, such proposals are
still under development. Furthermore, development partners and private, public partnerships and
collaborations are looking into options for increased accessibility to climate and disaster finance,
including policy advice on contextualised financial instruments. So, while we continue to develop
innovative development financing options at the regional level, attention is also required to
address the concerns of those at community level and small and micro business owners.
Financial inclusion initiatives which are being considered across our region to mobilise
microfinance and insurance, ensure better use of remittances, credit and savings through
financial literacy, as well as embrace fin-tech solutions to reduce the transaction costs of access
to finance will help build a stronger microeconomic foundation for a more holistic, resilient and
sustainable development for our countries. In addition, global initiatives such as micro-insurance
for healthcare, life, crop and livestock are being piloted or are planned for roll out in the Pacific. I
hope that these initiatives can eventually be offered and implemented on a full scale where such
services are desperately needed to improve livelihoods. I look forward to the discussions that
we will have on these initiatives in the next two days.
The Future of Financial Inclusion in APEC
Throughout this Summit you will look to develop innovative mechanisms to ensure greater
financial inclusion for our people in the APEC region. I would like to leave you with three
proposals. First, I urge you to consider priority areas of structural and regulatory reform to
promote financial inclusion. Reflect on schemes that encourage and incentivise the development
of gateway products, removal or reduction of processes that are barriers to inclusion, and
investments that build long term prosperity for the region's vulnerable community. Second, I
urge you to explore leveraging digital platforms and mobile technologies to enable opportunities to
create and monetize non-traditional assets also taking into account the role of data and
consumer protection. Third, I encourage you to consider the role of women in economic
inclusion and what more can be done to push for progress or harness their influence in financial
and economic reform.
Conclusion
Distinguished Delegates, in closing let me thank the Foundation for Development Cooperation,
and the various development partners for your continued support in promoting financial inclusion.
Your discussions are to focus on issues that are at the very heart of sustainable development
and poverty reduction. These are not trivial matters, but are issues upon which the lives of many
depend. I wish you well in your deliberations, and urge you to take on your tasks with energy,
knowing that you contribute to the welfare and benefit of our people - particularly those who are
in most need of support.