“Lanka must promote digital financial inclusion” | Sunday Observer

“Lanka must promote digital financial inclusion”

4 October, 2020

Sri Lanka is yet behind Colombia, Rwanda, Peru, Uruguay and India in the Asian region in financial inclusion rankings, according to the Global Microscope 2019 Index despite the efforts to boost fair and equitable access to financial services for all in the country.

The countries ranked above Sri Lanka have been recognised for their commitment to increasing access to funding, financial literacy, minimising the number of unbanked segments, interaction with the private sector and inter institutional commitment.

Colombia has an overall score of 82 followed by Peru which has a national strategy for financial inclusion and a highly regulatory environment. The National Bank of Rwanda implements policies on financial inclusion.

The country strengthens the regulatory environment and comprises micro insurance regulations.

It was ranked 10th and was recognised for high consumer protection and infrastructure supporting financial inclusion. India is among top nations with the most conducive environment for financial inclusion in terms of allowing non-banks to issue e-money, proportionate customer due diligence and effective consumer protection.

The overall environment for financial inclusion has improved globally with India, Colombia, Peru, Uruguay and Mexico having the most favourable conditions for inclusive finance. Within the overall framework for promoting digital financial inclusion, the report identified four basic enablers – allowing non-banks to issue e-money, presence of financial service agents and proportionate customer due diligence.

“Sri Lanka must take a cue from the countries ranked high in financial inclusion to identify areas of financial exclusion and take steps to boost inclusion in insurance, access to finance, financial literacy and digital financial services, said Dean, Faculty of Humanities and Social Sciences, University of Sri Jayewardenepura, Prof. Shirantha Heenkenda during a public lecture on ‘Financial inclusion Landscape in Emerging Economies: Lessons for Sri Lanka’ on Tuesday.

He said Covid-19 is an eye opener for Sri Lanka to promote digital financial inclusion with digital financial services. “Sri Lanka must design financial products to enable easy and affordable access for all and look at ways to promote digital transactions with more use of mobile phones and access to digital services,” he said.

The Global Microscope for Financial Inclusion, now in its 12th year, is a benchmarking index that assesses the enabling environment for financial access in 55 countries.

The 2019 Microscope features 11 new indicators to better assess what governments are doing to address the gender gap in financial inclusion. The report notes regulators play a significant role in catalysing or impeding a country’s progress toward financial inclusion. By evaluating five domains of the regulatory environments in 55 countries (i.e., government and policy support, stability and integrity, products and outlets, consumer protection and infrastructure), the Global Microscope identifies each country’s current policies and regulations and notes which are likely to create an enabling environment for financial inclusion. The countries covered in the study’s regional analysis of Latin America and the Caribbean maintained the most favourable regulatory environments.

These findings are at odds with access and usage data that show that Latin America and the Caribbean have recently fallen behind other regions.

This points to the limitations that policies play in driving outcomes. They can contribute, but policies alone are insufficient in driving desired outcomes.

Practical impediments such as limited access to identification, the internet, and or mobile phones – restrict women’s ability to use digital financial services. Policymakers must ensure that women and men are enabled to use and empowered to benefit from greater financial inclusion.

As the landscape for financial inclusion continues to evolve, and as financial service providers adopt new technologies and approaches, governments will need to implement policies to ensure that potential users develop the capabilities and possess key enablers to access and use these products (such as national ID and mobile phones).

This includes developing and implementing policies specifically designed to address gender disparities in access to these enablers.

Governments must ensure their national strategies do not worsen the gender gap. As financial inclusion policy shifts its focus towards the promotion of digital financial services, regulators and policymakers must address this digital gender gap or risk contributing to even greater disparities in access to financial services between women and men.

Although nearly four-fifths of countries in the Microscope have strategies or initiatives to promote digital literacy, only one-fifth incorporate a gender approach into these programs. The Global Microscope is produced by The Economist’s Intelligence Unit with policy guidance and financial support from leading organisations in the field, including CFI.