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NEWS & VIEWSEN
May 2018
The Voice of Savings and Retail Banking
G20 and locally focused banks:Good for sustainable societiesWSBI makes further progress on UFA 2020 pledge (see page 10)
Highlights of WSBI conference at G20 (see page 12)
Contents
NEWS & VIEWS
News and Views is published on a quarterly basis by WSBI-ESBG,in Brussels Belgium. It is distributed to individuals andorganisations from the financial sector in more than 80 countriesincluding all WSBI and ESBG members. An electronic copy of thiscopy of News and Views can also be found on the corporatewebsite www.wsbi-esbg.org
Responsible editor: Chris De Noose, WSBI-ESBG Managing DirectorEditors: James Pieper, Senior Communications Adviser andDirk Smet, Communications ManagerDesign & Layout: altera
World Savings and Retail Banking Institute | European Savings and Retail Banking Group aisblRue Marie-Thérèse, 11 | B-1000 BruxellesPhone + 32 2 211 11 11 | Fax + 32 2 211 11 [email protected] | www.wsbi-esbg.org
LEADERS
3 Local banking can bridge global economic divide
4 G20 Argentina helps amplify the savings, retail banking
message
6 Financial inclusion, economic and social development
FEATURE
10 WSBI makes further progress on UFA 2020 pledge
G20
12 Highlights: WSBI conference during G20 in Argentina
14 WSBI publishes positions for G20 decision makers
16 G20 Declaration
17 WSBI joins B20 task force for second straight year
18 G20 Argentina: Focus on future workforce and infrastructure
ESBG UPDATE
20 ESBG: 2017 year in review, what’s ahead in 2018
22 EU Commission FinTech Action Plan: A welcome next step
23 Commission action plan key milestone in EU sustainable
finance strategy
24 Workshop on Proportionality in Banking Regulation
25 Shedding light on proportionality
26 ESBG responds to EBA Pillar 2 framework review
27 ESBG: Streamlined resolution plan info provision process
welcomed
28 Locally focused banks critical to sustainable finance
29 Chris De Noose appointed EBIC chair
30 Human rights and finance
31 Retail and banking sectors: From shared challenges
to shared solutions?
WSBI UPDATE
32 WSBI: Moving forward in 2018
33 WSBI welcomes new member Bank Asia
34 First Workshop on Rural Financial Inclusion in Beijing
35 The viability of agri-finance – an Indian perspective
36 WSBI joins Asian financial cooperation organisation
37 WSBI holds LatAm, Caribbean regional group meeting
FINANCIAL INCLUSION
38 MTripleSW: WSBI, PostBank Uganda to boost financial
inclusion services in rural areas
39 MTripleSW: LAPO Microfinance Bank signs MoU with WSBI
to improve savings by women
40 Dormant bank accounts: inevitable, but not hopeless
41 MTripleSW: Merchant agent banking in Morocco
42 WSBI member showcase: Belarusbank
43 G20 and Rural Finance
INNOVATION HUB
46 WSBI Innovation Workshop: Part 2
48 Update: ‘Innovation Exchange’ videos
48 New ‘Innovation Insights’ page launched
EVENTS
49 Upcoming: 25th World Congress of Savings and Retail Banks
in New Delhi
51 African financial institutions transform via innovation
Upcoming events
n 22 May – Financial Education, quo vadis?, Brussels,Belgium
n 28 June – Retail Banking Conference, Brussels,Belgium
n 15-16 November– WSBI World Congress inNew Delhi, India
Local banking can bridge globaleconomic divide
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WSBI-ESBG MANAGING DIRECTOR CHRIS DE NOOSE ON NEEDFOR RIGHT POLICY
A rare event occurred in the Financial Times newspaper in
March. The global newspaper had published two pieces in
consecutive days on what they termed ‘community banks’ –
what we normally describe at WSBI-ESBG as locally focused
savings and retail banks.
Their analysis of locally focused banks, especially in Europe,
made clear that local communities and their civic leaders are
reaching into their toolbox for answers on how best spur
economic growth and address any market failures. That toolbox
includes locally focused savings and retail banks.
But as the global economy turns the corner, perhaps the more
pressing need is to address social inequalities. Why? Because
seemingly for the first time in decades, people are seeking ways
to narrow the gap between the gains made by the few in a
globalised world and the rest. That is why the need for community
banks is greater than ever. That was an important theme at this
year’s WSBI event during the G20 in Argentina, which we devote
plenty of coverage in this edition of News & Views. But it
doesn’t end there. The theme takes centre stage at the World
Congress in New Delhi in November, where WSBI members,
policymakers and stakeholders will tackle the subject head on.
“Community banks” are taking bold steps to connect more
closely to local people. Mindset change, greater use of
smartphone apps and new ways to use bank branches enable
Sparkassen, cajas, and locally focused retail and savings banks
around the world to be even closer to the households, local
businesses and public authorities they serve. Savings and retail
banks who are members of ESBG, for example, remain close to
the Mittelstand too, with €500 billion in SME loans on the
books, about a third of the market. In the United States,
community banks are a lifeline to SMEs, including 80 per cent
of farm loans coming from them. In Africa, Asia and Latin
America, the locally focused model there too has a big impact
on helping create micro enterprises and nourish them
throughout their lifespan. That’s not saturation or dominance
of a local market, as the FT implied, but rather the proof of an
effective tool that is much-needed. Community banks are a tool
that helps start up and expand job-creating SMEs, build
infrastructure like schools, bridges and hospitals, and weave
social cohesion through cultural programmes and worker training.
Beyond nuts and bolts banking, communities see the value
in local banks. Their oftentimes pioneering foundation work
accounts for $2 billion in annual contributions to local social
and cultural programmes in Europe and beyond. Large multi -
nationals, whether in banking or otherwise, in the name of
profit maximization, may turn to shedding jobs locally and pivot
activity offshore.
Policymakers can help the community bank model – which
includes locally savings and focused retail banks – to be even
closer to the customer and achieve its social aims. Through a
proportionate, tier-based approach – where our specific nature
is understood and acknowledged – community banks’ retail,
regional and responsible approach can still exist and help people
reach their dreams, no matter how big or small, from the
bottom up. If policy fails to do this, it will put a spanner in
works, widening the gap between the many communities
– rural or urban – and the fruits of globalisation.
WSBI-ESBG Managing Director Chris De Noose
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G20 Argentina helps amplifythe savings, retail banking message
WSBI PRESIDENT HEINRICH HAASIS GIVES IMPRESSIONSBUENOS AIRES MEETINGS
This year’s WSBI conference in Buenos Aires held in March gave us
an opportunity to share the link between the G20 Argentina
presidency, our members, and stakeholders alike.
The event also provided us a chance to showcase our global reach,
our local focus and purpose, which seems to always fit well with
overall G20 aims and themes. This year was no exception.
Hosted by Banco Nación of Argentina, we exchanged on global
regulatory frameworks among the 19 countries within the group
as well as the European Union. That is important because the G20
and its stakeholders shape global financial policy.
The one-day meeting also gave WSBI member a chance for sponsors,
namely CaixaBank of Spain, Banco Caja Social of Colombia, and
Sistema Fedecredito of El Salvador to highlight their commitment
to our banking model and the G20 process. WSBI shared with
G20 parties and stakeholders the WSBI Institutional Positionsto the G20, which outlined our stance on two main G20 themes:
“The Future of Work” and “Infrastructure for Development”.
During the conference, we heard constructive dialogue between
from WSBI-ESBG member banks with stakeholders and policy-
makers, which helped us piece together how the G20 themes fit
into our banking model. ESBG and Fundacion bancaria “la Caixa”
President Isidro Fainé delved deeper into some of the G20 themes
and the link between financial inclusion, economic and social
development. Diego Prieto Rivera, president of Banco Caja Social
in Colombia and president of the WSBI Latin America and
Caribbean Regional Group, provided a look at how our banking
model helps narrow the globalisation gap. The panel discussions
were rich in insight too.
IDB-WSBI collaboration
As part of our G20 work in Argentina, we collaborated with the
Inter-American Development Bank (IDB Group). Our relationship
with them is important and we hope that our collaboration will
expand as we look to do several concrete projects to promote
financial inclusion and MSME financing in the Latin America and
Caribbean region.
There are many areas where we would like to collaborate further,
including:
n Digitisation for ‘last mile’ financial inclusion.
n Data sharing to better serve micro and small businesses through
big data.
n Knowledge sharing by WSBI members on innovation &
digitisation with IDB Group
We hope the collaboration will also try to address WSBI members’
need for long-term financing.
We look forward to discussing next steps with IDB. WSBI members
from the Latin American region, many of whom attended the event
in Buenos Aires, are invited to identify their own specific needs for
which they could cooperate with the IDB Group. We understand
that the IDB Group does not start any work until there is a clearly
identified demand from our members.
Locally focused banking model:our overall position
Forming that bridge starts first with supporting the real economy.
WSBI members do this primarily through lending to small and
medium-sized businesses and private households. Second, locally
focused banks provide people with financial services, with in-depth
knowledge of local needs, local business activity, and local
authorities. Those locally driven banks take different shapes and
forms in different countries, and oftentimes have decentralised
structures. Thanks to their close proximity to customers, they are
perfectly placed to bring the global opportunities of a global
economy to the local level. In this way, locally focused banks
can manage risk on the ground while in an internationally
connected economy.
To make these puzzle pieces fit so that local economies and the
people who live and work in them thrive, the policymakers from the
G20 should take sufficient account of locally focused institutions.
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WSBI President Heinrich Haasis
They should keep in mind three areas:
First, boost access to traditional bank financing for SMEs. The most
logical and simple way for an SME to get financing is to get a credit
from a bank, rather than risking it on the global financial markets.
SMEs don’t have the time, nor the know-how to do this. Locally
focused banks are ideally placed to help. They know how local
businesses work and spend a lifetime doing it. It’s the basis for our
values: Retail, Regional and Responsible. WSBI members often say:
“Think and act at local level, cooperate at global level.”
Second, put in place targeted banking rules designed to take into
account a bank’s specific business model, size and risk – what is
often called the proportionality principle. A “one-size fits all
approach” doesn’t work. A proportionate approach does. If policy
fails to apply this “tier-based” approach, expect the gap to widen
between different groups – rural or urban – benefiting from the
fruits of globalisation.
Third, promote models of financial inclusion and financial education.
To bridge the globalisation “gap”, efforts must be made to boost
access to basic banking services and change hearts and minds so
people feel a want and need to access them. From their start in the
19th century, savings and retail banks have always used financial
education as a path to help people take control of their lives.
The very reason for their creation was to include the working classes
into the formal economy. To date, these “self-help” roots remain
part of our DNA. Financial education and financial inclusion can
only work if governments, citizens as well as banks like ours work
together. I can ensure you that the WSBI members are ready to do
their part.
WSBI and its members made clear to policymakers these three
points throughout the day. We think our efforts will pay dividends
both in the short term and longer term, creating the right policy
approach to help us be a part of the solution to build more
sustainable, growing and cohesive local economies within a
globalised world. That‘s something the world’s citizens crave.
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Learn more about the G20 eventat https://bit.ly/2E4hweF or byscanning this QR code.
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Financial inclusion, economic andsocial development
ESBG PRESIDENT FAINÉ ADDRESS TO WSBI G20 EVENT
ESBG President Isidro Fainé Casas addressed an audience ofmore than 400 stakeholders attending WSBI G20 conferencein Buenos Aires, 21 March. His remarks, translated fromSpanish, follow.
Dignitaries,
Dear Colleagues,
Ladies and Gentlemen,
It is indeed an honour for me to address you all at this conference
hosted by the World Savings and Retail Banking lnstitute – the WSBI –
within the framework of the G20, chaired by our host country,
Argentina, and in close collaboration with the lnter-American
Development Bank, the IDB.
Before starting my presentation, I would like to express my
gratitude, especially to the Banco de la Nación Argentina, and its
chairman, Javier González Fraga for hosting our conference today
in Buenos Aires, such a hospitable and universal city.
I would also like to highlight all the support Javier has given us to
organise this event, just one more example of your permanent
collaboration. Thank you very much for the involvement you have
shown in this common endeavour. An old proverb says: “If you want
to go quickly, walk alone, But if you want to go far, go together”.
The WSBI, as the representative of the community of banks
committed to economic and social sustainability, wants to go far,
as far as we can, along the path of inclusive social progress. That is
why we are pleased to be able to travel this road in the company
of public institutions. In this sense, the Argentine Presidency of the
G20 is excellent news that fills us with satisfaction and pride.
Moreover, it is an excellent opportunity for us, given that we wish
to contribute to the achievement of the G20 objectives by
advancing human development and the overall quality of life.
We are pleased to see that one of the main objectives the Argentine
Presidency established, and on which we all concur, is to promote
fair and sustainable development that creates opportunities for all
and that enables us to take advantage of the great economic
potential of Latin America and the Caribbean to advance towards
a powerful industrial development with the capacity to create
employment that will help us to eradicate, as much as possible,
social exclusion and poverty.
In the face of this noble and difficult challenge, the members of the
responsible international banking community cannot stand still.
That is why the WSBI has wanted to set up a “partnership with the
IDB”, whose objective is, in fact, to promote economic growth and
integration in Latin America and the Caribbean that is sustainable
in terms of the environment and socially, with the goal of achieving
a lasting reduction in poverty as well as the aim of advancing
towards greater social fairness.
The members of the World Savings and Retail Banking Institute fully
share these objectives, and we want to be a leading player, at an
international level, in the preparation of proposals, design of
initiatives, and execution of specific programmes.
We can contribute, through our organisation, by providing the
necessary credit capacity, to generate microcredits for families with
pressing needs and provide micro-entrepreneurs with credits that
allow them to create different kinds of businesses, such as grocery
stores, shoe shops and barbers, among others.
We can also provide commercial loans for SMEs, which help them
settle pending payments while enabling them to have a permanent
proximity to all our citizens, families, companies and institutions, be
they customers or not.
And we do all this by being permanently ready to collaborate with
them in both their more far reaching projects as well as their most
urgent needs. We can offer them our extensive team of experienced
professionals and our networks of branch offices and ATMs, which
offer all kinds of traditional services, as well as the most advanced
digital and mobile banking. Where possible, we wish to distinguish
ourselves with a high degree of excellence in quality of service and
personal treatment. I always say that the best “social work” we can
do in our companies starts with good personal treatment of all our
customers in every branch office and call centre.
In addition to the opportunities that are opened up with the
Argentine Presidency of the G20, there is another favourable factor
that we must take advantage of in order to continue advancing
towards our social development goals. I am referring to the
favourable environment for economic growth that we enjoy on an
international level: solid, extensive and balanced growth, although
not exempt from some endogenous and exogenous risks.
The remarkable global expansion that is expected over the next few
years will also favour all Latin America and the Caribbean, with a
somewhat slower, but relevant recovery. We estimate that the
growth in the region will approach 3% in 2019 and in some specific
countries it will easily surpass that figure.
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As far as Argentina is concerned, I believe that a window
of opportunity has clearly opened up, thanks to the
commitment to rigor, economic orthodoxy and legal
stability. I am convinced that this formula will lead you,
not only to successfully lead the G20 this year, but also
to inspire and disseminate a development model that will
promote a lasting productive economy, social sustainability
and financial inclusion to take advantage of the clear
opportunities afforded by this dynamic and promising
American continent – which is very dear to me.
Within the framework of the topics covered in this
Conference, I would like to present some reflections on
the economic and social value of retail banking, its
essence, its challenges but also its strengths and
opportunities. I believe that, in retail banking, everything
is based on three very clear principles:
n Mutual trust of all our stakeholders: customers, shareholders,
employees, suppliers, and institutions, both private and public;
n Excellence in the quality of the personalised service we offer; and
n The implementation of all the useful technological innovations
in the banking business, respecting the role and the value that
all our points of sale provide.
Technological transformations will continue at a fast pace and on
multiple fronts at the same time. We must prepare for them.
I would simply like to mention some fields that can, directly or
indirectly, affect the business models of banking: mobile telephony,
5G, cloud computing, blockchain, big data, social networks,
augmented reality, virtual reality, robotics, virtual assistants, and
above all, artificial and cognitive intelligence. lt is a list that, without
being exhaustive, overwhelms.
But there is a primordial premise: “without trust there is no
business”. And the trust of our customers is gained day by day,
continuously and particularly in the most difficult times by accepting
responsibility, understanding the customer’s situation and being
decisive in our decisions.
As you all know very well, our activity is developed on those
principles. As in any organisation, we direct ours towards the
achievement of certain objectives. For me, in our field, there are
four priority objectives that can be expressed in terms of:
1. The profit and loss account: we must be profitable to give
continuity to the company;
2. Market share: we must survive by growing while being efficient;
3. The right quality of service: (relentlessly seeking excellence to
provide a better valuable service for our customers); and
4. Social contribution: which beyond any doubt helps to improve
the social plights of our society.
I would like to add that these four goals should manifest themselves
in each of our actions. They are by no means easy to achieve.
They have never been easy. But the future that lies ahead holds a
series of particularly complicated challenges, which we will have to
face without any hesitation:
A. Defending the savings of our customers: for me, it is of utmost
importance that our customers are at ease when they entrust us
with their assets. Nowadays, with the international environment
of such low interest rates, we have to avoid the temptation of
taking reckless risks, either for us or for our customers. And I am
pleased to say that in Spain, after getting through the greatest
crisis in history, our clients have recovered, as you say here,
all their “dough”/money.
