A Banker’s Revolution

KUALA LUMPUR – Financial regulators are generally known for taking a measured and cautious approach to change. But in the developing world, that reputation is being turned upside down. In some of the world’s poorest countries, central bankers have proved willing to make bold decisions – embracing innovative approaches in their quest to broaden participation in the formal financial system, increase financial stability, and put their countries on the path to inclusive, sustainable economic growth.

Increasing financial inclusion requires fundamentally rethinking how a country’s financial system is structured and operates. It also frequently necessitates the use of instruments outside of the central bankers’ traditional toolkit. In Kenya, for instance, officials altered the regulatory framework to allow for the growth of mobile money. In Malaysia, the central bank took a lead role in raising the public’s level of financial literacy. And in the Philippines, the Bangko Sentral ng Pilipinas helped double the number of access points where consumers could obtain financial services, supporting the opening of 517 micro-banking offices, many of them in municipalities with no traditional bank branches.

Likewise, in 2011, the Bank of Tanzania made a specific commitment to increase financial inclusion under the Alliance for Financial Inclusion’s Maya Declaration, a commitment by policymakers in the developing world to unlock the social and economic potential of the poor. The result was dramatic and vastly exceeded expectations. Tanzania reached its goal of providing 50% of its adult citizens with access to banking a year ahead of schedule, making the country a global leader in digital financial services. As in neighboring Kenya, the game changer was the widespread adoption of mobile money. “It may sound maverick,” said Benno Ndulu, the bank’s governor. “But we must let innovation run ahead of regulation.”

While East Africa is blazing the trail when it comes to electronic money, other parts of the world are adopting different innovative approaches. Last year in Colombia, Congress passed a law creating a new type of financial institution called a Specialized Electronic Deposit and Payment Institution. While not technically banks, these institutions are able to accept customer deposits and payments electronically through mobile phones or at licensed locations like a post office. The effort is part of a larger national strategy, launched in 2014, to provide 76% of adults with financial access and 56% with active savings accounts by the end of 2016.