> Posted by Sonja E. Kelly, Fellow, CFI
I was thrilled when I opened the paper this week to the news of Michelle Bachelet’s victory in Chile. The first female president in Chile, first elected in 2006, is back in office after a one-term break. I have long admired her advocacy for those living in poverty, her tenacity, and her activism. However, her victory also means a question of what will happen to the admirable financial inclusion initiatives begun by the Piñera administration.
In many of my conversations with government employees in Chile in the past year I have heard some caveat to the effect of, “I’m not sure what we’ll be able to do in the coming months given the upcoming election.” Initiatives like electronic government-to-person (G2P) payments, for example, were pushed forward by people connected with the Piñera government, and if the new administration does not prioritize such initiatives, financial inclusion may receive less policy attention.
This highlights a larger issue of who “owns” government-initiated financial inclusion efforts. The answer matters because the leadership structure of government-led initiatives determines longevity. If financial inclusion policy is spearheaded by the Central Bank, and the Central Bank ministry is largely independent, financial inclusion initiatives are unlikely to change course with an administration change. If it is a Ministry of Finance-led push, however, financial inclusion may indeed be an administration-specific initiative.
In the Chilean case, the electronic G2P payment initiative was in part tied to the administration because the work was led by the ministry of Social Development, a part of the president’s cabinet. Recognizing that lack of continuity may be a weakness, many countries, including Chile, have created intra-departmental committees with formal structures that involve departments with a spectrum of players and a diversity of mandates. Rwanda and Fiji have established Financial Inclusion Taskforces. Brazil organized a National Partnership for Financial Inclusion. Mexico has a National Council for Financial Inclusion. These committees or councils are set up to endure beyond the political lives of their participants.
Governments are also moving toward formalizing longer-term goals and structures that outlive the tenure of a particular administration by undertaking initiatives like national strategies, complete with long-term targets for access, use, and quality. Examples of these efforts include Nigeria’s Financial Inclusion Strategy, Brazil’s Financial Education Strategy, and Mexico’s Financial Inclusion Strategy. We’ve talked before about various national strategies for financial inclusion here on the blog. In the past few years, many additional countries have adopted such strategies or announced their intention to create a financial inclusion strategy through their Maya Commitment to the Alliance for Financial Inclusion.
Long-term financial inclusion efforts like these, however, require broad political support and long-term thinking. Initiatives that have been set up for the long-term, with broad support from both ends of the political spectrum, will not be very affected by political change. Countries with large and complex government structures are attempting this—India, Nigeria, South Africa, and Mexico, for example, are all moving toward or have achieved this kind of a sustainable financial inclusion strategy.
We would be naïve, however, if we did not acknowledge how difficult such efforts are—a reality we considered in the Financial Inclusion 2020 consultative work that we undertook this year. A robust and long-term financial inclusion strategy involves accommodating a large number of stakeholders, both internal to the government and external. It means finding common ground between elected, appointed, and long-term government figures, and it often requires outside consultation. Given how many hoops they have to jump through, I admire the regulators, policymakers, and legislators who promote financial inclusion at the government level.
To Michelle Bachelet and her future administration, congratulations. And please don’t forget financial inclusion as you move forward in your work in Chile.
Image credit: Sebastián Villanueva
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December 20, 2013 at 9:39 pm
yerramr
The article is very timely at least in so far as India is concerned as it faces General Elections in the next four months. The CRISIL Financial Inclusion index showed a marginal improvement of around 2.2 while the RBI’s composite analysis recently put down by its Executive Director, P. Vijay Bhaskar says that from the NSSO 59th round (Jan-Dec 2003) reflecting an exclusion of 51.4 percent farmer households there is considerable improvement but fails in its own study to make exact comparison when he mentions in the chart that mentions of all the rural households having access to financial services from the banks. This chart depicts from 1951 to 2002 the course of debt from the formal and informal sources. The formal sources increased by just 4.2% between 1991 and 2002 – the initial years of reforms in the banking sector while the informal sources increased by 13.8% during the same year. When we look at the data put out by the World Bank, as at the end of 2011, only 51.78 percent availed bank credit and around 68percent the deposit services. If we compare NSSO 59th Round (2003) with World Bank 2011 financial inclusion data the households availing bank credit increased by marginal 0.38 percent. Central Bank -driven financial inclusion effort made only marginal impact during the period 2002-2011. Financial inclusion is thus full of sound and fury signifying almost nothing during the effective years of its efforts – 2005 to 2011. The reason would appear to be that the initiative is strongly driven by the central bank and hypocritically led by the Government. The constituent banks, most in the public sector, continue to make any apology of the effort in financial literacy and financial inclusion indulging in numbers to make believe that they are serious about it.
December 22, 2013 at 11:21 pm
Matt @ Financial Marketing
Informative article. I really appreciate the up to date details here. Nowadays, there’s a lot of interruption on elections, especially financial related concerns. Its been going on for years, someone has to start an action really soon.