B. Fighting against financial exclusion and poverty. They will
continue to be very serious problems. lt is true that globalisation
and the technological revolution are positive forces for society,
but the speed of change gives rise to winners and losers
among countries, cities, neighbourhoods, trades, social groups,
generations, in other words among people. Many run the risk
of being left behind. Therefore, our social commitment and our
contribution to social cohesion will be just as necessary as in
the past or even more so. >
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C. Another priority objective is to achieve a better banking regulation,
which involves rationalising the excessive regulatory burden.
Our aim is to attain a level playing field that promotes financial
systems that are both efficient and fair.
D. Lastly, taking advantage of our customer relationship model,as against other models based on disintermediation and/or
virtual technologies. This last challenge is key to the continuity
of retail banking.
As I have already pointed out, we are immersed in the greatest
technological revolution known to man. Boosted by the digital
transformation.
The change we are experiencing is exponential and global in scope.
I am sure it will continue at a dizzying pace in the future.
Retail banks have to compete with the “Fintechs” and “Bigtechs”,
the big technology companies that dominate the world information
market and that you all know very well.
I am convinced that we will overcome the challenge if we are able
to capitalise on our great strength, which is the trust our customers
place in us. lf each of our employees has a good relationship with
our customers and strengthens the human and professional bonds
with them, then we will be unbeatable in our banking profession.
This is precisely my experience and personal conviction after dealing
with customers for over 50 years.
I will continue talking about our strengths as socially responsible
retail banks. In my opinion, we have some very powerful points in
our favour going forward, in both the short and long term. I believe
there are sound reasons for optimism that will enable us to turn
challenges into opportunities.
I will now focus on three factors: 1. Profitability; 2. Business model;and 3. Mission.
1) With regard to the first, profitability, it is quite clear to me that
we have enough time ahead of us to generate profitable
business. I trust that we will be able to take advantage of it.
The reduction in the intermediation margin – whose causes are
well known by all – can be offset if we achieve critical mass that
lets us operate with lower costs and attain all the scale
economies.
I propose two mechanisms to increase scale:
n Agreements between financial institutions, and
n Agreements through concentrations that enable us to keep
our brands and our culture.
Apart from these scale economies, we must, in turn, generate
scope economies through a broader range of products and
services that we can offer our customers and that increase
revenues via fees and/or with companies from within and
outside the group. For example, the entire range of: insurance;
investment funds and services; pensions; stock exchange
operations; foreign trade or real estate information services.
2) The second strength that I would like to highlight has to do
with our unique business model, whose backbone is financial
inclusion.
Socially responsible retail banks are suppliers for those who live
in: rural or remote geographical areas; marginal neighbourhoods
of large cities; or for those who, because of their youth or on
the contrary, due to their advanced age, do not have access to
other types of banking entities; micro-entrepreneurs who cannot
present more guarantees than their own talent and enthusiasm.
We want to fight against financial exclusion and we know how
to do it, after many years of experience in this endeavour. We
know the best formulae to do it effectively, profitably for the
bank while adding value to customers that other entities
disregard.
I would like, if I may, to summarise my personal experience in
CaixaBank, with the creation of a new brand, Microbank in 2007
– a mini-bank within a bank – with hardly any structure, as if it
were just another service, but using the bank’s own network of
almost 5,000 branch offices, which allows it to cover every inch
of the country. 2017 was its 10th anniversary, 10 years of
experience.
I will now present a summary of its activity during this short
period: More than 4,000 million euros granted in credits; 1,400
million euros in business projects and 2,600 million euros in
family aid, with positive results from the first year and an average
annual profit of about 25 million euros.
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The recorded losses on overdue loans amounted to 4.25%,
a figure that, with the European lnvestment Fund grants, fell to
2.87% – an excellent result considering that all operations are
granted without guarantees.
As a result, Microbank’s delinquency ratio – which stood at
3.68% at the close of 2017 – has always ranged between half
and one third of the average for Spanish banks.
On the other hand, ESADE, the prestigious Business School in
Barcelona – which is managed by Jesuits – has estimated that
the financing undertaken by Microbank has contributed to the
creation of almost 200,000 jobs, not an insignificant figure,
especially if you take into account the financial crisis and the
destruction of jobs during that period in Spain.
I wanted to present this real case to you, one in which I have
been heavily committed to from the beginning, because I firmly
believe it is an effective way to achieve profitability, while
fighting against financial exclusion. Should you be interested in
knowing more about Microbank, I will be delighted to provide
you with the necessary contacts.
3) Moving on to the third strength I wish to highlight, it is, as I am
sure you will agree, the most decisive of all. I am referring to the
social commitment, which stands at the highest possible place:
the mission of our banks.
Our social commitment acts as a very powerful motivating force
for all our stakeholders: customers, shareholders, employees,
suppliers, and lnstitutions. lt is also the axis on which the
objectives and actions of our stakeholders are aligned. I would
like to remind you that our association – which includes both
the ESBG and the WSBI) – champions the 3 “Rs” banking model:
Retail, Regional or Rooted, and Responsible.
And it is precisely this last “R”, where our commitment to society
lies. This translates into one of the main sources of development
aid and equal opportunities among the most vulnerable groups.
As chairman of the ESBG, I am pleased to inform you that the
contribution to the Social Work of our European Associates is in
the order of 2 billion euros per year – without counting the
corporate taxes we pay.
These funds are devoted to social and cultural programmes,
medical research and study grants, the fight against child poverty
and the creation of jobs, personal attention to the elderly and
the sick, and the defence of cultural and historical-artistic
heritage among other activities.
This special sensitivity towards social problems, and our
involvement in the efforts to solve them, is what differentiates
all the entities gathered here today. We try, with our attitude and
our activities, to contribute to improving our reputation while·
emphasizing the important social function that we carry out. Of
which we should all feel very proud.
Before I wrap my speech up, I want to insist once again on the fact
that local banks and savings banks are always willing to support
those activities and initiatives, whether public or private, that pursue
human development and the improvement in the quality of life.
This commitment must be made known to public institutions and
should be included in such international debates and forums as
significant as the G20, held this year under the presidency of
Mr. Macri’s Government, which is the main reason we have
gathered today in Buenos Aires.
Finally, I would like to address you, members of such “meaningful”
organisations, using the values of the ESBG and the WSBI, and in
coherence with those values. I want to say that, in my opinion, the
time has come when we are all obliged to give of ourselves and
demonstrate to society and the authorities of each country, with
projects and facts that the solutions to our big problems exist and
they are within our reach. We just need to discover them and give
them life, life to continue offering all our fellow citizens: the hope
of a job; the opportunity of feeling useful; enough energy to forge
with their daily effort: a life of meaning; a family, and almost surely;
a more just and equal society. lf we do this, we will not only
accomplish the objectives of the G20, but we will also feel fulfilled
as professionals and as people.
9 | News & Views MAY 2018
Learn more about the G20 event,download the speeches and newsstories at https://bit.ly/2E4hweFor by scanning this QR code.
WSBI makes further progresson UFA 2020 pledge
WSBI FIGURES IN-LINE WITH WORLD BANK FINDEX DATA SHOWINGFINANCIAL INCLUSION 'ON THE RISE' GLOBALLY
WSBI progress towards reaching its UFA2020 commitmenttook a further leap in 2017, the global association of savingsand retail banks said on 24 April.
Latest available data compiled by the Brussels-based institute point
to 234 million new clients as of 31 December 2017 from the UFA
commitment starting point set at year-end 2014. That means
WSBI's some 100 members had 1.674 billion clients as of year-end
2017. Relatedly, the number of new transaction accounts provided
by WSBI through 2017 stood at 2.457 billion, up 342 million based
on the end-of-2014 level.
Commenting on the progress made, WSBI President Heinrich Haasis
said: “It's another strong result from WSBI members who serve
customers in close to 80 countries. They have nearly met in 2017
their UFA 2020 goal of 1.7 billion customers and 400 million new
transaction accounts, which was foreseen to be reached by the end
of 2020.”
New Findex report shows global financialinclusion progress
The news comes as the World Bank Group updated in April its
FINDEX report, which showed financial inclusion is on the rise globally,
accelerated by mobile phones and the internet. An estimated
1.7 billion adults remain unbanked, down from 2 billion in 2014.
Nearly half of the world's “unbanked" live in seven developing
economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria,
and Pakistan. The FINDEX data show that 56% of all unbanked
adults are women and that half of unbanked adults come from the
poorest 40 percent of households within their economy, the other
half from the richest 60 percent. The data was presented in April
at the IMF-World Bank Spring Meetings in Washington.
A closer look at WSBI data
The 2017 year-end update showed a slightly faster growth rate on
the client and account fronts as compared with WSBI data released
in 2016 and 2015. That's good news, as progress made for the
2015 and 2016 time periods had already exceeded UFA 2020
commitment projections both in terms of total numbers of
customers as well as transaction accounts.
WSBI in 2016 announced 136 million new clients were signed up
as of 31 December of that year from the UFA commitment 2014
year-end starting point. WSBI members had 1.57 billion clients as
of year-end 2016. Relatedly, the number of new transaction
accounts provided by WSBI through 2016 stood at 2.35 billion,
up 236 million based on the end-of-2014 benchmark. In 2015,
WSBI reported that clients reached by its members was 1.55 billion,
while transaction accounts grew to 2.33 billion for year-end 2015.
Haasis concluded: "Progress by WSBI
members has accelerated in 2017
compared with the past three
reporting periods. Our overall
progress is in-line with the FINDEX
data update. Like that data, WSBI
data and anecdotal research
gathered show innovation and
digitisation are forces driving efforts
to tackle the financial inclusion
challenge. Banking breakthroughs on
the digital front go beyond sign-up
of new clients and accounts, but also
can boost chances that people
actually use the accounts."
10 | News & Views MAY 2018
FEA
TUR
E
WSBI’s commitment to UFA 2020 Goal
WSBI is a member of the Coalition of Partners that support the
World Bank Group’s Universal Financial Access (UFA) 2020 Goal.
At its meeting in Washington, D.C., on 23 September 2015,
the WSBI General Assembly announced a new UFA 2020 numerical
commitment that aims to reach 1.7 billion clients and 400 million
new transaction accounts by the end of 2020, based on the current
membership. This pledge reinforces WSBI’s continued engagement
with its ‘Account for Everyone’ goal launched by the trade body in
2012, which it re-endorsed in 2015 at the World Bank spring
meetings. The UFA commitment also forms an integral part of the
Washington Declaration issued the day after during the 2015 WSBI
World Congress .
WSBI recognises that achieving universal financial access by 2020
requires a collective effort. The institute is honoured to be part of
the initial Coalition of Partners who have been invited to contribute
to this global cause.
WSBI's global reach
An international banking association, WSBI brings together savings
and retail banks from around 80 countries representing the interests
of approximately 6,000 banks in all continents. As at year-end 2014,
members served a baseline total of 1.3 billion customers, which
includes providing accounts for the poor worldwide. It remains fully
committed to the ‘Account for Everyone’ goal adopted by its
members in May 2012 when reaffirming a deep commitment to
financial inclusion set out in our Marrakech Declaration.FE
ATU
RE
Learn more about WSBI'scommitment to UFA 2020 byscanning this QR code or by goingto https://bit.ly/2Iea6eM
11 | News & Views MAY 2018
Highlights: WSBI Conference duringG20 in Argentina
G20 AND LOCALLY FOCUSED BANKS – GOOD FOR SUSTAINABLE SOCIETIES
More than 400 people attended a WSBI conference held on21 March in the context of the 2018 G20 Argentina presidency.Held at the Casa Central Banco de la Nación Argentina inBuenos Aires, it explored the important role locally focusedWSBI member banks have to play in the stability of thefinancial system at national and international levels.
Conference participants especially explored pressing issues for retail
banking in the framework of G20 Argentina Presidency priorities,
such as better regulation, financial inclusion, digitisation and
sustainable finance. The event also fostered a constructive dialogue
between industry and policy-makers, as well as discussions and
exchanges with like-minded organisations.
WSBI President Heinrich
Haasis set the stage for the
one-day event, providing a
welcoming address. He
noted: “The event hopes
for constructive dialogue to
occur between my
colleagues from WSBI-ESBG
member banks, along with
stakeholders and policy-
makers. The event also
gives us a chance to see
how some of the G20
themes from the Argentina
presidency fit into our
banking model.”
He also provided food for thought for policymakers when designing
policy that affects their banks. He urged that policy help boost
access to traditional bank financing for SMEs and put in place
targeted banking rules designed to take into account a bank’s
specific business model, size and risk, avoiding a “one-size fits
all approach”. He also stressed the need to promote models of
financial inclusion and financial education.
Diego Prieto Rivera, president of the WSBI Latin America and the
Caribbean Regional Group and president of Banco Caja Social,
Colombia, also addressed the audience in the Argentinian capital.
He noted that savings and retail banks in the Latin American and
Caribbean region have a deep desire to serve their communities
with financial solutions that support the real economy – households
and micro-, small- and medium-sized enterprises.
Locally focused banks can help close the “globalisation rift”,
he added, but to do so, it requires that regulation takes into account
their specific nature as well as local nuances within domestic
economies and financial systems. Regulation must also connect the
dots between developing economies and the global economy,
international capital markets and financial systems of developed
countries. He noted that the financial crisis was essentially a crisis
of the developed countries that had little influence on the financial
systems of developing countries, but much more their economies.
A consequence of the crisis was that foreign direct investment
dried up in many countries as the “flight to quality” took hold.
This complicated the work of the G20.
Isidro Fainé, president of
Fundación Bancaria “la
Caixa” in Spain, who also
serves as ESBG president,
provided a keynote address
on financial Inclusion,
economic and social
development. He explored
two G20 themes: the future
of the workforce and infra -
structure for development.
Financial inclusion, training
and education and skills
acquisition to address
workforce challenges are
important to WSBI members in the Americas, where some
130 million people now seek banking services from them.
Examples from the region include those from Peru member
FEPCMAC (Federacion Peruana de Cajas Municipales de Ahorro y
Crédito), BancoEstado in Chile, El Salvador’s Fedecrédito’s and
Banco Caja Social in Colombia, which are featured in a new WSBI
publication “Banking.Serving.Thriving.: The impact savings andretail banks make to boost the real economy while giving back tothe communities they serve in Latin America and the Caribbean.”
G20
12 | News & Views MAY 2018
See Mr. Fainé’s address starting on page six of thisedition of News & Views.
Javier Gonzalez Fraga, Chairman, Banco de la Nación Argentina .
Panel discussions
Dialogue among stakeholders began after opening addresses with
a breakdown of the G20 presidency and how it applies to Latin
America and the Caribbean region. Exchange took place between
Andrés Neumeyer, deputy general manager of economic research
under the Argentina G20 presidency; Business 20 Chair Daniel
Funes de Rioja; IDB Invest Chief Investment Officer Gema Sacristán
on behalf of IDB President Luis Alberto Moreno; and Banco de la
Nación Argentina Chairman Javier Gonzalez Fraga.
The first panel explored better regulation for better inclusion,
bringing together Diego Prieto Rivera as moderator with Gabriel
Bizama, G20 director for financial inclusion from the Argentinian
treasury ministry; Yolanda Cue López, deputy general director of
financial inclusion at Banco del Ahorro Nacional y Servicios
Financieros (BANSEFI); José Francisco Demichelis, senior financial
markets specialist at the Inter-American Development Bank, IDB
Group; and Lucas Llach, a vice president at Banco Central de la
República Argentina , the South American country’s central bank.
The second panel took a digital path, looking at how best to build
a financial business ecosystem in the digital age. IFC’s SME Finance
Forum CEO Matt Gamser led the discussion with panellists
that included Afluenta founder and CEO Alejandro Cosentino;
Above and Beyond (A&B) CTO and FINCONECTA/FINFORWARD’s
Mauricio Lorenzetti; Esteban Pérez Caldentey, chief of the financing
for development unit at the Economic Commission for Latin
America and the Caribbean (ECLAC); and Fedecrédito of El Salvador
President Armando Rosales.
Panel 3 focused on sustainable finance, with Silvia Pavoni,
economics editor of The Banker magazine moderating exchange
between Maria Paz Uribe Estrada, head of international banking at
Findeter in Colombia; CaixaBank International Relations Director
Joan Rosás, and Carlos Serrano, who leads business development
lead for the region at the International Finance Corporation,
World Bank Group.
Why the conference is important
Locally focused banks support the real economy, primarily through
lending to small- and medium-sized enterprises and private
households. They have the necessary in-depth market and customer
knowledge and the required customer proximity to combine security
and dynamism, reliability and competitiveness. They represent a
diversity of business models and market proximity via decentralised
structures. In this way, locally focused banks can provide an
effective and granular distribution of risks in an internationally
connected economy.
It is essential that the decisions and initiatives of the Argentine
presidency of the G20 take sufficient account of locally focused
institutions.
This primarily includes:
n strengthening access to traditional bank financing for small and
medium sized businesses;
n implementing targeted regulation, oriented towards a bank’s
business model, size and risk;
n promoting models of financial inclusion and financial education.
Providing a conference wrap up, WSBI Managing Director Chris De
Noose concluded: “I think that the conference allowed us to show
that WSBI and its members can be a force that helps make our
society more sustainable. I trust that we can continue this quest
going forward.”
13 | News & Views MAY 2018
G20
Learn more about the G20 event,download the speeches and newsstories at https://bit.ly/2E4hweF orby scanning this QR code.
