Identify policy anchors for digital economic inclusion

Guide
Written By Alexis Ditkowsky

Start here to determine if the government has formally committed to drive financial inclusion through digital financial services (DFS) and how to start leveraging these “policy anchors.”

+ 1. Examples of when to use this guide

If you are a policymaker wishing to develop a policy and regulatory context that is digitally-focused, financially inclusive, and gender-sensitive, you will need to understand which elements make a policy inclusive. You might also want to compare your country’s objectives to objectives developed in other countries and determine the direction that will create a more inclusive and gender-sensitive policy context.

If you are a development partner, you can use this guide to assess whether a specific country is prioritizing digital financial inclusion and determine the expected policy objectives that emerge from market reforms. Contact us to learn more.

+ 2. Review the country’s commitment to digital financial inclusion

There are different ways that a country can express its commitment to digital financial inclusion — and the degree of a country’s commitment can vary. The government documents below can form the foundation for your review. This list is not exhaustive, and there could be other types of publications you may choose to review.

As you review the below publications, try to identify which documents can be considered a “policy anchor.” Policy anchors are documents that are binding and express a concrete commitment towards digital financial inclusion.

Policy declarations

A policy declaration can include a public speech by a high-level government official clearly stating that digital financial inclusion is a priority. These documents are important because they reflect a commitment, but they usually are non-binding. Therefore, policy declarations are an encouraging sign but are usually insufficient to serve as a policy anchor.

A public speech without subsequent actions may indicate that digital financial inclusion is not necessarily a priority or that resources have yet to be committed.

Policy declaration which includes a digital financial inclusion target

A public declaration coupled with a commitment to reach a digital financial inclusion target by a certain timeframe is a stronger anchor from which good policies can emerge. It would still require subsequent actions to be taken, but it is a step beyond a simple policy declaration to prioritize digital financial inclusion.

For instance, AFI’s Maya Declaration is a global initiative to encourage national commitments to responsible and sustainable financial inclusion. It enables AFI member countries to establish concrete financial inclusion targets, implement in-country policy changes, and regularly share progress updates. A public commitment to the Maya Declaration is a means to champion financial inclusion. AFI also encourages its members to balance innovation in technology-based financial services with effective regulation and supervision

National Economic Development Plans

Many countries publish their objectives for economic development in strategies or that define target outcomes, some of which may contribute to digital financial inclusion goals. National Economic Development Plans are most often focused on policy objectives, rather than the details of regulation or legal frameworks. These policy objectives are useful to determine the extent of high-level support regulators can expect from other branches of government.

In many cases, national plans explicitly mention plans with respect to financial sector development through digital financial services (DFS), particularly in regard to infrastructure like digital ID, retail services like digital payments or savings mobilisation, or systemically important services like commercial lending. In particular, many countries face weak regulatory environments, a lack of digital payment infrastructure (e.g., ID systems, credit information, internet and mobile access), and/or challenges related to financial literacy, consumer protection, and the security and integrity of digital financial services. When these challenges are explicitly mentioned, this can accelerate financial inclusion-related regulatory approval processes when the reforms are clearly linked to national goals.

National Economic Development Plans can also help identify issues that are complementary to digital financial inclusion. For example, national strategies to develop communications infrastructure or improve the security of national cyber assets can support regulatory reforms for payments systems or data protection, respectively.

National Financial Inclusion Strategy (NFIS)

According the World Bank, National Financial Inclusion Strategies (NFIS) can be defined as roadmaps of actions, agreed and defined at the national or subnational level, which stakeholders follow to achieve financial inclusion objectives. Many NFISs include a DFS focus.

Successful strategies coordinate efforts with the main stakeholders, define responsibilities among them, and create a clear action plan by prioritizing targets with customer-centric outcomes. An NFIS can promote a more effective and efficient process to achieve significant improvements in digital financial inclusion.

Since 2010, more than 55 countries have made headline financial inclusion commitments, while more than 60 have either launched or are developing a national strategy, according to the World Bank (2022). Many of them are developing National Financial Inclusion Strategies to ensure that resources are allocated and actions are taken to achieve those commitments.

Key questions to consider
  • Does the country have an NFIS or similar strategic plan?
  • Does the country’s strategic plan or NFIS have financial inclusion targets (including those with a DFS) within a clear timeframe?
  • Does the strategic plan create a coordinating structure or unit with clear responsibility to implement the plan?
  • Does the strategic plan identify policy ‘levers’ that will enable the financial inclusion objectives?

Regulation and laws aligning with the financial inclusion strategy

A country can demonstrate its commitment to digital financial inclusion by aligning regulations with their stated priority of reaching poor and underserved communities through DFS.

For example, a country can improve the laws and regulations that impact the access to and usage of digital financial services, including regulations related to the four CGAP basic regulatory enablers (non-bank issuance of electronic money, agent networks, customer due diligence, and consumer protection) and other related topics such as competition, interoperability, data protection, data exchange, and cybersecurity. As many of these issues fall under the purview of multiple regulators, increased access to digitally enabled financial services requires communication and collaboration.

Key questions to consider

  • Has digital finance been identified as a strategic lever to reach financial inclusion objectives?
  • Have specific regulatory changes been identified to support efforts to reach the NFIS’s financial inclusion targets?
  • Is the coordinating structure working with the Central Bank, Ministry of Finance, and/or other related financial authority(ies) to reform regulations?
  • Is consumer protection a priority? Has consumer protection been specifically identified as a policy lever? Is there a focus on financial consumer protection linked to digital financial services?
  • Are issuance of electronic money, agent networks, and customer due diligence priorities? Have they been specifically identified as policy levers?
  • Have specific government programs been identified to drive digital financial inclusion of excluded and/or underserved populations?
  • Could voices of vulnerable and underserved communities be included in the policy design process of the NFIS’s financial inclusion targets?

Notes

  • Pay close attention to regulation of e-money licensing, agents, customer due diligence, and consumer protection, as defined by CGAP.
  • Where applicable, consider working with the Ministry of ICT, Ministry of Social Affairs, Ministry of Finance, and/or other institution(s) responsible for delivering government-to-person (G2P) payments to digitize G2P flows.

Other documents and activities

Review other public policy documents and activities that demonstrate a country’s commitment to and prioritization of digital financial inclusion. These can include a public policy paper, a draft regulation, or even the participation of government or Central Bank staff in events related to digital financial inclusion.

+ 3. Apply in practice

  1. Review national publications related to financial inclusion.

  2. Create a list of “policy anchors” as you identify them during your research. “Policy anchors” are binding documents that express a concrete commitment towards financial inclusion. You can leverage these anchors later when making policy recommendations.

  3. Repeat the process for other countries so that you can identify additional examples of inclusive policy objectives. Learning from other countries can help you gain insight into your own context and identify potential next steps for creating an enabling DFS policy environment.

  4. Organize peer learning sessions for sharing knowledge and experiences among financial regulators, private-sector providers, civil society, and other relevant stakeholders. Well-planned and focused discussions can help surface valuable insights regarding the country’s commitment to digital financial inclusion.

UNCDF Policy Accelerator Toolkit

This guide is part of the UNCDF Policy Accelerator Toolkit. Watch a video overview in English or French to learn more.

Watch the overview in English.

Watch the overview in French.

 
 
Alexis Ditkowsky
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