From Digital Financial Services to inclusive digital economies…

…and how we’re working with colleagues at UNCDF and with Macmillan Keck to better understand the specific ways that policy and regulation can help create economies that include everyone.

Learning more about how to create economies that include everyone

Removing policy and regulatory barriers to Digital Financial Services (DFS), especially for women, has been and will continue to be the core focus of our work. As our relationships grow deeper in our focus countries, we are seeing opportunities to explore the connections between DFS and what it really takes — from a policy and regulatory perspective — for people to be included in the formal digital economy. Robust DFS offerings are one piece of the puzzle; supporting the use of these services by women and other marginalized groups is another.

Contributing to UNCDF’s Inclusive Digital Economies Scorecard 

For the past year, we have been contributing to UNCDF’s new Inclusive Digital Economy Scorecard, which, as of September 2021, has been applied in 25 countries around the world.

The Scorecard is a tool developed to assess how 1) policy and regulation, 2) infrastructure, 3) innovation and 4) skills work together in least developed countries (LDCs) to support environments where everyone can participate in a digital economy.

Taking a “snapshot” of the current state of the digital economy

The tool proposes a method for measuring the current state of these four enabling blocks of a digital economy. In line with the objectives of the Policy Accelerator, an enabling policy and regulation environment should encourage the development of infrastructure for a digital economy, spur innovation to accelerate digital transformation and equip its population with the skills to leverage the dividends of a digital transformation of the economy. 

Understanding policy and regulation focus areas

The policy and regulation axis looks at the areas of law and regulation which we think are most likely to influence an "enabling” environment: 

• Consumer protection; 

• Data protection;  

• Cybersecurity;  

• Competition;  

• Data localization or data residency;  

• Electronic signatures;  

• Broadband policy;  

• Fair access to communication and data channels;  

• Market dominance or anti-trust;  

• Agent networks;  

• E-money issuance; and  

• Risk-based account opening.  

Understanding policy and regulation in relation to the other focus areas

A key purpose of the Scorecard is to put the policy and regulation findings in conversation with the other axes.  

For example, a relatively high score in the policy and regulation section in comparison to relatively low scores in infrastructure, innovation and skills may indicate a mismatch between policy intent and market reality.  

Or a sparse policy and regulatory framework compared with a high-scoring infrastructure or innovation context may indicate flourishing business models that governments should codify rather than contain.

Developing risk-proportionate regulations is an ongoing challenge in every market in which we work, and we see the Scorecard as especially useful in sparking dialogue with governments, the private sector and civil society about the risks of both over-regulating and under-regulating.

We’re proud of the work our UNCDF colleagues have undertaken, and we hope that the Scorecard will prove valuable to stakeholders in each country in which it’s implemented.   

Research next steps: Understanding inclusion  

As we develop a more nuanced view of the policy and regulatory enablers of a digital economy, we must be attentive to who may be excluded and how.

To that end, we are also collaborating with Macmillan Keck to understand inclusion in the context of:

• Consumer protection;

• Data protection;

• Competition policy;  

• Cybersecurity;

• Broadband policy;

• Fair access to communication channels;

• Digital identification;

• E-money;

• Use of agents; and  

• Risk-based Know-Your-Consumer (KYC).

In the coming months, we will release more in-depth analyses of each of these topics so that others can benefit from our research.

Looking ahead

We hope to learn which elements of policy and regulation listed above are most enabling for a digital economy and which are foundational for ensuring that everyone is included in the digital economy. 

We also hope this research will help us improve the sub-indicators in future versions of the Scorecard and guide our work on DFS in the coming years.

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Authors

Seharish Gillani

Alexis Ditkowsky