WSBI publishes positions for G20decision makers
WELCOMES ARGENTINA FOCUS ON FUTURE OF WORKFORCE,INFRASTRUCTURE
WSBI released on 18 March its Institutional Positions to G20decision makers. The 16-page document follows closely thethemes of this year’s G20 Argentina presidency: the futureof the workforce, agrifinance and infrastructure.
Titled WSBI’s Institutional Position to G20 decision-makers: BuildingConsensus for Fair and Sustainable Development, it welcomes the
G20 Argentinian presidency call to continue the G20 German
presidency’s initiative to further strengthen the international
financial architecture and global financial safety net.
The G20 has highlighted risk associated with volatility, macro -
prudential measures and capital flow management tools, and
pinpoints seven policy areas of particular interest to WSBI, including
the appropriate regulation for better economic growth, the pressing
need for impact assessment, proportionate legislation and SME
financing and de-risking.
The future of work: unleashing people’spotential
Financial education was addressed in the WSBI paper as a way to
address the Argentinian presidency’s position on the importance of
providing citizens with tools and skills, empowering them to shape
their own futures. The association notes that financial education
should be a “continuous process that constantly adapts to the
changing social, financial and political context, and where several
actors from different sectors of society shall play a key role in
improving its efforts.”
Policymakers should build upon the experience of savings and retail
banks, including public banks, for the development of financial
inclusion policies, for the promotion of an entrepreneurial culture,
and to improve the access and the use of financial services by
vulnerable populations.
The WSBI position paper also flags policies needed to embrace the
opportunities and address the challenges presented by technology.
It also touches on promoting the development of inclusive finance
and contributing to the sustainability of inclusive finance. It also
looks at the need for developing digital skills, where it calls on policy
that ensures that everyone has the right skills for an increasingly
digital and globalised world, which is essential to promote inclusive
labour markets and spur innovation, productivity and growth.
Financial inclusion and financial education initiatives can also
indirectly empower citizens regarding their digital skills. The paper
outlines how financial inclusion needs to be viewed from a gender
perspective, especially for women. WSBI also sees need for greater
effort to include migrants in the formal banking system. The work
of development financial institutions also will be important in the
workforce development puzzle. WSBI sees the Inter-American
Development Bank Group (IDB Group) as a strong ally for WSBI and
its members in this area.
Infrastructure
WSBI agrees with the G20 approach to developing infrastructure
as an asset class, particularly by improving the instruments designed
to fund infrastructure projects. To ensure more investment, it calls
for ensuring a level playing field among finance providers for long-
term financing projects. WSBI added that in the area of blended
finance, WSBI welcomes and fosters public-private partnerships in
the framework of blended finance strategies. Working with
development funders via strategic partnerships – be it foundations,
development finance institutions, World Bank Group and actors
alike – forms the core of sustainability-minded banks.
Improving agri-finance to reach a sustainablefood future
On agri-finance, actions are needed to increase both public and
private investments in agriculture or agri-aligned sectors. Recent
innovations have also paved the way for several new and promising
delivery mechanisms for agri-products and services and are creating
important opportunities for the sector to grow. To be successful
these solutions need to be supported by governments through the
development of enabling regulatory frameworks and policies which
support climate resilience. Without access to finance, rural
smallholders are extremely limited in their ability to expand and
meet the rising demand for agriculture.
WSBI provides a laundry list within the paper of policy and measures
required to support agriculture, including the need to support the
availability of lines of credit through both public and private
financial institutions for smallholders, providing agricultural
information on insurance markets, and incentivise banks to extend
partial credit guarantees to farmers.
WSBI position paper shared at WSBI conferencein Buenos Aires
The paper complements outreach and advocacy efforts done in
March by WSBI. The association of savings and retail banks,
representing 6000 banks in 80 countries, also held a conference on
21 March in Buenos Aires on the sidelines of the G20 meetings.
G20
14 | News & Views MAY 2018
WSBI joins B20 task force for second straightyear
WSBI also takes part in G20 through B20 task force work. WSBI
received news recently that will be a member once more in the B20
Financing Growth & Infrastructure Taskforce under the new
Argentinian presidency, the second time it will take part in the body.
WSBI advocated to the B20 in 2017 its ‘better regulation and
evidence-based regulation’. Efforts paid off, as the G20 committed
at the Hamburg summit held last year that it would work to finalise
the Basel III framework without further significantly increasing
overall capital requirements across the banking sector, while
promoting a level playing field. It also supported the necessity to
analyse the effects of financial regulatory reforms and the
structured framework for post-implementation evaluation.
15 | News & Views MAY 2018
G20
Download the G20 InstitutionalPositions Paper athttps://bit.ly/2J4VvQH or byscanning the following QR code.
G20 Declaration
BUILDING CONSENSUS OF FAIR AND SUSTAINABLE DEVELOPMENT
WSBI released in March a declaration addressing policy themesoutlined by the G20 Argentina presidency. The declaration isbased on the document titled ‘WSBI Institutional positiontowards G20 decision-makers’ also published in March.
Leave nobody behind in the digital age
Economic research shows the benefits of globalized trade relations.
However, globalization also increases economic and social inequality,
since some people are more skilled and have access to better
resources and infrastructure than others have. The digital revolution
further exacerbates this inequality. Individuals, organizations or
companies without the required mindset; the necessary skills or
the indispensable financial and logistical resources are at risk to be
left behind.
An inclusive, fair and sustainable financial system that offers all
households and companies appropriate access to financial services
is a key element for the stability of the financial system and the
global economy. Locally focused financial institutions such as the
WSBI members can help bring a maximum of people in the financial
system. Indeed, WSBI members are close to their customers and
have a long-term perspective. They are ideally placed to help people
better navigate their financial future in an inter-connected world.
Same risks, same rules
In order for locally focused banks to cater to their clients’ needs in
an efficient way, banking regulation should take into account the
principle of proportionality. Efficient regulation needs to consider a
bank’s business model, size and risk profile. Currently, local banks
in particular are hampered by one-size-fits-all-regulation.
A much-needed framework for digitalized finance needs to create
the right environment for innovation in the financial sector and
protect both companies –incumbents as well as newcomers - and
customers. Regulators need to act on data protection, e-identity,
and cyber security, among others.
Strengthening access to traditional bankfinancing for small and medium-sizedbusinesses
The role of banks in fostering investment should be well recognized.
The capability of banks to fund investment should not be impacted by
the regulatory framework such as the rules on capital requirements
and liquidity. These rules increase significantly minimum capital
requirements for banking institutions, especially for smaller banks.
WSBI encourages regulators to design policies that could boost
bank lending for infrastructure projects and that involve SMEs.
In the developed and the developing world alike, SMEs are able to
rapidly transmit innovative solutions to the global economy.
Small and medium-sized enterprises representthe backbone of the world economy.
In order to remain competitive, SMEs absolutely need to have
unrestrained access to traditional bank financing. Bank financing is
not only the most accessible source of capital, but it guarantees the
SME also the competent advice of the financial adviser, especially
in the case of local banks. Indeed, local banks, such as the WSBI
members, are able to achieve an effective and granular distribution
of risks in an internationally connected economy.
Excessive regulation restricts the ability of banks to supply the real
economy with credit.
Promoting a policy framework for financialinclusion
Policy support is required to advance financial inclusion commitments
from all stakeholders involved. The goals must be to achieve a
stable, sustainable financial system, which offers appropriate access
to financial services for all households and businesses. This is the
key to sustainable, worldwide economic growth, which develops
from the bottom up and in which everyone can participate.
In this context, WSBI points to the far-reaching consequences of
de-risking. The most worrying aspect of de–risking is the fact that
citizens and businesses alike still need to make payments and if
traditional banking channels are no longer available, transactions
are likely to be forced into alternative channels, which may be less
well regulated.
In a certain way, de-risking represents a regulatory failure.
Financial education as a door-opener forinclusion in a globalized world.
Ensuring that everyone has the right skills for an increasingly digital
and globalized world is essential to promote inclusive labour
markets and spur innovation, productivity and growth.
WSBI particularly welcomes initiatives to enhance digital skills of
the youth, such as the digital opportunity initiative launched by the
European Commission, aimed at boosting digital skills on a cross-
border basis through internships.
WSBI also points to the importance of financial education for all
segments of the population: young people, employees but also
business starters. Financial institutions, public authorities and
non-governmental organizations should collaborate to make sure
citizens have access to objective and accessible information
throughout their life cycle.
G20
16 | News & Views MAY 2018
WSBI joins B20 task force for secondstraight year
FOCUS ON FINANCING GROWTH & INFRASTRUCTURE
WSBI received news earlier this year that it will be a memberonce more in the B20 Financing Growth & InfrastructureTaskforce under the Argentinian presidency.
This is the second time WSBI will take part in the body. WSBI
participated in the task force for the first time during the 2017
German presidency, where it advocated its “better regulation and
evidence-based regulation” to the B20.
Efforts paid off, as the G20 committed at the Hamburg summit
held last year that it would work to finalise the Basel III framework
without further significantly increasing overall capital requirements
across the banking sector, while promoting a level playing field.
It also supported the necessity to analyse the effects of financial
regulatory reforms and the structured framework for post-
implementation evaluation. WSBI looks forward to working
with other B20 working group members to develop policy
recommendations.
About B20 Task Forces
B20’s trademark is the development of consensus-based concrete
policy proposals from the private sector with the objective of
generating more and better jobs, sustained growth and
development. The process involves the constitution of taskforces
(TFs) of around 100 business representatives of the entire G20 and
invited countries. After a seven-month period of discussions,
the B20 will be ready to submit its policy recommendations to the
G20 leaders. B20 Argentina proposed the Financing Growth &
Infrastructure Task Force along with seven others.
Financing Growth & Infrastructure(From B20 website)
Infrastructure has long been recognized by G20 leaders as a
fundamental driver for economic growth. Physical and digital
connectivity ensures inclusive, safe, resilient and sustainable human
settlements. The last decades have witnessed an extraordinary
urban growth and the trend is expected to continue, but adequate
infrastructure and a reliable energy matrix allow regional economies
to flourish, while digital infrastructure and collaborative efforts
allow innovation to occur in every community, fostering investment
and trade.
But most importantly, infrastructure is essential to guarantee a good
quality of life and, ultimately, to sustain the social contract between
communities and the state. Estimates indicate that between 3-4%
of the global GDP needs to be invested each year in infrastructure
to achieve the growth goals and projections of G20 countries.
According to estimates, in some regions like Latin America,
investment needs may reach 8% per year as the infrastructure gap
includes electricity access and drinking water coverage for rural
populations.
Yet still an extremely insufficient ratio of the world’s financial funds
is directed towards long-term infrastructure investment. This has
been a staple of past B20 discussions, but more needs to be done
and clear milestones need to be set to measure success.
17 | News & Views MAY 2018
G20
Learn more about the B20 atwww.b20argentina.info or byscanning this QR code.
G20 Argentina: Focus on futureworkforce and infrastructure
SAVINGS AND RETAIL BANKS PLAY A ROLE ON BOTH THEMES
A closer look at G20 and its importancewith WSBI’s Aimée Suarez.
The globally connected world and economy
is complicated, sometimes turbulent and
increasingly leading to people calling for
change in how it is managed and how it
should better benefit society. People are
wriggling out of the 10-year aftermath of
the financial crisis, and pockets of growth
appear in most places, including Argentina, the host of this year’s
G20. Two themes for this year’s G20 are especially relevant.
G20 key themes: the future of work,infrastructure for development
The first key issue is the future of work. The Argentine G20
presidency has stated that technological
change sweeping the global economies has
huge potential to improve our lives and
economies. Policy responses are needed in
the wake of technological changes that
should not “engender exclusion” and
“social backlash”. The hope is that through
coordinated policy, governments can
prevent these negative effects. Education
and training will play a big part. The second
key issue is infrastructure for development.As organisers rightly note, infrastructure
is critical to development. Infrastructure
investment has knock-on effects that boosts growth and
productivity. They correctly point out that infrastructure provides
not only physical access – via roads, bridge, but also schools and
hospitals – for citizens to seize the promise of the future economy,
but also digital access in the form of high-speed internet access that
provides a boost to local economies.
So what role does WSBI and its 6,000 savings and retail banks
play to address these two themes? The answer is threefold. First,
G20 provides a forum for WSBI and its locally focused member
banks to showcase to policymakers and stakeholders what they do
and how they impact local communities – and local economies –
when living in a globally connected world. Second, G20 gives us a
chance to engage with its implementing partners like the IMF, FSB,
the World Bank, OECD and the United Nations to take part in
consultations related to new policy initiatives, principles and
guidelines managed by the G20 partners. Third, the two G20 key
topics just mentioned align well with what locally focused savings
and retail banks strive to do every day to build the future:
an inclusive future. That means inclusive growth where everyone can
taste and benefit from the fruits of globalisation. In many regions,
WSBI members are the only financial institutions that continue to
cater to the financial needs of households, SMEs and local authorities.
Future workforce needs financial inclusion,financial education, digital skills
As recent data show inequality widening between rich and poor in
many countries around the world, people are looking for new ways
to narrow that gap. There are solutions. To start with, it begins with
being able to be a part of society economically and financially.
Financial inclusionThe future of the workforce depends on key areas such as financial
inclusion, financial education, and workforce education and
training. First, financial inclusion is a pathway to banking services
and economic prosperity. Savings and retail
banks, governments and international
bodies place high importance to it. Being
financially included – and digitally included
– means people are also plugged into the
social aspects too. That means easier access
to benefits from government agencies and
improving prospects to establish a micro or
small enterprise. That’s why it is especially
important to find frameworks that help
move people into mainstream banking
services.
Financial and digital educationSecond, financial education and financial inclusion. WSBI and its
6000 member banks worldwide also place much weight on
financial literacy and financial education to help unleash people’s
productive potential. On financial education, it is important to
provide citizens with tools and skills, empowering them to shape
their own futures. Promoting financial education for all citizens
worldwide and continue to carry out a wide range of initiatives
aimed at not only preventing social and economic exclusion, but
also providing citizens with a better knowledge of financial issues,
enabling them to make informed choices and to gain the adequate
skills for full insertion into the labour market. Financial education
should be an endeavour of governments, consumer-organisations
and financial institutions alike and should be available to citizens
from “cradle to grave”.
Policy can also address the digital divide too. When people are
armed with the skills to tap into the “digital wave” sweeping over
industries – including banking – then society benefits.
18 | News & Views MAY 2018
Aimée Suarez
The future of theworkforce depends keyareas such as financial
inclusion, financialeducation, and
workforce educationand training.
G20
It is also important that banks “deliver” on the digital front and do
so while delivering to all segments of the population. With the right
support from policymakers, policy can help, not hinder digitally led
financial inclusion efforts. To be financially included, people need
to be digitally savvy too. The G20 Argentina Presidency puts
digitalisation high on the agenda, which shows a willingness to
explore possible effects on financial stability and financial inclusion.
What is clear is that when people lack the required skills and
knowledge, including on the digital front, the chances of becoming
economically excluded rise. A sound public policy framework can
help address these needs. Financially excluded citizens should be
given the chance to improve their training and knowledge through
programmes for financing their studies via micro credits.
Economic development, social development,SME financing
On economic development, we agree with the G20 that infrastructure
will play a big role. The G20 identifies a worldwide infrastructure
spending gap, which is projected until 2035 to be around US$5.5
trillion. To close that gap, mobilising private investment will help,
including long-term financing. Developing infrastructure, including
financial infrastructure and physical infrastructure – like mobile
networks – should be addressed.
Policymakers should keep in mind the need by banks in developing
countries for long-term financing. When that is achieved, banks can
fulfil their social role.
Policy support is also required to advance financial inclusion
commitments, in terms of policy guidance and incentives, to
promote and accelerate the building of social credit schemes.
Coordination should be enhanced at national level to make sure
that central banks, finance ministers and banking supervisors work
hand in hand with national authorities and bodies in charge of
non-financial areas.
The savings and retail banks are ideally placed to finance the
businesses that will help build the infrastructure needed. We see a
big role for more mature SMEs in this respect. A healthy micro-
business ecosystem is also needed to ensure a robust business fabric
in a community. We help micro- and small enterprises in the early
stages of creation, when no other bank is willing to place a bet.
They do this through decentralised credit
approval procedures and the fact that we
don’t focus on short-term profits, but long-
term relationships and community need as
our banks are an integral part of the local
economic fabric.
To help entrepreneurial spirits, however,
people need to have the right skills. The lack
of entrepreneurial skills, such as business skills
and financial literacy, can be a barrier to
success for potential entrepreneurs. WSBI
members undertake efforts to help through
financial education programmes, including for
youth. Empowering vulnerable groups via
financial education remains one of WSBI’s
priorities. As such, WSBI members also
undertake efforts to empower women.
Socially responsible savings and retail banks
have role to play to tackle growing inequality.
By keeping in mind the values under the three Rs – retail, regional,
responsible – we can tackle the great challenges ahead.
19 | News & Views MAY 2018
Learn more about the G20 event,download the WSBI G20 declarationand more at https://bit.ly/2E4hweFor by scanning this QR code.
G20
ESBG: 2017 year in review,what’s ahead in 2018Last year was marked by further change, perhaps most notably as
digitisation continued to shape our lives, Brexit moved forward and
global forces shaped our world. Change in the banking was in full
swing, as the digital wave continued while EU and global banking
legislation remained a heavy load to bear. The low interest rate policy
regime lingered. With this backdrop, we acted more than ever.
We shared our locally focused banking model with policymakers
and stakeholders, especially our case for proportionality. We pressed
on with our case for subsidiarity and aiming to end the low interest
rate policy. We continued to push for a fair outcome on Basel
reforms. ESBG helped savings and retail banks thrive, focus on
providing service to local communities and boost job-creating SMEs.
