UN Advisors Group Releases Five Key Messages for Four Key Audiences

Messages Targeted at Addressing Obstacles that Prevent the Poor from Access to Finance

NEW YORK, 16 March 2007 - The United Nations Advisors Group on Inclusive Financial Sectors has released "Five Key Messages for Four Key Audiences": statements of best practices for expanding access to finance for the poor targeted at governments, regulators, development partners and the private sector.

The United Nations established the Advisors Group 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. With a strong presence and engagement in financial sector development, access to governments, central banks, bilateral agencies, Bretton Woods institutions, academia, civil society and the private sector, and substantial advocacy and convening power, the United Nations is uniquely positioned to help inspire, support, and coordinate broader efforts toward building inclusive financial sectors in all parts of the world. The Advisors Group will guide, encourage and support the UN in these efforts.

The messages were made public by the Advisors Group after its recent meeting in Amsterdam. The meeting was the third one for the Group. Previous meetings have taken place in New York, and Halifax, Nova Scotia.

Princess Máxima of the Netherlands, 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. 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 United Nations Capital Development Fund, 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," he said. UNCDF, the UN organization that hosted the Secretariat for the 2005 International Year of Microcredit, also hosts the Secretariat for the UN Advisors Group.

There are five messages for each of four key stakeholder audiences:

For Governments

• 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.
• 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.
• The role of government is to create a helpful policy environment: broadening access while protecting consumers. When the government itself provides financial services, politics almost always limits access.
• Governments should refrain from imposing interest rate ceilings, as they may limit credit expansion and shift the cost burden to hidden fees. The best policy of governments to lower interest rates is to promote transparent prices and an open, competitive market.
• Broadening access to financial services is an important policy goal, but will not in and of itself eliminate poverty.

For Regulators

• Financial inclusion should be a major objective of financial regulation. The role of regulators 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.
• Regulators must assure appropriate supervision of both financial services providers and their supporting industries, such as telecommunications.
• Regulators must exercise caution that anti-money laundering and related regulations do not block access to financial transfers that are critical for poor people.
• Broad-based access to financial services requires an enabling regulatory environment for telecommunications and technology infrastructures.

For the Private Sector

• 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.
• The private sector has an important role to play in expanding access to financial services for poor people.
• Private sector participants in inclusive financial sectors should include not only direct providers of financial products and services, such as banks, insurers and money transfer companies, but also telecommunications, technology, credit bureaus, retailers and other companies that support the financial services industry.
• For the private sector to realize the market opportunity of expanding access to financial services, it must be engaged in establishing appropriate enabling environments.
• The private sector can expand access to financial services in many ways. These include providing capital; building infrastructure; developing new products, services and technologies; and improving human and institutional capacity.

For Development Partners

• For development partners, quality of funding for inclusive finance is at least as important as quantity. Good funding requires technical expertise and appropriate funding instruments.
• The key bottleneck for development partners supporting inclusive finance is the shortage of strong institutions and managers.
• 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. What is not measured cannot be managed.
• For development partners, both an effective division of labor and coordination of efforts are needed for maximum efficiency and impact of development assistance to inclusive finance.

For further information on the Advisors Group, please visit ag.uncdf.org. To arrange a press interview with any of the Advisors, please contact:

Adam Rogers
+1 212 906-6082.
email: adam.rogers@uncdf.org

Or

Hyewon Jung
+1 212 906-6693
email: hyewon.jung@uncdf.org