Bob Annibale, Global Director, Citi Community Development and Microfinance, shares his views on the lead up to the FI2020 Global Forum, as well as reflecting upon the panel discussion ‘Global Trends & Emerging Markets’.
Please share with us Citi’s perspective on the lead up to this Global Forum
What led us to this point is a convergence of a number of organizations that have been working together originally on traditional microfinance. As that grew, some of the original microfinance institutions became banks, cooperatives, credit unions, and other players that were trying to work on some similar issues with the same communities. In other words, it was a bigger discussion.
We then found other players like mobile operators and the card companies becoming interested in financial inclusion, or becoming interested in businesses that will probably expand financial inclusion. They didn’t come at it with a goal of financial inclusion necessarily, but the work that they’re doing is leading towards that.
So, we realized we needed to convene a wider range of organizations than we had before. And that was the discussion that led us with Accion and CFI to come up with a goal for financial inclusion. With the goal of 2020, it’s hopefully far enough off for us to do something, but it’s not so far off that it seems a pipedream. With the belief that there can be exponential growth using new technology and a much wider range of institutions, it has become an ambitious target for financial inclusion.
Emerging markets and banks
I don’t think that many of the banks that are not already in emerging economy/developing countries are suddenly going to become active. We don’t see new banks or international banks in Dhaka or Chittagong or in Hanoi or Kinshasa. And it is an awareness among local banks too that there is probably another way other than the old model of the bricks and mortars branches to expand access.
More awareness from regulators, policymakers, and governments
It is important that there is an awareness by regulators too. They need to be more creative if they want to see a much wider outreach. Indeed, it’s not just regulators, but also policymakers and governments themselves who say ‘we want greater inclusive growth that’s better for the economy. It’s better politically, and it’s more stable’. The financial system, if left to its old structure, wasn’t really going to do that.
You can plan to open hundreds and thousands of new branches somewhere, but then you realize you have the duplicity of that with agents, correspondents, or even third parties that could act as mini-branches, which is already occurring in other countries. And I think more and more governments have seen that.
As mobile operators became more involved in this space and we see some pilots, they too became enablers. We envision that there’d be different models – not all of them will be the mobile operators themselves providing the services, but they’d actually be providing the platform at which we confirm whether payments have been received or made.
Think of the SWIFT system, where we move a trillion dollars a week through payments between financial institutions. It’s a payment system – no cash moves. Nothing actually moves, but we have a confirmation of payments. We are aware, and governments are aware that there is more that can happen much faster with these new players, but they need to be, and we all need to be, more creative.
‘There’s no one core group that’s going to do this globally’
This forum, ultimately, was a convergence of people – many of whom know each other, but not totally, so that was good. I may recognize half the faces here, but not the other half. But they don’t all come from one of those deep specialist areas with rich histories – the NGOs, microfinance, the new mobile folks, or regulators; there are people who I think are representative of movements within all of those areas. And there’s no one core group that’s going to do this globally.
The people at the forum represent and illustrate what is happening in other parts of the world or on a country level. I think there’s awareness that there will be a wide range of institutions that lead towards the achievement of this goal, and that this group has some of the best of those institutions. I think what they can put to paper, illustrate, and advocate for will reach out to wide audiences within many other spheres. So I think it’s really a good moment to be coming together with so many thought leaders and practitioners.
A Retrospective: FI2020 Global Forum panel discussion on ‘Global Trends & Emerging Markets’
What was interesting about that panel was that it was one of the first times talking about financial inclusion, access to finance, or microfinance in Africa where it wasn’t coming from a development or charity perspective focusing only on the challenges found in Africa, but rather three viewpoints on the opportunities and business case for the continent. We actually had three very energized, articulate CEOs who run institutions that are putting their capital at work – real capital of their own.
None of the panelists were here for donor funds; they were trying to look at people who have often been spoken of in the past as beneficiaries. These were folks who needed and didn’t have access to financial services and would go to an NGO, or some other route, which was probably the only provider willing to focus on them. On the panel, they were actually talking about clients and different segments of clients.
How interesting that the MD of Fidelity Bank Ghana, Edward Effah, said ‘we’re a middle-income country, we have a voter register of X million adults; all of them, and more, have mobiles – we can see statistically – and 10 percent of them have a bank account’. It doesn’t make a lot of sense commercially either. That range of underserved and unbanked, in his example, are all kinds of people – yes, they will be the ultra-poor, and very poor and destitute, and people who should have specialized access to all kinds of services (public and financial).
Clearly there are economically active people all along the value chain, and socio-economic strata. They’re beginning to think of those communities as clients. And that’s really different, because that’s what their resources are designed around – solutions for attracting, serving, and retaining clients. The same with Nigeria and, of course, the panelist Kennedy Bungane from Barclays Africa was able to talk about, in some ways, coming from an older footprint type bank into this space, which is quite challenging, because it’s got new competitors – in places like Kenya – people like mobile operators that don’t have any of this legacy footprint.
Expanding financial access in African countries
I think what was really exciting was to have three CEOs really talking about the opportunities to expand financial access in their countries, and those markets are big, those are large numbers of people. It’s illustrative of what could be happening in many other countries, not just in Africa. And it was great to have it happen in a discussion of African markets, rather than just saying ‘great, look what’s happening in this part of Latin America or Asia, but if only it could happen in Africa’. It was very positive and optimistic.
There was also a real articulation and appreciation that we need to write regulatory frameworks to keep up with this change – that is, regulatory frameworks that are designed around what is there today. But we’re moving very quickly, and there’ll be all kinds of new players they need to be sure that that’s a comprehensive environment. They also need to be sure that it’s not only a level playing field amongst providers, but also that there’ll be consumer protection, in whatever form we take that, and that institutions embed that in terms of their own practices, and how they assess themselves, and that, externally, there are benchmarks for consumer protection.
Responsible growth and transparency
It’s very healthy to hear this idea of significant rapid growth. But also with that awareness comes the responsibility about growing responsibly. And also there is the challenge of making sure that consumers have financial capability, that the products have transparency, and that pricing is understood upfront. We could have had a session with bankers who seemed out of touch, but these panelists weren’t at all.
Legacy of this forum
There’s a legacy in terms of keeping on eye on where we’re getting to and how we are proceeding. Moving forward, we need to ask; where’s the greatest growth coming from? And where do we illustrate and share that continually? And you have great groups who can do that from CFI to CGAP to many others who are all looking at this. There needs to be future convenings, data, and support.
It’s not an exhaustive group here at the forum, but it’s one that’s representative of a part of a trend and a movement that probably is going to accelerate very quickly, so we have to be sure that all of these other risks are addressed. I think Citi will continue to be a supporter of CFI, and a number of the lead organizations here that helped to frame that. And, of course, as a financial institution we’ll continue to be a force, we hope, in expanding financial inclusion.