Prudential legislation
Prudential topics remain a lingering top policy priority at international
and EU levels. Towards the Basel Committee on Banking Supervision
(BCBS), ESBG – as well as EBIC – reiterated several times its position
in the context of “Basel IV”, underlining the importance of a good
and sensible agreement without undermining neither the IRB
models nor the standardised approach. ESBG remains highly active
in following the adoption of the Risk Reduction Measures package,
with specific attention to the resolution part.
European Supervisory Authorities
A notable action in 2017 was the ESBG reply to the European
Supervisory Authorities’ operations consultation – known as the
ESAs review. In our response, we highlighted the need to keep
the funding structure in line with the role of the authorities as
responsible for the public good and accountable to the legislator.
ESBG also pointed out some shortcomings about the functioning
of these authorities, accompanied with some constructive
suggestions in terms of governance, mandate and tools.
Proportionality: front and centre
Proportionality remains high on the agenda of ESBG and European
Union – including at global level – as illustrated by the recent
Financial Stability Institute report and the IMF work stream. ESBG
and sister association WSBI seek to convince regulators and
supervisors to apply it. The risk-reduction package is currently the
main vehicle in the European Union for this purpose. Efforts are
being made towards ironing out the proportionality concept in the
amendments to the proposal. Support from various sources –
academic, economic, political – is being sought on this concept in
the interest of the savings and retail banks model.
Capital Markets Union
The mid-term review of the Capital Markets Union initiative was
published on 8 June 2017. The review consists mainly of a stock-taking
exercise on achievements on prospectus review, securitisation,
venture capital and social entrepreneurship funds. ESBG continuously
reiterated the crucial role of the banking sector in this context and
participated in the industry-led initiative on SME feedback. ESBG
has also developed contacts and a position on sustainable finance,
which will fuel the reports expected from the Commission’s high-
level expert group on sustainable finance in the CMU context.
Action Plan on Consumer Financial Services
The action plan on consumer financial services is another pillar
of the European Commission’s plan for
improving cross-border consumer protection
and service quality. While being overall
positively assessed by ESBG, cross-border
e-identity checks, common credit worthiness
assessment standard, regulatory treatment
of FinTech, switching enlarged to retail
financial services products and quality
comparison websites are the areas where
ESBG has started reflecting upon and
sharing its preliminary thoughts through
contacts with the decision-makers – in
particular the Commission and interested
MEPs. On payments-related actions, ESBG
has responded to the Commission’s
consultation, indicating that there is no
need to expand the current cross-border
regulation to non-euro currencies.
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Charter for Responsible Business
The Charter for Responsible Business was updated this year.
It shows our commitment to socially responsible banking and
sustainable development with a ‘digital dimension’. A section
addresses the reality of digitisation, placing focus on client
protection, inclusion and tackling exclusion in multiple ways.
Digital change: Innovation move forward
The digital sphere affected banks in 2017. ESBG made considerable
efforts to help banks unleash digitally led innovation in their banking
business models through innovation events. We held innovation
workshops in Brussels and the business forum in Barcelona, which
brought members together to shape the future of 21st century
banking via best-practice exchange. ESBG experts work on several
digital work streams, supporting policy that fuels innovation
through a level-playing field and keeps in view customer protection.
Payments (PSD2 and RTS)
Payments was an important topic during 2017 as well. With the
PSD2 due to be transposed into national law in January 2018, the
industry was eager to get more clarity on the Regulatory Technical
Standard (RTS) on authentication and communication. Whilst the
initial proposed text from the EBA contained a clear ban against
screen-scraping, the Commission decided to introduce a fall-back
option based on screen-scraping. This led to strong reactions from
ESBG and the banking industry. Based on this, the Commission
introduced the possibility of an exemption from having to provide
the fall-back option subject to conditions. ESBG is involved in the
group to help set the criteria for those exemptions.
Cybersecurity
Last but not least, cybersecurity got increasing attention during
2017, and the Commission even dedicated a specific ‘cybersecurity
month’ to this topic. ESBG welcomed the Commission’s set
of measures to build strong cybersecurity in the European Union.
Achieving cybersecurity through prevention and deterrence, detection,
and last “remedy and repression” is the key determinant to a digital
society. Cybersecurity is high on the ESBG agenda for 2018.
Meetings with high-level EU policymakers,stakeholders and standard-setters
WSBI-ESBG held meetings this year with EU and international
institutions and policy makers. At European level, we met with EU
Commissioner Dombrovskis, responsible for Financial Stability,
Financial Services and Capital Markets Union (DG FISMA) as well as
Peter Kerstens, Co-Chair of the Taskforce on Financial Technology
(DG FISMA). A lot of interactions have taken place with Ralf Jacob
(DG FISMA) too. ESBG continued its dialogue with the European
Central Bank too. We held regular high-level and working-level
meetings, including one on 19 May with Sabine Lautenschläger.
We also met with Andrea Enria, Chair of the European Banking
Authority. We engaged European parliamentarians, oftentimes at
technical-level. In 2017, we became a Supporting Member of the
European Banking Institute (EBI) to help develop cross-EU academic
research on European banking regulation and supervision. By being
a Supporting Member, an ESBG representative serves on the EBI
Advisory Board.
Coming together: Events, communications,knowledge sharing
Communicating our positions requires the right tools, which
includes our website and social media. We improved them in 2017,
with the WSBI-ESBG website going through a second revision in the
last two years. The site is even easier to navigate and more
“searchable” while our social media presence expanded too.
Knowledge sharing flourished, with a full slate of events like our
Business Forum in September in Barcelona, which focused on “retail
banking reimagined.” Before then, bankers and policymakers
convened at the annual Retail Banking Conference in June to
explore proportionality and sustainable banking. EU Commissioner
Katainen headlined that policy-focused event. WSBI-ESBG held
workshops on innovation, SME financing in Europe, proportionality
and the history of financial education. The high-level G20
conference in Berlin shared our locally focused, retail banking model
at global level. The Innovation Conference in Brussels explored
digitisation and how members approach it. We look forward to a
full slate of high-impact events in 2018.
ESBG looks to continued support from members in 2018 as their
effort and commitment form the roots of our success.
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Learn more about ESBG atwww.wsbi-esbg.org/About-us/About-ESBGor by scanning this QR code.
EU Commission FinTech Action Plan:A welcome next step ESBG SEES NEED TO ENSURE A LEVEL PLAYING FIELD
Below is ESBG’s response to the EU Commission FinTechaction plan released on 8 March.
ESBG welcomed the EU Commission FinTech Action Plan, with
Managing Director Chris De Noose saying: “We are especially happy
to see a neutral definition of FinTech, ‘technology-enabled financial
innovation’, as many of our members are avid users of FinTech.”
On crowdfunding
Regarding the new crowdfunding proposal, crowdfunding and
peer-to-peer lending platforms should abide by the same legislative
measures as banks. What is therefore needed is a comprehensive
EU approach – treating platforms like regulatory trading venues or
payment institutions. This approach secures a level playing field,
enabling platforms to scale cross-border, and at the same time
securing reliability and trust through a proportionate and effective
risk management framework.
However, the Commission is in favour of developing a proper legal
framework for crowdfunding across the EU to ensure appropriate
investor and consumer protection. Potential areas of harmonisation
are platforms’ disclosure requirements, registration requirements
and investor protection rules. ESBG is concerned that this option as
the “opt-in” element will imply that there is no level playing field
among platforms. National platforms could gain a regulatory
advantage compared to cross-border platforms due to potential
less-demanding local regulations. Furthermore, a lack of reliability
in local platforms operating below ‘best practice’ standards could
have a negative contagion upon the trust in cross-border platforms.
Finally, existing regulations of credit institutions,
credit intermediators and investment firms
should be taken into account in order to reflect
the nature of the platforms different services
and nature.
Remaining action plan topics
With respect to the remaining topics of the
plan, ESBG supports the Commission initiative
to address identified regulatory gaps and will
contribute to the best of its ability in this
respect. To that end, ESBG would be interested
in nominating representatives to the expert
group to review the fitness of the EU financial
services regulatory framework as planned by
the Commission.
Savings and retail banks throughout the
European Union have taken great strides to acclimate themselves
to the digital transformation. The most recent development in this
ongoing process is distributed ledger technology. This topic greatly
interests us. We will endeavour to provide input in the planned
consultation and will follow Commission’s activities with great interest.
Lastly, ESBG is looking forward to the public-private cybersecurity
workshop planned for the second quarter of 2018. We see that
these types of activities are important in the realm of cybersecurity
because service providers must constantly adjust and refresh
measures designed to protect data to mirror the constantly evolving
technology and thus new threat profiles. Any potentially new
legislation should be assessed against the risk of altering the level
playing field, meaning that only some players should not be
required to invest disproportionately in order to counter the new
risks imposed on their supply chain.
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See the European CommissionFinTech action plan athttps://bit.ly/2HwsJqv or byscanning the following QR code.
Commission action plan key mile stonein EU sustainable finance strategy
LOCALLY FOCUSED RETAIL BANKS BEST PLACED TO SUPPORTTHE COMMISSION’S WORK
The following statement from ESBG responds to the 8 Marchrelease of the European Commission Sustainable FinanceAction Plan.
The European Commission’s long-awaited action plan on sustainable
finance published today is an important milestone in the EU strategy
to focus on green and social financing.
ESBG Managing Director Chris De Noose said: “Europe’s savings
and locally focused retail banks are best placed to support the
Commission’s work on sustainable finance. The first action on
developing an EU Taxonomy is particularly welcome. Having widely
accepted definitions should contribute towards improving the
general understanding of what can be considered as ‘green’. What
should be intended is to ultimately foster the financing of a green
economy in the regions and consequently boost jobs.”
ESBG members are concerned, however, about action 6 – integrating
sustainability in ratings and research. Integrating environmental,
social and governance (ESG) factors into disclosure requirements
should not place additional burden on savings and retail banks and
therefore restrict certain activities.
We value that the Commission is proceeding with ambition and
caution on green or social supporting factors. Those factors require
further discussion, and in much greater detail, within the expert
groups to see how best to proceed.
Expert groups: ESBG ready, willing
ESBG is most willing to contribute to expert groups which are being
set up by the Commission on different topics, in particular in order
to amend key directives – such as the revised Markets in Financial
Instruments Directive and the Insurance Distribution Directive – to
include sustainability factors in their rules. We will surely be willing
and able to submit input on sustainable finance gathered from our
members that policymakers should find highly valuable.
Background
Based on the High-Level Expert Group report released earlier this
year, and setting out priority action points to be carried out over
the next 18 months, the plan aims to:
n Reorient capital flows towards sustainable investment, in order
to achieve sustainable and inclusive growth;
n Manage financial risks stemming from climate change,
environmental degradation and social issues; and
n Foster transparency and long-termism in financial and economic
activity.
23 | News & Views MAY 2018
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See the ESBG position onsustainable finance athttps://bit.ly/2Gjkj9T or byscanning the QR code
See the European CommissionSustainable Finance Action Planat https://bit.ly/2tq0pE5 or byscanning this QR code.
Workshop on Proportionalityin Banking Regulation
VIEWING PROPORTIONALITY UNDER SCHOLARLY LENS
Policymakers, researchers, banking industrydebate need for principle
More than 100 participants took part on 7 March
in a conference called “Fostering a diversified
banking market through proportionality” in
Brussels. The European Banking Institute (EBI)
event on proportionality, co-organised by the
European Savings and Retail Banking Group
(ESBG) and the European Banking Federation
(EBF), was hosted at the Single Resolution Board
(SRB).
Divided into three sessions, the event focused on
reflections around the concept of proportionality
and the principle of proportionality in regulation
and supervision. These topics were discussed by
professors from several European universities and
research institutions as well as representatives
from the financial industry, supervisory authorities and policy -
makers.
The perspective of retail and savings banks was presented by ESBG
Managing Director Chris De Noose. “How could we ensure the
stability of EU banks whilst still making sure they had adequate
lending capabilities? The answer? Proportionality,” started his
opening remarks De Noose.
De Noose also emphasized that there is still more that should be
done so that Europe’s savings and locally-focused retail banks can
continue to be key players in ensuring that EU citizens have access
to finance. According to him, activities which do not pose a risk to
the financial system should not be subject to the same risk
reduction measures as those which could destabilise the system.
Ensuring the diversity of the banking systems and looking at the
social and sustainable role of a bank should also be taken into
consideration when discussing financial regulation measures.
Astrid Engel Thomas, head of the legal department at the Danish
local and savings banks’ association (LOPI), an ESBG member,
presented specific examples of challenges related to financial
regulation. She called for less administrative burden on local banks
and emphasized that “one size fits all” is not workable in practice.
This idea was also repeated by Markus Ferber, vice chair of the
Committee on Economic and Monetary Affairs at the European
Parliament. He added that same rules does not mean same efforts.
Although the rules applied to banks are the same, this does not
mean that the efforts required from them are the same.
The conference ended with a debate on proportionality in
supervision. Thomas Gstaedtner, in his role as the head of division
at the Directorate General Micro-Prudential Supervision II at the
European Central Bank, stated that there should be a combination
between prudential soundness and maintaining a level playing field.
Other speakers such as Isabelle Vaillant, director of regulation at
the European Banking Authority, stressed that supervision is still a
forward-looking territory to conquer and that transparency will be
crucial to achieving proportionality.
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See the speech by ESBG ManagingDirector Chris De Noose athttps://bit.ly/2pObA4g or byscanning this QR code.
More information about the eventat www.ebi-europa.eu
Shedding light on proportionality
ESBG’S DE NOOSE ADDRESSES EBI EVENT FROM SAVINGS &RETAIL BANK LENS.
Below are remarks from WSBI-ESBG Managing Director ChrisDe Noose to the EBI Workshop on Proportionality in BankingRegulation held on 7 March in Brussels.
It is important to shed light at this point in the public policy debate
on proportionality and banking rules from a savings and retail
perspective.
More than five years ago, in discussion with colleagues in the EBA
Banking Stakeholder Group, we decided that more was needed to
rebalance the choice made by the EU decision makers to apply the
Basel III framework in the same way to all banks. Financial institutions
were working hard to implement many complex regulations, and it
was clear that some banks should abide by a framework that
allowed them to continue their core
activities: the financing of Europe, mostly of
its households and SMEs.
But what could we do? How could we
ensure the stability of EU banks whilst still
making sure they had adequate lending
capabilities?
The answer? Proportionality. This long word,
which you will hear in nearly every sentence
today, was not very well known when the EBA BSG started its work.
It definitely existed; in the Basel Committee’s Core Principles, and
in the Treaty for the European Union, but it was not in the spotlight.
How times have changed! 18 months later, a detailed report was
issued by the EBA BSG which has been circulated widely among the
EU institutions, authorities and other stakeholders.
It has even been referenced in the excellent background paper
drafted by some of the EBI academics which will trigger the
discussion today. Titled “Stability, Flexibility and Proportionality:
Towards a two-tiered European Banking Law?”, this paper looks in
detail at the possibility of introducing a two-tiered banking system
in Europe as it is already the case in other parts of the world. Japan
and the United States are the examples quoted in this publication.
“Regulatory Relief”, as it is called in the US, is far more advanced
than the European proportionality principle.
The US Senate recently passed “regulatory relief” legislation for the
financial sector, which inter alia reduces the reporting, exempts
them from the Volcker rule, or from mandatory Dodd-Frank Act
stress testing. Europe is still progressing towards alleviating the
burden. Every single bank has to sift through every single EU text
to see what does – and perhaps more importantly does not – apply
to them. Let us take for example the current prudential and
resolution package which amounts to 595 pages for only the level 1,
which will become even thicker once the Risk Reduction Measures
package is adopted, or the MiFID 2 regulation, with its 1874 pages,
with the level 2 and 3 measures included. This burden must be
reduced, and quickly, before we find ourselves in a situation where
we cannot foster the growth of the EU economy and providing
more jobs to our citizens.
Proportionality will help us to ensure a brighter outlook on growing
our businesses. Proportionality is now being included in EU texts
such as the CRR II and CRD V, which will be discussed this morning.
There is a general consensus that it should also be included in the
ESAs regulations – the proposal was explicitly made to consider
proportionality in every impact assessment of the ESAs’ work.
Proportionality has been taken into account for disclosure, reporting
and remuneration, and a general definition
is being ironed out in the Parliament. But
there is still more that we should do so that
Europe’s savings and locally-focused retail
banks can continue to be key players in
ensuring that EU citizens have access to
finance. And this should not be limited to
the size of the institutions, as it is crucial to
capture the business models based in
particular on the following criteria:
n The first is to gauge the riskiness of a bank’s activities. Activities
which do not pose a risk to the financial system should not be
subject to the same risk reduction measures as those which
could destabilise the system.
n The second is to ensure the diversity of the banking system. It
has been proven that a diversified EU banking system reduced
the effects of the financial crisis and therefore should be
maintained.
n The third is to look at the social and sustainable role of a bank.
Look at how the bank operates within its town, its region.
Savings and retail banks have a commitment to their area to
provide access to finance, financial education, and support for
local infrastructure and green finance.
These tasks build a strong case that local banks should be supported
in their work and that proportionality is the best tool in the box to
achieve our goal.
I hope that the conference today will have lively discussions and
develop new ideas. Please, don’t be shy to ask your questions and
share with us your views. Thank you in advance to our panellists,
and many thanks to the SRB for providing us with this excellent
venue. Ladies and gentlemen, we hope that you will enjoy your day,
and that you will take with you our belief, and its concrete
implementation, in proportionality.
