UN group targets obstacles that prevent poor from accessing financial services

A United Nations group that was formed to promote financial inclusion has released a series of key messages designed to remove the obstacles that prevent poor people from opening a bank account, taking a loan or buying insurance to protect their crops.

The messages, which are targeted at governments, regulators, development partners and the private sector, were formed through a consultative process lead by the UN Advisors Group on Inclusive Financial Sectors.

Princess Máxima of the Netherlands, a member of the Advisors Group and chairperson of the working group on advocacy, said she hopes the key messages clarify the role of the four different target groups. “We need to expand financial inclusion so that the poor can get access to financial services,” she said.

“But let us be clear: microcredit can be a catalyst for growth but not a quick fix to the poverty problem. It takes a concerted development effort that calls on the private sector, governments, regulators and development partners alike to each play their natural role.”

Richard Weingarten, Executive Secretary of the UN Capital Development Fund (UNCDF), said the Advisors are fully engaged in advocacy efforts to address the obstacles that limit access to financial products and services. “The Advisors will bring these messages to governments, regulators, development partners and the private sector to underscore the constructive role each of those groups can play in broadening access to financial sectors.”

Among other messages, the Group advises governments that inclusive financial sectors require building and supporting permanent, local financial institutions and embracing new technologies and systems that deliver a diverse range of financial products and services to the poor.

It notes that governments’ vision for a well-functioning financial system should include access for all citizens to a broad range of financial products and services including savings, credit, insurance, and money transfers.

Messages for Regulators include that their role is to establish environments that allow a diverse range of institutions to provide a wide variety of financial products and services.

Regulators must be flexible in their approach; they must mitigate risks, without limiting access to financial services, the Group notes, adding that regulators must also exercise caution that anti-money laundering and related regulations do not block access to financial transfers that are critical for poor people.

The Group points out that providing financial products and services to poor people represents a large business opportunity for the private sector. Providers of financial products and services should use their strengths to develop a range of products that better serve the needs of the poor, it says in messages to the private sector.

Addressing development partners, the Group says development assistance for inclusive finance should complement private sector activities, not compete with them. Better information on the performance of development partner investment portfolios is essential, the Group says, noting that “what is not measured cannot be managed.”

Created by the UN for a two-year term following the 2005 International Year of Microcredit, the Group’s principal role is to advise the United Nations system and member states on global issues relating to inclusive finance.

The UNCDF, the UN organization that hosted the Secretariat for the 2005 International Year of Microcredit, also hosts the Secretariat for the UN Advisors Group in collaboration with the UN Development Programme (UNDP) and the UN Department of Economic and Social Affairs.