Good afternoon. Thank you, Tobias, and thank you all for joining us on this busy day.
This panel combines a long-term focus of the Fund’s work—central banking—with one of the policy challenges of our era—inclusive growth. This is where regulation and supervision can play a crucial role addressing the problem of inequality.
It’s a timely topic because the IMFC communique today called for policies to achieve inclusive growth through the promotion of opportunities for all.
Let me begin with a point about the work of central banks, and then I’ll offer some observations on financial inclusion.
Ensuring the healthy provision of credit while maintaining price stability and financial stability is among central bankers’ core objectives. But the rapid evolution of banking to enhance financial inclusion is presenting new risks.
Our research suggests that risks to financial stability increase when access to credit is expanded without proper regulation and supervision. Unfortunately, countries with the biggest gaps in access to the financial system also tend to have the lowest supervisory quality. So, investing in high quality supervision can pay big dividends as financial inclusion expands.
How big are the potential dividends? More than two billion people worldwide are still unbanked. Most are in the developing countries, but the problem exists in the advanced economies as well.
Many small businesses cite lack of access to credit as one of the main constraints on their growth. Women across the globe are denied access to financial services that could transform their lives. All of this means higher levels of unemployment or under-employment, and clearly means sub-optimal growth.
Recent Fund research underscores the micro- and macroeconomic importance of financial inclusion. Our staff compared countries with different types of financial access points such as automatic teller machines. They found that greater financial inclusion can make a 2-to-3 percentage point difference in economic growth
We know there already has been substantial progress. The rapid expansion of the middle classes in emerging market and developing countries over the past two generations has been accompanied by a proliferation of financial services and with a deepening of financial markets.
New digital platforms have come to play a very important role in spreading financial inclusion. Many of you are familiar with the rapid growth of mobile banking in countries like Kenya. Data from the Fund’s Financial Access Survey lists 17 economies in Sub-Saharan Africa where the number of mobile money accounts exceeds the number of depositors in commercial banks.
When I visited Kenya, I saw firsthand that mobile banking opens the door to all kinds of new opportunities. A company there has developed a program to electrify homes beyond the reach of the grid, providing solar panel technology to generate electricity, which people pay for on credit over their mobile phones.
Now, hundreds of millions are gaining access to the market economy in places where physical banking infrastructure is limited or absent. The transformative potential of marrying cell phones and banking cannot be underestimated—as anyone who spends time in developing countries is now able to see for themselves.
There are areas in which central bankers and other regulators can enable a major transformation—while also retaining their control over financial stability.
This involves the creation of regulations for the institutions, services and products that all support inclusion. It also means taking into account the risks that new financing opportunities present for providers and consumers, including consumer protection laws.
It also requires a financial architecture that facilitates the provision and sharing of appropriate information—for banks, access to information on borrowers; for consumers, it means facilitating the spread of financial literacy, particularly in developing countries.
Finally, central banks can foster an environment supportive of inclusion by enabling a level playing field for competition. This is important where institutions providing similar services are proliferating—for instance, with the competition between banks and nonbanks.
I am sure that our panelists will have much more to say on these matters.
Let me conclude by saying that the IMF will continue to deepen our work in this area. These issues are part of our analysis and policy work with our membership. They are important to our research into inclusive growth, and are a growing area of our capacity development efforts.
But it is the work of each and every country at the end of the day that is most vital to this effort. Thank you very much.