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How could we ensurethe stability of EU bankswhilst still making sure
they had adequatelending capabilities?
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ESBG responds to EBA Pillar 2framework review
COMMENTS ON SREP, IRRBB AND STRESS TESTING
ESBG responded in late January to the EBA consultation onthe review of its Pillar 2 framework for SREP, IRRBB and StressTest Guidelines.
Highlights from ESBG response
Consultation on common procedures and methodologiesfor SREP ESBG responded to the section on consultation on common
procedures and methodologies for SREP by saying the amendments
proposed by the EBA are going in the right direction, although
further alignments and clarifications will be necessary. ESBG also
noted that it would appreciate a more explicit explanation on the
interaction between supervisory and early intervention taking into
account the consistency requirements between the ICAAP/SREP,
the Pillar 2 guidance (P2G), the recovery requirements and the early
intervention. In ESBG’s opinion, the revised guideline, similarly to
other existing EBA guidelines, imposes a too wide range of operative
tasks to the management body.
It noted that the following provisions of the newly introduced Pillar
2 Capital Guidance need to be further clarified:
n consistency with Pillar 2 requirement (P2R),
n the relationship between P2G and limitations on distributions,
n the exact mechanics as to how buffer offsetting is supposed to work,
n how to determine the levels of P2R and P2G as well as the
scoring rules,
n how the results of supervisory stress tests are used to determine
P2G and provide more detailed, and
n quantitative explanations on the inclusion of stress test results
in P2G.
Regarding required capital composition of P2G, ESBG believes
the EBA does not have a mandate to specify a tightening of the
expected Level 1 requirements by means of guidelines.
On disclosure of P2G: ESBG argues it should up to the institution
to decide if it publishes it or not given that some institutions may
consider this information relevant for their investors. On re-designation
of systemic risk add-ons to the systemic risk buffer would impact
the maximum distributable amount (MDA) calculation, ESBG would
prefer that it be left to the judgement of the supervisory authority
to decide whether further MDA restrictions are necessary.
Consultation on the management of IRRBBRegarding consultation on the management of IRRBB, ESBG proposes
monitoring credit spread risk from non-trading book activities
(CSRBB) as a balance sheet risk measure apart from IRRBB, and only
related to tradable instruments.
26 | News & Views MAY 2018
Also, the EBA could be more specific when defining interest rate
sensitive loan commitments that should be included in the IRRBB
analysis. It argues that the EBA should provide a specific technical
guidance on how non-performing exposures (NPEs) should be
treated within the supervisory outlier test in order to obtain
comparable results across the industry and that the EBA should
clarify the guidelines regarding capital identification, calculation,
and allocation as well as governance.
Speaking of proportionality, ESBG believes less complex institutions
should be allowed to use simple and standardised stress tests with
less frequent calculations and reporting.
Consultation on Guidelines on institution’s stress testingESBG appreciates the focus on proportionality and finds it important
for this concept to be included in all aspects of the Guidelines.
With regard to stress test scenarios, ESBG is of the opinion that the
text could benefit from a clear recommendation to the competent
authorities to design and publish such scenarios.
It also notes the link between stressed risk factors and the risk
parameters: Institutions could benefit from the statistics on risk
parameters for a financial industry as whole broken down to
individual portfolios. In ESBG’s opinion, when assessing the
appropriate degree of severity of scenarios, institutions should also
compare them with the scenarios outlined in their reverse stress
testing, considering specific implications of the reverse stress test
design on the scenario plausibility. ESBG also stressed that assessing
planned capital requirements based on scenarios with extremely
low probability of occurrence should be avoided.
ESBG: Streamlined resolution planinfo provision process welcomed SAYS IN BRRD-RELATED EBA CONSULTATION RESPONSE
ESBG submitted in mid-December 2017 a response to the EBA’s
consultation on the provision of information for the purpose of
resolution plans under Article 11(3) of the bank recovery and
resolution directive (BRRD) . In its position paper, ESBG, in principle,
welcomes the EBA’s contribution to standardise the existing inquiry
standards/templates and the effort to streamline the process and
to establish the minimum set of reporting obligations as well as to
specify procedural and technical reporting requirements.
However, one should also bear in mind that the technical
implementation of regulatory reporting requirements triggers
complex project activity and needs adequate lead time. For ESBG
members, it is especially important to get planning on security
regarding the requirements and concrete reporting templates.
ESBG will closely follow the outcome of this consultation, and track
whether there was any take up by the EBA of the suggestions ESBG
made on the specific reporting templates.
27 | News & Views MAY 2018
Read the ESBG consultationresponse at https://bit.ly/2GlfUPDor by scanning the followingQR code.
See the full ESBG response athttps://bit.ly/2DnK06T or byscanning the following QR code.
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Locally focused banks critical tosustainable finance
ESBG RESPONDS TO REPORT FROM EU HIGH-LEVEL GROUPON SUSTAINABLE FINANCE
The following is a statement by ESBG on the report releasedon 31 January from the High-Level Expert Group on SustainableFinance.
The report brings to light the important role locally focused banks
play in Europe’s sustainable future. The group acknowledges that
the savings and retail banking model will be a catalyst for
sustainable investment on the ground. But there remain obstacles.
The paper includes calls from the group for more proportionality as
complex banking rules hamper our lending efforts. When this
principle is applied, local banks can provide more financing for
green projects, especially for SMEs, households and local
authorities. When proportionality is used, all banks can contribute
full throttle towards a sustainable future.
SMEs are a force the paper clearly notes. Some 92% of green
projects are carried out by SMEs according to one study. That means
financing SMEs’ green projects and the cooperation of local
banks/local public authorities/SMEs, via the issuance of loans
stemming from local savings, appears critical to allow the green
economy to grow sustainably and to provide jobs. Savings and retail
banks play a key role in financing the improvements in energy
efficiency – a low-hanging fruit – both in residential and commercial
buildings, as well as in equipment used by SMEs.
The report calls for expanding the Juncker Plan, especially the
continued commitment in the “green sector”.
Boosting the plan’s annual
investment funding by €170 billion
will help as long as the public and
private work well together. If it
they do, the transition to a
sustainable, low-carbon economy
is within reach.
The report also highlighted capital
requirements as an obstacle.
It is. Feedback from banking voices
contained in the paper indicated
that the current capital framework
is not sufficient for non-complex
banks. Our members see the Basel
III capital floor at 72.5 per cent
as being too high and will impede
our model’s ability to provide
sustainable finance, amongst other
daily activities. We welcomed the
debate on this point by the group on lowering the capital
requirements. Concerning the green supporting factor we support
very much that the High-Level Expert Group recommends the
Commission should indeed investigate whether there is a risk
differential justifying use of such a factor.
When discussing sustainability, its definition must be precise. It is
important to ensure that material ESG (environmental, social and
governance) factors are integrated into the national definitions on
sustainable finance. Definition of green and sustainable assets and
potential capital reliefs are needed too. Beyond the definition,
policymakers should also consider a wider range of banking
products included in the EU taxonomy, especially taking on board
green certificates of deposits. To conclude, savings and retail banks
should be more integrated in working groups as they have the
capacity to tap into their local network.
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Chris De Noose appointedEBIC chair
CHANGEOVER COMES AS COMMITTEE FOCUSES ON FULL SLATEOF INITIATIVES
Chris De Noose was appointed on 20 February as chairmanof the European Banking Industry Committee (EBIC).
He succeeds Wim Mijs, chief executive of the European Banking
Federation, who completed his one-year term for the committee.
Mijs has been appointed as EBIC vice-chair, replacing EBIC Vice-
Chairman Hervé Guider, managing director of the European
Association of Co-operative Banks (EACB), who also served a one-
year term. The overall secretariat of EBIC, which rotates along
with the chairmanship on an annual basis, is in the hands of
the European Association of Cooperative Banks (EACB) as of
20 February.
The annual changeover comes at a time when the committee is
focusing on initiatives in the areas of prudential regulation, banking
supervision, compliance related to Anti-Money Laundering (AML)
and Counter Terrorism Financing (CFT), as well as a number of
topics in the retail banking area such as consumer and mortgage
credit. The priorities for 2018 will remain the Risk Reduction
Measures Package, the ESAs review and the follow up to the Action
Plan on Consumer Financial Services.
About EBIC
Founded in 2004, EBIC is committed to providing the common
voice of the EU banking sector at large regarding EU financial
legislation initiatives and banking practices and to maintaining an
open and fruitful dialogue with the EU institutions and international
bodies. An advisory committee regularly called upon to provide
expertise in the field of financial services, EBIC provides a forum for
European banking industry representatives to: exchange views and
information on matters of common interest; ensure a representative
and coordinated industry view on issues of common interest
throughout the process of drafting, adopting, implementing and
enforcing EU-financial legislation; and provide advice to the
European institutions on initiatives, both at legislative and
implementing levels.
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Learn more about EBIC atwww.ebic.org.
25th World Congress ofSavings and Retail BankSustainable Retail Banking: Bringing the Promise of Globalisation Home
n 15-16 November 2018New Delhi, India
Learn more at www.wsbi-esbg.org/Events/WorldCongress_2018or by scanning this QR code
Human rights and finance
HIGHLIGHTS FROM EUROPEAN PARLIAMENT EVENT
Representatives of the European Savings and Retail Banking Group
(ESBG) attended on 22 February a conference “Human Rights and
Finance: Next Steps for EU Policy” which took place at the European
Parliament and was hosted by Green MEP Bas Eickhout.
The purpose of the conference was to launch a discussion on how
human rights can be more effectively embedded into the current
reflection of the High Level Expert Group on Sustainable Finance,
so that this results into concrete policy measures in the future.
The outset is that the European Commission has supported the
development of the United Nations Guiding Principles on Business
and Human Rights in different policy areas, such as in the
development of National Action Plans on Business and Human
Rights, but has not integrated them into the policy discussions on
sustainable finance.
CaixaBank, providing the views of a retail bank
The conference attracted members of the European Parliament,
representatives of trade unions, non-governmental organisations,
banking associations, research institutions and other stakeholders.
Angel Pes Guixa, Deputy Director of CaixaBank with responsibility
for sustainability and President of the Spanish Network of the
Global Compact, as well as member of the WSBI-ESBG Corporate
Social Responsibility and Sustainable Development Committee,
participated in one of the panels dedicated to the stakeholder
perspective on the future of human rights and financial regulation
in the EU.
As pointed out by non-governmental organisations, one of the
main issues acting as a deterrent to effectively embed human rights
in policy is the lack of judiciary ground that would keep financial
institutions and organisations accountable, transparent and
responsible. It was argued that a comprehensive, legally binding
but to a certain extent flexible framework could bring significant
changes in the financial industry.
Non-financial risks are extremely important forretail and savings banks
Difficulties of measuring human rights, defining human rights and
translating it into the interest for business were also among the
topics discussed during the conference. According to some
speakers, the struggle to convince business to comply with human
rights is often related to the fact, that this brings mostly non-
financial return. However, Pes Guixa provided the example of retail
and savings banks, emphasizing that very often, and due to their
business models, non-financial risks are even more important than
financial risks, as the loss of trust from the customers can
significantly damage the business.
Pes Guixa also reminded that financial inclusion plays an important
role in enhancing positive outcomes related to many aspects of
human rights and Sustainable Development Goals (SDGs). In this
respect, the example of the social bank MicroBank, leading micro credit
institution in Europe set up by CaixaBank in 2007, was highlighted.
Pes Guixa also added that the SDGs are the way forward, as they
provide the framework and the opportunity to boost human rights
and sustainable development.
Event conclusions: concrete steps to moveforward
A variety of concrete recommendations for EU policy making were
suggested during the event. A classification system to establish
market clarity on what is ‘sustainable’, price signals reflecting
positive and negative externalities, greater transparency on the
sustainability impact and processes of retail funds and an adequate
design and application of regulation in respect of banks depending
on their business models and size could certainly contribute to
enhancement of a sustainable system and create a framework to
address inequalities and trigger positive impact.
Conference panellists concluded that financial sector, non-
governmental organisations and most importantly policymakers
should continue working together in order to bring positive
changes. Amongst other conclusions, the UN Guiding Principles on
Business and Human Rights should constitute the authoritative
source of how human rights considerations should be mitigated by
actors in the financial sector.
Overall, human rights should be integrated in the core of future
policy and not be treated as an add-on. In this respect it was
claimed that they should be regarded as a cross-cutting matter and
they should be explicitly included in any future potential taxonomy
to be designed by policy makers. According to some participants,
a crucial step ensuring that financially material human right risks
are captured in financial regulation could be an omnibus legislative
proposal, which would incorporate financially material environmental,
social and governance issues into the duties of asset managers and
asset owners.
30 | News & Views MAY 2018
An extensive interview withAngel Pes Guixa is availableon the WSBI-ESBG website athttps://bit.ly/2sNhcjT or byscanning the following QR code.
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Retail and banking sectors: From sharedchallenges to shared solutions?
EXPERT NORBERT BIELEFELD EXPLAINS
In Europe both the retail sector and the banking sector at present
essentially pursue two-pronged strategies:
n A structural reduction in their cost basis, in order to notably
better sustain the competition of both existing and new players;
n The transformation of their business model, to adjust to and
remain relevant in a digitized world.
The retail and banking sectors, already routinely accused of over-
pricing, now face further wrath from public opinion and authorities
as the deployment of these strategies necessarily translates into
workforce adjustments. In parallel, relationships at industry level
between both sectors can be strained at times, notably in the
context of legislative initiatives (e.g. card interchange, security of
payment transactions).
Considering the magnitude of the challenges at stake, it is worth
wondering whether a different approach shouldn’t be attempted.
Indeed, the development of digitization will ultimately affect and
transform all society strata. Digitization can be defined as the mass
adoption of connected digital services by consumers, enterprises,
and governments, complemented by the (not always accompanying)
transformation of sourcing, manufacturing and production, delivery,
and the related processes. Digitization comes hand-in-hand with
the expectation of and growing demand for immediacy – in terms
of responses, transaction completion, and payment – and that
meeting such expectation and demand has, and will continue to
have, profound implications far beyond the systems and entities
striving to provide such immediacy. In parallel, digitization – mainly
due to the spread of mobile devices – enhances participation by all,
both at political and economic levels.
Hence the retail and banking sectors should be taking an ecosystem
approach – also integrating the consumer’s view – to the above
strategies. As highlighted by the 2017 World Economic Forum
study, titled Shaping the future of retail for consumer industries,mobile and digitization drive the emergence of a new consumer
equation, where the traditional cost, choice and convenience
dimensions are complemented by control and experience
requirements. The WEF study identifies eight disruptive technologies
with retail value chain applications, of which at least six – namely
Internet of Things, Artificial Intelligence/machine learning, robotics,
digital traceability, augmented reality/virtual reality, and blockchain
– are also relevant to the banking industry. As both sectors test and
pilot these technologies, it is fair to assume that “comparing notes”
and developing joint projects from an infrastructure-building,
cooperative perspective will foster benefits for both sectors.
The time window for engaging is however not infinite: most of the
a.m. disruptive technologies are expected to reach full readiness
within the next two to five years.
Closer to the payments space, in a mobile and digitized context the
consumer wants to be able to use the payment instrument he/she
chooses, for a payment transaction to be executed extremely fast,
in a secure way, and without friction. Both loyalty and credit (e.g.
instalment) functionalities, when required, have to be accessible in
the same smooth manner. This is why the retail sector should make
use of technical, non-competing standards and focus on its primary
mission (actually the same as banks’), i.e. serving consumers and
ensuring their loyalty. There are presently 2 opportunities to remove
pain points through standardization:
n All large players roll out and develop their own solution with
respect to “checkout” or “paybuttons”. But will these individual,
often single payment instrument approaches be sufficient to
meet ever more mobile consumers’ expectations for convenience
in an Open Banking environment? A cross-sectoral initiative to
develop – e.g. in the form of an API – a standardized payment
checkout capability, payment instrument-independent and usable
for both online and in-store purchases, should find traction.
n With more opportunities to make purchases “anytime,
anywhere”, consumers will also be looking for enhanced control
facilities, not only over their payment account balance, but at an
even more granular level, i.e. by budget lines and/or types of
retailers. Here again the answer resides in a standardized, API-
oriented solution that provides both the necessary information
to consumers and allows (in an Open Banking environment) to
share selected data with chosen retailers.
Both developments should equip European retailers and payment
service providers with better tools to compete in an environment
increasingly dominated by a few, global players.
Here again the time window to produce these standards is not
infinite. This is hardly the moment to engage in a wide-ranging
governance debate as to who should be tasked with these
standardization activities, but rather to look at which existing bodies
should be leveraged (albeit with some scope and profile
adjustments) to deliver. The existing European Payments Council,
European Cards Stakeholder Group and Nexo (the latter 2 already
bringing together key economy sectors) could be used to
respectively formulate business requirements and specifications
for the a.m. standards, developing the “paybutton” and “budget
control” APIs sketched above, and being tasked with the
mplementation of the resulting standards.
31 | News & Views MAY 2018
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WSBI: Moving forward in 2018
BUILDS ON SUCCESSES MADE THE YEAR PRIOR
As 2017 swiftly came to an end, we had witnessed a change of an
era. Global political forces continued to move towards more
populist-leaning politics. Economies shrugged off worries of the
crises and grew; but not always benefiting the whole of society.
High-tech breakthroughs reshaped how we live and how we bank.
