Financial Development, Financial Inclusion, and Growth in ......The missing link in financial...

Finance for All: Promoting Financial Inclusion in Central Africa

September 20, 2016

ECOWAS Regional ConferenceDakar, Senegal 1

International Monetary FundAfrican Department

Financial Development, Financial Inclusion, and

Growth in Africa

Roger NordDeputy Director

African department IMF

ECOWAS Regional Conference, Dakar,

Senegal,September 20, 2016

Outline

1. Financial development and growtha c a de e op e t a d g o t2. Financial inclusion in Africa3. The role of technology: Lessons from Kenya4. Policy implications


September 20, 2016


Financial development has supported growth and reduced its volatility in sub-g ySaharan Africa

10

15

20

25Pe

rcen

t cha

nge

in G

DP

Reducing borrowing constraintsReducing participation costsIncreasing intermediation efficiency

Long-Term Impact on GDP of Relaxing Financial Constraints

3

0

5

Keny

a

Moz

ambiq

ue

Nige

ria

Ugan

da

Zam

bia

CEM

AC

WAE

MU

Sources: Dabla-Norris and others (2015); IMF country staff reports; and IMF staff calculations.

Note: CEMAC = Economic and Monetary Community of Central Africa; WAEMU = West African Economic and Monetary Union.

Access varies significantly across SSA

Account at a formal financial institution(% age 15+), 2014

Account used to receive wages (% age 15+), 2014

Source: Findex.


September 20, 2016


The Role of Technology: Mobile Financial Services have significant potential in sub-Saharan Africa

Roughly 1 billion people have a mobile phone but no bank account

(CGAP)

SSA Africa leads the way fin the adoption of mobile

banking

Mobile banking helps reach the unbanked

0

10

20

30

40

50

60

70

Buru

nd

i

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uri

tiu

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Tog

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ine

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nin

Nig

eri

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Bu

rkin

a F

as

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Nig

er

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gasca

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Sie

rra

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one

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bon

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ngo

, D

em

. R

ep

.

Na

mib

ia

Ma

li

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mbia

Gh

ana

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uth

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ica

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an

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f p

opu

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ag

e 1

5+

5

The Role of Technology:Lower transaction costs

Mobile money use has expanded rapidly… …thanks to low transaction costs.

6


September 20, 2016


Case study: KenyaThe Rapid expansion of transfers …

Kenya shows one of the highest share of population with access to financial services after South Africa…

…to a large extent because of the success in making mobile-phone payments available to its population.

43

50

54

58

59

61

69

70

75

79

17

13

31

16

8

20

8

3

7

5

40

37

15

26

33

19

23

27

17

16

Nigeria 2012Swaziland 2011

Uganda 2013Tanzania 2013

Botswana 2009Lesotho 2011

Zimbabwe 2014Namibia 2011

Kenya 2016South Africa 2013

Regional Comparison of Financial Access

7

38

40

41

43

21

14

15

17

41

46

44

40

0 20 40 60 80 100

Zambia 2015Malawi 2014Ghana 2010

Nigeria 2012

Formal Informal Financially Excluded

Case study: Kenya… was rapidly followed by other services

The number of deposit accounts (million) and net loans andadvances (Ksh billion) have increased too

8


September 20, 2016


Promoting financial inclusion through innovation …

Leveraging IT to E d S i

●Mobile phone-facilitated micro

payments

●●New framework for

payments (including taxes, utility bills, etc)

Customers can save, earn interest and access small loans

Platform for new products

(insurance products,

consumer finance)

Expand Services

9


R id i

Facilitation factors

Rapid expansion of mobile phone

use

Exploit technology for service improvement

Willingness to penetrate new

markets

Design of government policiesg g p• Allowed parallel payment system• Secured customers funds

More financial products to low income HH

10


September 20, 2016



Innovative Financial Instruments : Support Infrastructure

Credit Reference BureausCredit Reference BureausReducing cost of doing business - Build information capital, reduce information search costs and problems associated with information asymmetry; and extending credit based on financial identity. This allows change in the collateral technology in use. So far CBK has licensed 3 credit reference bureaus.

Consumer Protection The missing link in financial inclusion and innovation –

i di l f i diencouraging transparent disclosure, fair treatment, dispute resolution and financial education/awareness and costs.

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Conclusions

Financial inclusion: critical role in sustainable development,Financial inclusion: critical role in sustainable development, reducing poverty, boosting shared prosperity

Technology offers significant scope for rapidly expanding access to financial services, notably for households and SMEs

Governments should focus on providing a supportive regulatory framework, ensuring competition among providers, and educating & protecting customers.

12


September 20, 2016


Th k !Thank you!www.imf.org

Financial Development, Financial Inclusion, and Growth in ......The missing link in financial...

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