As emerging Asia aspires towards achieving higher levels of income and living standards, a different path from that which led the way for many advanced economies will need to be considered. The global financial crisis and the Asian financial crisis have provided us with many important lessons that should form the underpinnings for the development of a sound economic and financial policy framework. Such a framework must effectively combine strong regulation and market discipline to reinforce financial stability. The recent crisis has shown that markets cannot be exclusively relied on to rein in excesses. A broader perspective of regulation that looks beyond individual institutions is also essential to identify the build-up of system-wide risks. Equally, financial institutions need to consider how to meaningfully include such system-wide perspectives in their approach to managing risks in their respective institutions. Public policy also has a crucial role in promoting economic development that benefits society at large, and that addresses the disproportionate social welfare effects of a financial crisis on the most vulnerable groups of society, including low-income households, retail consumers and small businesses. Specifically, policies that protect the core savings of these groups, promote financial inclusion and contain excessive leverage should also form an integral component of the resolution and reform agenda. Given the high costs of financial crises there is now a better appreciation of the need for such policies to co-exist with free markets, working to efficiently allocate economic capital to achieve more sustainable outcomes.

This can be seen from recent evidence of financial institutions in the region that have successfully adopted “double bottom line” strategies that combine enhanced financial access goals with profitability, thus enabling the financial inclusion agenda to be achieved in a responsible and sustainable manner. Institutions in several parts of Asia have been effective in utilising innovative means of outreach to overcome geographical and cost barriers in delivering essential financial services such as microcredit, affordable insurance, avenues for savings, and accessible payments and remittance services. Governments in the region continue with measures to bridge the gap with the necessary financial infrastructure, developing rules for orderly and responsible business conduct, and catalysing the volume of financial transactions by channelling social transfers, wages or pensions through the formal financial system. Such advancements by the region in financial inclusion contribute towards eradicating poverty and uplifting living standards. As growth in the region continues, it will become even more important to ensure that such growth does not further widen the social divide and disenfranchise those who remain excluded from its benefits. An inclusive growth process in the region, which draws marginalised segments into the formal financial system and that empowers small businesses and consumers already within the financial system to better utilise financial services, will enhance the contribution of this segment of the population to the economic growth process. Fourth, is the greater regional economic and financial integration in Asia which has been supported by strengthened institutional frameworks for safeguarding regional financial stability and a deepening of regional cooperation.