Digital change: Innovation working for you
Change was seen most vividly in the digital sphere and in increased
regulation, and WSBI responded. The association redoubled its
efforts to help banks unleash digitally led innovation in their
banking business models through innovation events. From Bangkok
to Barcelona to Brussels, innovation workshops and fora brought
members together to shape the future of 21st century banking via
best-practice exchange. WSBI built out a dedicated WSBI Innovation& Digitisation Hub on its website and launched the InnovationExchange video series.
Case for proportionality marches on
We continued to advocate for proportionality, especially when
applied to prudential regulation like the finalisation of Basel III,
which concluded with an output floor at a level which will lead to
a significant increase in capital requirements. This also shed some
doubt on the future of internal models and the calibration of the
standardised approaches which are very conservative. The Basel
Committee plans on these fronts push things too far. Any reforms
that ratchet up these requirements greatly threaten our model.
WSBI General Assembly, Board and Conferencein Cape Town
The General Assembly and Board meetings, hosted by Postbank
South Africa, were a success. The WSBI 2018 work plan was
unveiled, with priorities for next year focused on strengthening the
profile and influence of WSBI advocacy activities on relevant G20
priority files, enhancing exchange of best practices in digitalisation
and innovation, pursuing the UFA 2020 goals, implementing the
WSBI-ESBG transformation plan and conducting various regional
projects. A conference following the statutory meetings focused on
financial inclusion, SME finance and digitisation. WSBI members
showed how change is happening.
WSBI 2020 Strategy: Member feedbackmattered
WSBI in 2018 looks to fine-tune its internal processes to deploy
better its newly crafted value proposition, based largely on a
member survey that we conducted this year. Thank you to all
members who responded. The WSBI General Assembly and Board
approved the strategy at the November Cape Town meetings.
WSBI Advisory Services: Building up brickby brick
WSBI Advisory Services celebrated their first birthday in 2017.
They landed project work with clients that included the WSBI
“Making Small Scale Savings Work” programme, EBRD, and the
Savings banks Foundation for International Cooperation, Botswana
Savings Bank and Tanzania Postal Bank. As your bank adapts to a
changing banking landscape, we hope you consider them for your
specific consultancy needs.
Change globally, change regionally
Our WSBI Regional Group in Asia continued to see great strides
made towards the Universal Financial Access goals. They tackled
areas like remittances and rural financial inclusion. At the APEC
Financial Inclusion Forum, they explored agri-finance and shared
experience in financial education. WSBI Asian members’ regional
outreach in 2017 paid off, with three new members in 2017 joining:
Bangladeshi banks IFIC Bank and Bank Asia as well as Chamber of
Thrift Banks from the Philippines.
Members in Africa there continued to address the pressing
challenge of “derisking”, whereby international players are ending
relationships with member banks in the region at a worrying rate.
Areas like remittances and financial inclusion continued to be points
of focus too. Newly created WSBI-led webinars have started,
as has the Making Small Scale Savings Work (MTripleSW) program.
A partner ship with Mastercard Foundation, MTripleSW recently
announced that WSBI members in Morocco and Kenya have
signed on.
In Latin America and Caribbean, members continued their focus on
the communities they serve, especially on the socio-economic front.
WSBI members weaving digital technology into financial inclusion
and financial education efforts showed big gains towards our
Universal Financial Access (UFA) 2020 aims.
In Europe, our sister organisation ESBG continued its work in top
strategic policy areas like proportionality. WSBI-ESBG welcomed
new member Postbanc of Romania, and we are working with other
European groups to become a member. Like in Europe, our U.S.
member ICBA advocated for proportionality via a two-tier approach
to banking rules. The vote in the U.S. Senate in March 2018 showed
how ICBA’s campaign for regulatory relief payed off. Our reception
during the October IMF/World Bank meetings in Washington was
an ideal forum for us to share that message.
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Sustainable banking: Bringing thepromise of globalisation home
The G20 remains a stage to show a globalised
world how our unique business model fits in,
and how the WSBI-ESBG Charter forResponsible Banking underpins what we do.
Relatedly, progress continues on our UFA 2020
goal. For 2018, access to finance will remain
a top priority.
Our model was proudly shared in Argentina atthis year’s G20 meeting. We continued to present
our case for better regulation, which our members
in the Latin American region are keen to share.
Working with B20 and Global Partnership for
Financial Inclusion buttresses our G20 advocacy
work. Our G20 institutional messages were well
received by high-level bodies.
The 2018 World Congress in New Delhi next
15-16 November, titled Sustainable RetailBanking: Bringing the Promise of GlobalisationHome, is already taking shape. The event gives
us a chance to persuade international decision
makers to take our model as a benchmark for
real economy banking. Our message to them:
craft rules meant for internationally complex
banks, but keep in mind the sensitivities of our
locally focused model.
Moving ahead in 2018
Working together, we can further unleash the
savings and retail banking model. That means
taking part in our activities and projects, sharing
successes among members, and demonstrating
each day our special role.
The WSBI secretariat remains ready to support
you and your institution to continue to thrive.
We look forward to a busy and change-driven
2018.
WSBI welcomes newmember Bank Asia TECHNOLOGY HELPS NEW BANGLADESHMEMBER SERVE 311,000 CUSTOMERSIN REAL TIME
WSBI welcomed in 2018 three new banks, including Bank
Asia from Bangladesh. They join more than 100 fellow
members from 80 countries all around the world who
make up WSBI membership.
Bank Asia started its journey in November 1999. At present
Bank Asia is conducting operations through 120 branches,
three subsidiaries, 133 ATM booths and three retail kiosks
with around 3000 employees. The bank also operates
five Islamic windows to ensure financial inclusion of
those sections of the society that remain excluded due
to religious reasons.
“Bank Asia joined WSBI to exchange knowledge and experience with other
financial institutions and migrate global best practices like financial inclusion,
digitisation initiatives, digital payment system and other technical issues in banking
along with guidelines regarding anti money laundering,” says Bank Asia’s President
and Managing Director Md. Arfan Ali.
Committed to Financial Inclusion
With an aim to serve the unbanked people Bank Asia is now operating EBEK (Ektee
Bari Ektee Khamar), a government project for the ultra-poor people of Bangladesh
focusing on reducing poverty level by 10% within 2021. Under the project, a total
number of 1.63 million beneficiaries have been served with a lending amount
of BDT. 24,544 million (around US$300 million). The bank has implemented
1,494 agent banking outlets all over the country to provide banking services to
geographically disperse rural poor segment of the society.
According to Md. Arfan Ali, Bank Asia’s aim is to transform Bank Asia to an “every
day” bank for a better tomorrow from the conventional brick and mortar model.
Innovation enables to reach previously unbanked people
“Technology has enabled us to serve more than 311,000 customers in real time
with biometric authentications. Customers get SMS alerts, receipts against any
transaction and instant notifications. The customers that were previously unbanked
and underserved, are now enjoying one stop banking services from our agent
points. Even the ready-made garments industry workers, school students,
smallholder farmers, social safety net beneficiaries and rural insurance holders are
also benefiting from our agent banking services. For this reason Bank Asia has
been collaborating with a number of national and international partners to
facilitate the financial inclusion activities,” explains Md. Arfan Ali.
33 | News & Views MAY 2018
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Bank Asia’s Presidentand Managing DirectorMd. Arfan Ali
First Workshop on Rural FinancialInclusion, Beijing, China
FOCUSED ON DELIVERING RURAL FINANCIAL INCLUSION SUSTAINABLY
The 1st Workshop on Rural Financial
Inclusion hosted by the Postal Savings
Bank of China (PSBC) gathered about
50 participants from the WSBI Asian
membership. Distinguished guests
included Chinese policy makers in
charge of financial inclusion,
academics and vice presidents of
largest Chinese commercial banks.
Postal Savings Bank of China explained
how the financial resources allocated
to rural areas are not proportionate to
the rising importance and contribution
of the rural economy to the national
economy and cannot keep pace with
the increasing financial needs in rural
areas with modernization of agriculture,
villages and farmers. The Chinese
government has put in place different
measures to address the gap, such as requesting banks to set up
rural financial inclusion departments to specialize in serving the
sector, building the credit rating system for the rural poor,
developing credit guarantee schemes. PSBC’s approach in financial
inclusion is labelled as “4D”: Deep (deepen the outreach),
Directed (focused groups), Dependent (collaborative), and Digital
Inclusive Finance.
The objective is to enable more rural outlets to offer credit business
and make sure that deposits from rural areas are used for rural
development. Capacity building for bank staff in rural outlets and
equip them with credit skills are also an absolute condition to
address the finance gap.
During the workshop, the participants from Bangladesh (Bank Asia),
Cambodia (Cambodia Post), Korea (Korea Post), the Philippines
(Aski), Sri Lanka (National Savings Bank) and Vietnam (LienViet
PostBank) participated in the discussion and in the exchange of
experiences in the field of financial inclusion, agent banking and
digital finance.
WeBank, the first online-only bank in China
The workshop was organized back to back with a study visit to
WeBank – the first Chinese online-only bank. WeBank received its
banking license in 2014 and uses Artificial Intelligence, blockchain,
“cloud” and “big data” in its customer and marketing approach.
More than 98 million users have been pre-approved, and the bank
has 31 million microloan customers.
WSBI and financial inclusion
Financial inclusion remains a strategic area for WSBI and its
members, including in Asia. However, too little resources are
dedicated to financial inclusion in rural areas. These rural areas
contribute more and more to national economies and the current
financial services offer struggles to keep up with the modernisation
of agriculture, villages and farmers. WSBI helps members address
that challenge.
34 | News & Views MAY 2018
Learn more about the workshopat https://bit.ly/2Ip6NOs or byscanning the following QR code.
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The viability of agri-finance –an Indian perspective
STATE BANK OF INDIA AGRI-BUSINESS HEAD TELLS MORE
State Bank of India Agri Business Unit Chief General ManagerS. Adikesavan explores agri-finance in India. The views arepersonal and do not reflect those of the bank.
If food security and sustainability of employment in the primary
sector are the objectives of development, agri-finance would
definitely occupy centre-stage in any discussion regarding these two
issues.
Agri-finance assumes added significance in the case of developing
countries where the farm sector and allied activities still provide
more than 50% of the total jobs in the economy. A thriving farm
sector supported by a formal credit delivery system is a sine qua
non for the stability of any developing country, especially in large
tracts of Asia, Africa and South America.
It is accepted that formalized credit delivery systems through the
bank and other institutional channels substantially reduce finance
costs for farmers and others engaged in allied activities like dairy,
poultry, fisheries and animal husbandry.
The Indian experience in farm credit has been quite instructive and
the Government sector banking system in the country has played a
major role in building up a mass-banking structure which has
helped, to a large extent, in enabling farmers access credit at
relatively lower costs. Regulatory intervention has also helped.
The following chart gives an overview of agricultural creditin India over the last 10 years.
All Indian banks, including those which are privately-owned,
are mandated by the Reserve Bank of India (India’s banking
regulator) to deploy 18 per cent of their total loans for agriculture.
There are penalties for non-achievement which makes it obligatory
for banks to put the shortfall amounts in low-yielding, state-
sponsored Rural Infrastructure Funds.
Even though there has been growth in absolute terms, agri-finance
has not been without its share of problems. The Indian farm sector
has become a hot potato recently with everyone acknowledging
that there is distress and problems galore across the board on
the fields, mainly triggered by lack of remunerative prices for
farm produce.
The Indian government has recognized this challenge and has
taken a series of steps to mitigate stress in the farm sector.
These initiatives have been led by the prime minister himself and in
the second week of February, Narendra Modi, outlined a four-point
agenda for agri reforms: reducing cultivation costs, ensuring
profitable prices, processing farm waste and creating non-farm
sources of income.
Of these, the first two are of immediate relevance. Cultivation costs
need to be reduced and for this, efficient water, fertilizer and
nutrient usage is the key. As more and more farmers understand
that modern methods of irrigation using drip and sprinklers are just
as efficient as traditional water-guzzling methods, the Indian farm
sector is likely to gain in costs. “More crop per drop” has found a
resonance among Indian farmers and this will enable them also not
to be at the mercy of the monsoons. Prime Minister
Modi has also announced that one of his
government’s targets was to see that 99 irrigation
schemes stuck for 25 to 30 years were completed
within fresh deadlines. About 50% of these would
be completed by this year. The government has
earmarked 80,000 crores (US$12.5 billion) for this,
he added.
In a sense, India is facing its 1991-moment in the
farm sector – 1991 being the year in which major
structural reforms were made in the Indian economy
– and indications are that new steps required to deal
with farm distress will be taken up on a war-footing.
Agriculture in India is a “State” subject (there are
29 States in the Indian Union) and therefore
greater coordination between the central and
state governments is required to put in place the
proposed reforms. >
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Rs. in Billions
14000
12000
10000
8000
6000
4000
2000
02008
3081
2009 2010 2011 2012 2013 2014 2015 2016 2017
37564633
50725833
6454
8921
9706
11731
12652
If costs are brought down, the next step will be to ensure that farmers
get remunerative prices soon after harvest. The government has a
scheme of minimum support prices for many agri-commodities but
at the implementation stage, there are practical difficulties. In the
process, many small and marginal farmers, who do not have
storage facilities or the ability to hold on to produce are forced to
sell in the market when prices are low, sometimes at a loss.
Creation of an efficient market structure and provision of storage
facilities are essential elements of the agriculture value chain that
will ensure that farming remains a viable and sustainable option.
It is indeed a fact that agriculture has not received public
investments over the last several years commensurate with its
requirement. The winds of apathy sown over the last nearly four
decades are being reaped now in the form of whirlwinds of protests
by the poor farmers, most of whom face extreme hardships.
The crisis in the farm sector has not yet hit mainstream India home
as total food grains production at about 273 million tonnes last year
and burgeoning surplus stocks have led to few consumers feeling
the pain that exists on India’s fields.
Agri-finance, per se, is not a major issue in India. In fact, it could be
even argued that the formal system of agricultural credit is a model
for developing countries with finance at very affordable costs being
provided to farmers across the country. Interest subsidies are
provided by the Indian government and some of the state
governments. In fact, the effective interest rate on farm loans
in some States is zero.
Marketing and storage/infrastructure facilities along with
modernization of farming practices (less use of water/efficient use
of fertilizers/nutrients) are indeed the enablers urgently required
in India.
To most perceptive observers, the time has come for a refocusing
of national attention on this most important sector of our economy.
It is heartening that the Modi government has committed itself to
this crucial area. In India, agriculture cries out for 1991-like overhauling.
36 | News & Views MAY 2018
WSBI joins Asian financialcooperation organisation
SEEKS MORE EXCHANGE WITH ASIAN FINANCIAL INSTITUTIONS THROUGHAFCA MEMBERSHIP
Seeking more exchange with Asian financial institutions, WSBI
joined in January the Asian Financial Cooperation Association
(AFCA), which unites financial institutions, financial industry
associations, relevant professional service agencies and financial
sector experts from Asian countries and regions.
AFCA is devoted to building an exchange and cooperation platform
for Asian financial institutions, strengthening exchanges among
regional financial organisations and financial resources integration,
jointly safeguarding regional financial stability, and supporting the
development of real economy in the region.
The association was established in May 2017 and is strongly
supported by the Chinese government and China Banking Association.
It promotes China’s One Belt and One Road initiative by seeking
financial connectivity in Eurasian countries.
As a member of AFCA, WSBI will gain more insights into banking
landscape in Asia, cross-border financial infrastructure and business
development opportunities. WSBI will also have access to AFCA’s
research, publications and contacts.
In 2018 AFCA will focus on the establishment of different working
committees and the organisation of a high-level forum for Asian
bankers. Launching a publication “Asian Financial Observation”
is also among the priorities for 2018. The publication will provide
the latest information on Asian finance and banking.
WSBI is sure its AFCA membership will extend its network and
knowledge in the Asian financial market, and will contribute to
AFCA’s mission of cooperation and experience exchange.
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WSBI holds LatAm, Caribbeanregional group meeting
ARGENTINA MEETING FOCUSES ON G20 MESSAGES
WSBI held on 22 March its XXIV
Annual Latin American and
Caribbean regional group (GRULAC),
one day after the G20-focused event
in Buenos Aires. The GRULAC
focused on its institutional agenda,
with WSBI President Heinrich Haasis
delivering the welcoming remarks.
WSBI Managing Director Chris De
Noose shared WSBI achievements
in the past 15 months and looked
at what’s ahead.
A chance for members to exchange
in current policy and industry issues,
GRULAC Chair Diego Prieto led
roundtable talks on G20 messages
given at the event the day prior,
with special emphasis on the Latin
American and Caribbean region.
The group also assessed progress made on the cooperation with
the IDB group and ways to deepen it. More specifically, three
common areas in which WSBI proposes to start working are:
1. Identification of obstacles and adaptation to regulations to
reduce asymmetries and legal uncertainties and create an
appropriate regulatory framework that encourages retail
banking in general and financial inclusion in particular.
2. Facilitate exchanges on innovation and digitisation issues to
promote best practices and experiences between WSBI and its
members, the IDB Group and WSBI Advisory Services on issues
related to retail banking, with an emphasis on financial inclusion.
In this context, we see the IDB Group ideally placed to support
the three-way exchange of knowledge among these institutions.
3. Develop a guarantee program to support MSME financing,
covering part of the possible losses of non-payment of
microcredits and loans, following the model of the European
Investment Fund and MicroBank.
37 | News & Views MAY 2018
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Learn more about GRULACat https://bit.ly/2zxbqSA or byscanning the following QR codeor by contacting by [email protected]
See GRULAC event page atwww.wsbi-esbg.org/Events/24TH-WSBI-GRULAC or byscanning this QR code.
MTripleSW: WSBI, PostBank Ugandato boost financial inclusion servicesin rural areas
PROJECT HAS MANY INNOVATIVE ELEMENTS
PostBank Uganda (PBU) and WSBI recently signed a Memorandum
of Understanding to scale up Village Savings and Loan Associations
(VSLA) business model in the East African country. Falling under
WSBI’s Making Small Scale Savings Work programme supported by
the Mastercard Foundation, the bank will look to financially include
at least 200,000 new small individual savers by 2020. Forty per cent
of new savers will be youth, while women will make up just over a
third. A quarter of new savers will be farmers.
PBU Managing Director Mr. Mukweli Stephen, said. “To reach our
goal we will need to improve access. That requires us to initially
select and pilot 480 agents, including five VSLA agents in the first year.
We foresee that figure growing to 1260 agents, including 15 VSLA
agents, during the scale up phase in subsequent years.”
PBU will build on the capacity of 20 already-mature VSLAs community
groups to serve customers as agents within communities through
already established linkages. Those mature VSLA group agents will
be selected from within the pilot areas. Selecting VSLA group
agents, who will come from selected communities, will be based
on maturity. That means VSLA group agents will be screened for
financial capacity and transaction history, commitment to
development and growth efforts, the PBU Group’s executive team’s
capabilities and history among other criteria guided by the Ugandan
central bank for agency compliance.
WSBI Managing Director Chris De Noose said: “PBU can now roll out
agency banking upon approval from the central bank. That is thanks
to the Financial Institutions (Amendment) Act, 2016 that was
passed by the Ugandan parliament to allow financial institutions to
provide agency banking, among others. Agency banking will be a
game changer, helping PBU acquire new customers, especially in
the rural hard to reach areas of the country.”
The Ugandan agency banking rules allow PBU to have full end-to-
end ownership of the distribution channel, which means the postal
bank no longer needs to rely on the Mobile Network Operators
outside of communication services. It also means a more competitive
banking landscape, where service quality will get a boost and
pricing more attractive for customers.
The project has many innovative elements too, including a youth
App to particularly address young savers and an e-recording tool
designed to help better understand financial and social behaviour
of VSLA members and whether products are suitable for small-scale
savers.
PBU’s Mr. Mukweli Stephen concluded: “WSBI support matters a
lot as we move towards our PBU inclusion strategy. Their support
will help us bring into the financial mainstream hundreds of
thousands of customers and transform many VSLA’s groups into
agents. That will help our country both now and in years to come.”
About VSLA’s: Village Savings and LoanAssociations
VSLAs are a way to give access to basic banking services for people
living in mostly poverty-stricken areas where financial institutions
oftentimes cannot reach. VSLA provide group of individuals in a
close geographic area a place to save their money and access to
lending products. They also serve as an entry point to formal
financial services.
The Making Small Scale Savings Work programme:at a glance
FIN
AN
CIA
L IN
CLU
SIO
N
38 | News & Views MAY 2018
Region: Africa
7 projects in Cote d’Ivoire, Kenya, Morocco,Nigeria, Senegal and Uganda
Value: $16 million
Goal 1 million unbanked people activelysaving in formal bank accounts
Aim: 7 innovative & viable business modelsfor small scale savings
Period: September 2016 - February 2022
Funder: MasterCard Foundation
MTripleSW: LAPO Microfinance Banksigns MoU with WSBI to improvesavings by women
WILL TAP INTO AGENT BANKING NETWORK, TEAM UP WITH NATIONALCOUNCIL FOR WOMEN SOCIETIES
Nigeria’s LAPO Microfinance Bank and WSBI recently signed a
Memorandum of Understanding to tackle low-income customers,
particularly women’s financial inclusion in Africa’s most populous
country.
Falling under WSBI’s Making Small Scale Savings Work programme
supported by the Mastercard Foundation, LAPO’s project, called
My Pikin and I, will use not only a mass-market, low-cost
microsavings-insurance product through agent networks to reach
women, but also team up with bodies such as the National Council
for Women Societies NCWS. LAPO’s savings and insurance bundle
is an innovative approach that will allow low-income families to save
up small portions of their income conveniently and flexibly in daily,
weekly or monthly cycles. It is designed to cater to their needs in
areas such as health coverage and their children’s education.
Kunle Shittu, LAPO’s Head of Corporate Communications & Branding,
said: “Set for launch in April, the project is unique because it
primarily targets economically productive parents, guardians and
women between the ages of 20-50 in the low-income bracket.
That requires us to think carefully about their specific needs and
how they prefer to engage with us to raise their desire to save.”
Nigerian women and financial inclusion
The work is important particularly for women in Nigeria as they face
exclusion in several areas of society and usually bear the brunt of
negative social and economic shifts. Some 28 million or about
56.2% adult women are either financially underserved or excluded,
according to the EFInA Access to Finance Service in Nigeria Survey
(2014). To help address this, “My Pikin and I” draws on research that
concludes that women as a homogenous group have specific tastes.
When they are lumped in with men as a group, data show women
fare worse. To address this, LAPO has designed a different approach
to communicate and deliver products to women. In fact, research
shows women respond better to peer-to-peer and “cluster-focused”
communication for consumer education and marketing efforts.
One example that reflects these factors is the planned low-balance
savings offerings that impact children. The child-focused products
are known to attract backing by women-only channels like NCWS
to help deliver the offering. LAPO’s women-focus products will be
distributed through its existing channels too, thereby aligning with
the bank’s product and channel strategy. As the project seeks to
deliver services through branchless banking channels such as
stationary and roving agents as well as mobile banking, it presents
the right fit and added boost to LAPO’s evolving channel approach.
WSBI Managing Director Chris De Noose said: “Financial inclusion
helps women beyond the savings account balance. Thanks to
LAPOs close-to-customer approach, those who normally look to the
informal sector can migrate more easily to the formal one. That
means gaining access to socio-economic safety nets such as loans,
healthcare and pensions. That access changes their lives.”
Tapping into LAPO’s agent banking network: The My Pikin and I
project is designed as a part of LAPO’s Agent Banking efforts, which
is at the centre of LAPO’s Alternative Delivery Channels Outlook.
The Agent Banking project which was first piloted in December
2016 is one of LAPOs strategic moves to take its presence closer to
the customer. The work has achieved major milestones since then,
recruiting 76 agents, 1900 customers and more than 9 million
Nigerian naira deposits mobilized. The project was fully launched
in August 2017 with over a thousand Agents across the country
within the first year.
LAPO’s Shittu concluded: “My Pikin and I will succeed because we
provide new ways to reach women based on research, data and
first-hand knowledge. We also tap into the Agent Banking model,
which works with viable businesses like supermarkets, post offices,
boutiques and bookshops as agents. Harnessing these channels
along with our branch network will improve our chances of success.”
About LAPO
With a base of over three million customers and more than 400
branches, LAPO Microfinance Bank is Nigeria’s largest Microfinance
Bank accounting for over 25% of the microfinance market share.
Known as a “pro-poor” organization, in its mission, LAPO seeks to
improve the lives of the population at the bottom of the pyramid
by providing life changing business capital in the form of loans that
has helped moved thousands of Nigerians out of poverty.
Established in the late 1980s as a Non-Governmental Organization
(NGO), LAPO MfB obtained in 2010 the approval of the Central
Bank of Nigeria to operate as a state microfinance bank. It was
granted approval in 2012 to operate as a national microfinance
bank. LAPO’s five-year strategic outlook to 2022 seeks to grow its
customer base to 8 million customers.
Learn more at: www.lapo-nigeria.org
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Dormant bank accounts: inevitable,but not hopeless
BIGGEST CHALLENGE OFTEN RELATED TO FINANCIAL INCLUSION
Insights from financial inclusion specialist Stephen Peachey,who presented at a recent WSBI webinar.
Dormancy remains an unavoidable part of savings mobilisation for
banks and their customers, says a noted expert working with WSBI
on financial inclusion efforts.
According to independent financial inclusion specialist Stephen
Peachey, who has worked on multiple projects for WSBI and has
been working in savings banking for more than 30 years, certain
levels of dormant accounts are a usual phenomenon in banking all
around the world. However, there are some basic rules that banks
can follow to reduce dormancy.
Dormancy means various things in financial services. For mobile
wallets it means no activity in the last three months, for regulators
– no activity in the last year or two, while for savings banking –
no activity in the last six months.
Dormant accounts are inevitable because not everyone can save
steadily throughout a year. However, those accounts do not bring
any value neither to banks nor to their customers. Accounts that
are sold but not used rarely make money, while accounts that are
emptied by bank charges are considered as a theft, in particular
among rural people. Mis-sold accounts that can never be used are
never forgiven, says Peachey.
“There are many ways savings banks can employ to tackle
dormancy. If a previously active account becomes quiet, the bank
should contact the customer – through digital messaging, for
example – to remind them of bank’s services,” he noted. “If the
current account does not meet the needs of the customer anymore,
the bank should offer a more suitable option without charging a
fee for it.”
Forgive fees, analyse customer data
If the customer wishes to use the account again, a nice gesture is
not to charge the customer for the months they were not using
their account. This would help to keep the customer and improve
relationship with them.
The financial inclusion specialist also advises to look into data that
banks have about their customers and their activities. Alternatively,
public data from different institutions or country data can also
be used to get more insights into the dormancy situation and
tendencies in the region.
The financial inclusion challenge
The biggest challenge of dormancy is often related to financial
inclusion. Global efforts to bank people all around the world and
to provide access to banking services result in worryingly high levels
of dormancy. Lack of financial education or basic instruction on how
to use banking services lead to opening new accounts never used.
Peachey calls on banks and
governments in emerging
markets to aim to sell accounts
better designed to stay active
in the long term.
Peachey concluded: “Accounts
that have not been used for
one year are almost all turning
permanently inactive. If the
account has not been used
for two years, it is reasonable
to close it if local regulation
allows such action. In many
cases such situation can be
avoided if banks take action
much earlier.”
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40 | News & Views MAY 2018
MTripleSW: Merchant agent banking in Morocco
WSBI MEMBER AL BARID BANK PILOT CONNECTS MERCHANT AGENTS WITHCUSTOMERS VIA MOBILE APP
By Celine Stevens, Programme Manager for WSBI’s MakingSmall Scale Savings Work progamme.
Agency banking took its first, tentative steps earlier this year in
Morocco following new regulations on agency banking enacted in
2017. I saw first-hand the potential for agency banking to improve
access to financial services after spending two days with Al Barid
Bank, the postal bank in Morocco, a partner financial institution in
the WSBI programme Making Small Scale Savings Work.
ABB had invited me to attend meetings to launch the agent
banking pilot in Ben Guerir, a small city of about 90,000 people and
a provincial capital in central Morocco. Ben Guerir is home to a
Moroccan Air Force base and two ABB branches.
ABB had its first merchant recruited for the pilot in this city. A small
grocery owner, the merchant represented the start of a bigger goal:
to sign up 5,000 new clients and 100 merchants in Ben Guerir. The
project aims to harness use of an app on local merchants’
smartphones that would enable ABB customers to make purchases,
to cash in/out, and to make other transactions – a technical first in
Morocco and for ABB. From the experience with this first “pilot”
merchant came plenty of “ah ha” moments.
During my visit, I met with the director of one of the ABB branches,
who demonstrated real local knowledge despite having only two
workers – one manager and one customer advisor. Even with slim
staff levels, there was that one merchant who had already agreed
to take part in the program. But it didn’t go off without a hitch.
At face value the merchant sign-up would seem rather simple. First,
candidate merchants must already have an account at ABB. Second,
they must be willing and able to load the ABB merchant app on
their smartphone to receive online payments. The app allows
merchants to connect wirelessly whenever a customer with the ABB
mobile app comes into the store. The store customer mobile app
“talks” to the merchant app either through a QR code or via SMS.
This, however, is easier said than done.
On the day of our visit, the candidate merchant received a team
from ABB headquarters and the local branch. Joining the group was
the branch customer advisor, whose computer was just uploaded
with software designed to track merchant agents who sign up for
the app.
Loading the app on the merchant’s smartphone proved a bit of a
challenge. It didn’t work the first time, so ABB took the smartphone
back to the branch and uploaded the app there. The problem was
solved simply by a better internet connection during upload. Lesson
learned: faster bandwidth required.
The merchant and the ABB people then returned to the merchant’s
grocery store to show him the new app and how it works.
But, even after training, the merchant remained unconvinced.
Security concerns popped into his head, especially if the smart -
phone was stolen or if he was to forget it somewhere. That’s where
the branch director had sway over him, that local touch that no one
from HQ would dare to attempt. The branch director explained that
the phone will have key, just like the door in his store. The merchant
was put at ease. Lesson learned: local knowledge counts.
Beyond that first merchant in Ben Guerir is a rather vast set of
merchants that ABB would like to pursue, including those working
in a big open-air market. On the customer side, the ABB team
would like to tap into the military community at the nearby base as
most of these people have an account with ABB. That requires
getting the word out to military personnel through targeted
marketing and word of mouth. ABB must make the case that the
ABB mobile app connects them to their families who are often not
living on or near the base.
Another benefit for the military personnel is savings. By adding a
savings product, the economies gained by sending money to family
members also using the app can be put aside for the future.
That’s a big selling point because most of a soldier’s salary is sent
to dependents. Families avoid high-fee wire transfer services.
That leads to savings, our main goal. Lesson learned: demonstrate
savings, the need to connect.
Beyond technical glitches faced when setting up the first merchant
agent, we know that access issues will still surface. Right now,
merchants need a Google account to download the app. Is that
enough? With apps come updates which will need to be thought
through as well before bringing the app project to scale.
An identity issue may be problematic on the customer side, too.
Not so much in Morocco, I’ve been told, but more so in other parts
of Africa because it is not always the phone owner who owns the
chip installed in the phone.
Data is another challenge: not necessarily how to harvest it but
what to DO with it. Will it help fine-tune agent and customer use
to get people to take up the offer? Will it help provide real savings
for customers?
Recruiting the first merchant is a big step but there is plenty of work
ahead. ABB aspires to scale up and eventually attract 5,000
merchants and 250,000 customers to its mobile accounts. Half of
these people are seen as opening savings accounts.
We are in the early days of this project, but if some of the initial
roll-out bumps can be smoothed over, the road ahead may well turn
out to be productive and profitable for clients and banks involved
in the Making Small Scale Savings Work programme.
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WSBI member showcase: Belarusbank
2017 RESULTS FOR FINANCIAL LITERACY EFFORTS, 2018 GLOBALMONEY WEEK
Belarusbank, as an active participant within the financial market
when it comes to financial literacy, continued in 2017 to act in
accordance with the Plan of Joint Actions of State Bodies andFinancial Market Participants to Increase Financial Literacy of thePopulation of the Republic of Belarus for 2013-2018. This activity
is one component of the bank’s corporate social responsibility policy.
In each division of the bank and the head office there are groups
focused on increasing financial literacy, and the bank’s initiatives in
this area cover all regions of the country. The bank’s financial literacy
groups cooperate with educational institutions and territorial social
service centres, enterprises and organizations, take part in all the
landmark events held in the regions.
The main areas of work on financial literacy are: thematic, mass,
training events, joint projects with the media and children’s
publications, active work with clients in the bank’s offices, as well
as at their place of work and study. For customers of the older
generation bank organized special schools of “golden age” with
the purpose of practical training in the use of self-service devices,
internet banking and involvement in the system of non-cash payments.
On the bank’s website there is a special section “Alphabet of the
financial literacy. Finance lessons” (https://belarusbank.by/ru/33139/
press/finansovaya-gramotnost). The call centre is actively present in
social networks. In the bank’s head office there is a Museum of
Savings Business Development, which organizes excursions and
interactive activities on financial literacy.
World Savings Day
The bank traditionally takes an active part in the celebration of the
International Children’s and Youth Global Finance Week and World
Savings Day. In the cooperation with Children and Youth Finance
International (CYFI), the bank was awarded a “Best Product for
Children and Youth 2016” nomination for the implementation of
the “Student’s Map” project.
In 2017, the bank completed a project of preparation and
publication of a book for children “The Alphabet of Financial
Literacy from Belarusbank” (https://belarusbank.by/site_ru/33212/
groszyk_full_opt.pdf), which was presented on 29 November 2017
in the National Library of the Republic of Belarus. During the
presentation bank transferred the books to all children’s libraries.
In 2017, ASB Belarusbank organized and held about 8,000 events
with the participation of more than 320,000 thousand people,
including more than 110,000 children and young people.
Global Money Week 2018: Bank holds450 events
Belarusbank actively supported in March the celebration of Global
Money Week 2018.
The bank had a special section on its website called “The vocabulary
of financial literacy. Finance Lessons”, with the GMW-2018 logo
uploaded and a virtual literature exhibition dedicated to the
celebration of the week. The bank also provided a link to access an
online blog contest.
In all regional cities of the country there was an academic challenge
for high school students. Called “Study. Save it. Earn” offered by
its “Platinum Owl” youth club. On all screens located in the bank’s
offices, the bank broadcast promotional videos about financial
literacy, as well as training videos on using Internet banking and
mobile banking.
About 450 different events were held across the country including
lessons, excursions, open days, competitions, seminars, trainings,
lectures and presentations. Some 54,000 children, pupils, students,
and young specialists took part. About 60% of the events were
held in rural areas and small and medium-sized settlements.
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G20 and Rural Finance
MAKING THE LINK
By Ian Radcliffe, Director, WSBI
This year’s WSBI positions to G20 policymakers made an effort to
address agricultural finance. The paper spelled out actions needed
to boost both public and private investments in agriculture or agri-
aligned sectors. It also highlighted the need for access to finance
for rural smallholders, who are extremely limited in their ability to
expand and meet the rising demand for agricultural food production.
For many in developing countries, access to finance starts by having
basic financial access. This is an important link. Why? Because in
developing countries, financial inclusion efforts are the lifeline
to financing in increasingly isolated rural areas, which lead to access
to financing. But borrowing is towards the end of a process.
There is much that needs to be done before that. In fact, it’s a three-
step process that WSBI works at every day through member savings
and retail banks: transaction account access, savings and then
borrowing.
Addressing the financial inclusion conundrum
More than 1.7 billion people lack a basic transaction account, with
a large chunk living in rural or agricultural areas. That’s common
knowledge among international organisations and national
governments. WSBI frames the financial inclusion conundrum through
the mantra: “usability, affordability, accessibility and sustainability”.
On access and usability points, there are a couple of forces at play.
First, proximity to financial services. That means touch points where
banks, bank branches, agent banking outlets or even locally led
savings groups are present. That’s not mentioning digital access
through basic mobile phones through telecoms networks all the
way to more sophisticated smart phones over the Internet. This is
especially problematic in rural areas.
The second factor is geolocation – where people live – rural versus
urban. Proximity can be defined as the distance between people
and bank access points. Banks struggle with this aspect a lot and it
can greatly affect account use too. The rule we found holds true
during our years of work particularly in Africa is that people will
walk a maximum two kilometres to get a spare dollar out of their
pocket and into savings.
Geolocation greatly influences financial inclusion as well. No doubt
the world’s rural populations are moving into cities at a rapid clip.
But the struggle to operate a bank presence in deep rural areas is
not a consequence of urbanization – although that obviously
exacerbates the problem. The main issue relates to topography and
how people cluster in these sparsely populated areas. These factors
lead to deep rural areas struggling to attract and retain bank
presence. The pattern is acute in Kenya, for example, where only
50 to 55 per cent of people can be reached by traditional branch
banks or agent network. Inhabitants of Kenya’s vast swaths of
farmland in the north are especially hit. That’s according to a study
by WSBI as part of its Doubling Savings Accounts programme
supported by the Bill and Melinda Gates Foundation. Taking place
from 2008 to 2016, that programme preceded the current Making
Small Scale Savings Work programme, a partnership between WSBI
and Mastercard Foundation to help boost financial access and
economic development in seven African countries. In Tanzania it’s
even more daunting, where the figure drops to around 25 per cent.
In Uganda it is somewhere in between. The situation in Africa is not
too different from other parts of the world, such as Mexico and
Vietnam. That’s the big argument to partner with mobile money
operators because they can reach out further and reduce costs.
Rural challenge: affordability and sustainabilityplay a role
In Africa, in many cases people have only one account. In deep rural
areas, it’s no different. As people in those areas rely on 50 to 60
cents a day based on purchasing power parity, the pressing question
is how a bank develops a business model that sustainably delivers
three to five business transactions per month, which is what they
are doing in the informal sector. When 50 per cent of adults are
unbanked in certain markets, there is huge upside if banks get the
model right and deploy it. Again, mobile banking can help fill a need.
Spike charts contained in a 2015 WSBI report on access to finance
in East Africa’s rural areas show urban markets served rather better.
In that part of the continent, we concluded that an active account
base of one million inhabitants is a pre-condition to form a viable
market for sustainable banking. Solutions have emerged, however,
and will continue to evolve. Governments, banks and other
stakeholders know this. People on the ground are profiting from
fresh approaches. >
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Step 1: Transactions. A needed first step?
As eluded to before, the financial inclusion equation is based on
people transacting money. They spend, they wire money, and they
pay bills. That could mean sending money to family, to pay school
fees, to pay taxes. People also receive money, among friends and
family and government transfer programmes.
Transactions done through basic transaction accounts have knock
on effects that prove attractive to any government treasury.
For policymakers, getting people banked and transacting opens up
low-cost, safe and efficient ways to provide individual transfer
payments to intended recipients. Often innovative and digitally
driven, government payments through transaction accounts are
relief to cash-strapped national budgets and better ensures transfers
aren’t “skimmed” by the informal sector.
Financial inclusion also helps governments get better control of the
economy. Control can translate to understanding better the money
supply and money flows. That includes better controls on money
laundering and terrorist financing. There is also macroeconomic
evidence to show that economies with deeper financial intermediation
tend to grow faster and reduce income inequality. For local people
in rural areas, like their counterparts in the city, the effects of
plugging into a transaction account are immediate. It removes the
fuss and muss around working within informal players, slashes
often-usurious transaction fees, and buries the threat of theft from
a cash-only lifestyle that includes stuffing bills and coins in a
mattress or in a box under the bed. The need for loan sharks
evaporates as account holders start to develop a relationship with
a bank.
Step 2: Pennies saved
People need to transact, to be sure, but they also have need to save.
Transaction accounts in hand, people begin to accumulate money.
No matter how small the amounts and scale, savings can and
will build up. One can save without an account to be sure,
but temptation can disrupt savings held at home.
A good example hit me during my trip to Indonesia a few years ago,
where traditional savings practices remain. While there, I struck up
a conversation, through an interpreter, with a lady in her home
situated in a slum in Semarang, Central Java, to learn about her
savings habits. She explained how a little clay pot – called locally a
Tabungan – holds all household savings. But it doesn’t work for her,
warning sullenly: “There’s a thief in the house: me”. It reaffirmed
that, Tabungan aside, there are plenty of good reasons on the
consumer side to migrate people to basic banking accounts.
Technology plays a big part in that migration. Kenya’s M-PESA,
which is not a bank, is a prime example.
Kenyans signing up to that service often have spare change on their
account that accumulates day to day, month to month by millions
of users. M-PESA has found a creative way to go beyond basic
transactions through partnerships that migrate customers from
transactions to savings and even loans. M-PESA does not provide
loans on its own, but teams up with a bank to do so.
Banking rules also shape how banks provide access to transaction
accounts and savings products. In West Africa, for example,
regulatory barriers on agency banking make it difficult for banks to
reach remote and rural areas. Banks there can deploy agency
banking through so-called "Intermediaire en Operations de
banque”. That has proven unprofitable and therefore unsustainable
for banks. A more viable solution has taken hold, however, via
microfinance institutions (MFI). MFIs have more flexibility to run out
agency banking solutions since MFI rules allow them to launch
agency banking solutions through agents/merchants, to the extent
that they have a strong management information systems.
What is important to remember once people get access to
transaction and savings – be it through a bank, savings group,
agent bank or a mobile operator – the financial world really begins
to open up.
Step 3: Savings to borrowing, and beyond
Everyone wants to borrow. That’s clear. So as savings build up, the
prospect of taking out a loan improves. Kenya again is on the front
foot with M-Shwari. Offered within M-PESA, it gives qualifying
customers a chance to borrow. Linked with regulated financial
institution Commercial Bank of Africa and mobile network operator
(MNO) Safaricom, M-Shwari meets a market need. It has proven its
worth in the market. Beyond lending is insurance, a financial option
that opens up when savings balances emerge and grow.
Dormancy: the quest to keep accounts active
One key to better financial access is making people use an account,
not just have an account. By use, our definition means transacting
at least once during a period of six months.
That definition seems easy enough to reach, but it isn’t. Case in
point is GSMA’s latest annual mobile money report, which shows
total and active mobile money accounts by their definition.
Compare the two figures, and it is striking that 75 per cent of
mobile money accounts are dormant.
Whether in the countryside or in the big city, addressing dormancy
starts with customer centricity. It’s the core way we deal with the
issue in our financial inclusion efforts. Financial education has a role
too, especially at European level, but less effective in the developing
world, according to some reports from the World Bank.
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The quest for customer centricity starts from the top – the
leadership of the bank. That’s according to a well-referenced set of
customer centricity pillars outlined by CGAP. The culture of the
organization and management must be customer focused.
As management guru Peter Drucker once said, “Culture eats
strategy for breakfast.”
Operations too need to focus on centricity. This pillar requires banks
to focus efforts towards the customer in the back office in areas
like compliance, human resources management, IT, marketing and
staff training. Another pillar rests on understanding the customer
exceptionally well. That means getting a grasp of their daily lives,
their needs at different stages of their lives as well as the day to
day. Empowering employees helps this pillar stand firm.
The fourth pillar is products and services. They have to be tailored
to customer lifestyle to tailor their experience every time they
interact with the bank – in-branch, online or mobile. Customer
experience can be improved based on insights harvested though
data and face-to-face contact. This pillar is also built on testing
products and services, along with delivery, scale and renewal of
them. The final pillar is value: creating and measuring it at customer,
firm and society levels.
Old ways work… to a point
Banks must understand how to extend account access, going
beyond time-honoured, culturally driven financial solutions like
ROSCAs (Rotating Savings and Credit Associations). They function
in rural communities by banding together people in groups of
around 20 to save up. Savings are shared and rotate evenly between
members. ASCAs (Accumulating Savings and Credit Associations)
are another option, where savings are shared and can be borrowed
unevenly by the members. These groups have been going on for
centuries, but can only achieve so much.
That’s why the formal banking system needs to step in. As G20
leaders spell out the need for agri-finance, WSBI continues to push
ahead until 2022 with our partnership with Mastercard Foundation
to address banking services including in rural areas. WSBI has
already signed memoranda of understanding wtih banks in Nigeria,
Uganda, Morocco and Kenya. If programme partner banks in the
seven African countries targeted can make inroads in the country -
side, expect those who work the fields and feed the continent to
have a more prosperous, more stable future.
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WSBI Innovation Workshop:Banking Disruption, Bank-TechCollaboration & Open Banking Part 2
WORKSHOP TACKLES BANKING DISRUPTION, COLLABORATION& OPEN BANKING
After the successful Innovation Workshop in November 2017,a delegation of banking experts from all around Europegathered in Brussels on 28 February for the second part ofthe WSBI Innovation Workshop dedicated to bankingdisruption, BigTech trends, collaboration and open banking.
Question tackled included: who are the main players; which trends
will impact banking; how should banks react in the mid to long
term as well as how to build meaningful collaborations to enhance
the customer experience and offering for consumers and SMEs.
On the agenda: platformisation, challengersand Big Tech trend s
The event was kicked off by Natalie Staniewicz, WSBI-ESBG, with a
summary of the previous innovation workshop’s conclusions and
Jalal Douame, Erste Group, with insights on industry developments
in the last months since the workshop – the speed of change in
retail banking but also more and more in SME and corporate
banking became highly visible. AI and Big Data, Open Data and
Cloud being a few of the core underlying technologies reshaping
banking. Matters such as “platformisation”, challengers and
Big Tech trends were tackled. Is coopetition with the GAFA, BAT,
FATBAG an option? Should banks cooperate more together?
And how to strengthen collaboration with other sectors and
start-ups? Views differed, experiences were exchanged, everyone
sharing their best practices on innovation and open banking,
drawing a picture of trends for the next five to ten years.
Building meaningful collaborationsto unlock new potential
Roundtables, presentations and brainstorming
sessions allowed participants to reflect on the
importance of collaboration. Kristian Luoma from
OP Financial Group presented ideas on how to
establish bank – startup partnerships to enhance
the client offering and help evolve from a traditional
banking approach to a multiservice company.
“Focus on tackling concrete needs” in your bank
– start-up projects, was a clear advice given.
The vivid discussions brought forward a clear
common point: Next to building up banks’ own
capabilities, collaboration is becoming or is
already a vital part of banks’ strategy. As Natalie
Staniewicz, manager in innovation and business
development at WSBI-ESBG, said: “Banks must look at where
customers will be and keep an eye on the future to be relevant
today”. Banks are actively rethinking how they can remain flexible
and what they can implement to deepen the strong relationship
and trust they already have with customers and ease the customer’s
daily financial journey.
Insights from other industries – the TravelIndustry
Cornel Dinu and Daniel Farmache from Veltravel, an aggregation
platform to ease customer’s travel-related journey, shared insights
on how the travel industry was disrupted over time and drew
parallels to today’s banking disruption.
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WSBI’s Natalie Staniewicz
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Veltravel showcased how APIs have helped to aggregate services,
build platforms by integrating various offers, open new
opportunities for cross-industry collaboration and lower costs to
companies as well as clients.
Open banking & new business models
Alexander Keim from Projective discussed platformisation trends
and how banks could experiment, pilot and scale in an open
environment of co-creation. “Savings banks have a unique position
because they often maintain a relationship in an intimate setting
rooted in local communities. Customers are more likely to trust
them with what is at their heart and not just in their wallet. In order
to stay ahead of BAT & GAFA, they need to become self-aware of
their role as data fiduciaries”, Alexander Keim stated.
“The game is changing”, said Oscar Sala, co-chair of the Mobey
Forum Open Banking Workgroup, referring to what it means to be
a bank today. He showcased differences between UK Open Banking
and PSD2, trends of how banks are reacting and various strategic
options to connect people, merchants and banks in a new open
ecosystem.
In the afternoon, participants were split into discussion groups to
tackle on the one side Bank-Bank Collaborations and on the other
hand New Value Creation and Data Management.
The Workshop showcased a positive view of Open Banking, namely
that of ‘Sharing and cross use of bank products, services functions
and data with third parties to bring additional value and create new
business opportunities’.
Why is the ‘digital wave’ and Workshops suchas the one in February important for savingsand retail banks?
Jalal Douame from Erste Group mentioned after the Workshop:
“The workshop was a fantastic forum to discuss some key topics
for banks today, especially with our industry moving toward open
banking and GDPR. Today, banks need to act fast and leverage on
opportunities to cement relationship with clients and create
competitive advantages. Having such workshop will help us address
crucial questions, exchange views and debate approaches. There is
no right or wrong in the equation, it is all about maximising
opportunities!”
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Learn more about the 2018Innovation Workshop athttps://www.wsbi-esbg.org/Events/Banking_Disruption_Workshop
For questions, [email protected]
New: ‘Innovation Exchange’ videoseries continues
MULTIPART SERIES HIGHLIGHTS WSBI MEMBER BANKS’ EFFORTSTO HARNESS DIGITAL WAVE
WSBI released in early 2018 more episodes of its WSBI Innovation
Exchange video series. Representatives from WSBI member banks
in Austria, Spain, Sweden joined WSBI staff and members from
other markets to share their innovation successes. Episode 11
features CaixaBank’s Javier Mas, who talks about innovation and
how the Spanish bank approaches digital change. The two-minute
video looks at insights from Spain’s leading retail bank and how it
approaches digital channels to serve customers and how band
branches continue to play a role.
About WSBI Innovation Exchange
WSBI released in November its 11-part innovation-focused video
series. Episode 1 kicks things off with WSBI-ESBG’s Natalie
Staniewicz explaining how innovation and digitisation best works
within WSBI-ESBG member savings and retail banks. The second in
the series features WSBI-ESBG payments expert Diederik Bruggink,
who gives insight into the role retail banks play in the digital “New
Normal” sweeping over the financial services sector.
The third video features Shaheen Adam, acting general manager,
PostBank in South Africa, who tells how innovation will shape the
future of retail banking and the role of brick and mortar banks in
the digital age.
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See the latest videos on YouTubeat http://bit.ly/2AgAuhG or byscanning this code.
New ‘Innovation Insights’ page launched
In advance of the 8 March European Commission FinTech Action
Plan, WSBI-ESBG launched a new webpage dedicated to the latest
insights from the associations and members related to innovation
and digitisation.
Called “Innovation Insights”, it gives a first-hand look at how
innovation is taking place on the ground at WSBI-ESBG member
banks. Visitors can find policy positions and insight articles on topics
such a framework for FinTech, cybersecurity, cloud outsourcing,
data protection and data flow as well as digital financial inclusion
– to name a few areas. Also included are videos and opinion pieces
from WSBI-ESBG, its members as well as partners on innovation.
In the coming months, members will continue engaging in various
committees to develop positions in areas such as roboadvice, ICOs
and cryptocurrencies, digital skills and e-identity.
Visit Innovation Insights atthe WSBI-ESBG website athttps://bit.ly/2pQZCaR or byscanning this QR code.
InnovationExchange
InnovationInsights
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Upcoming: 25th World Congress ofSavings and Retail Banks in New Delhi
SUSTAINABLE RETAIL BANKING: MAKING GLOBALISATION INCLUSIVE FOR ALL
The WSBI World Congress set for 15-16 November in New Delhi,
India, aims at bringing WSBI and ESBG members and all interested
retail bankers together to discuss the topics that define the future
of the retail banking sector and to bring a powerful message to the
worldwide policymaking community.
The congress features speakers
and panellists from WSBI’s
membership as well as experts
from the banking sector around
the world. It offers the attendees
insights during high-impact panel
discussions.
The WSBI World Congress of
Savings and Retail Banks is an
excellent opportunity to create
and strengthen business relation -
ships and to promote your
products and services to an
international audience of retail bankers and policy makers.
This year’s theme: Sustainable Retail Banking:Making globalisation inclusive for all
Is the tide turning against globalisation? Are too many people
feeling left behind by global growth? These questions are being
asked more and more, reinforced by the tendency of some
countries to shift towards protectionism. Yet, while raising living
standards, globalisation is a positive force able to lift many people
out of poverty. Over the past half-century, globalisation has brought
many benefits to the world economy. Openness to trade enhanced
competition and spread technology; income and jobs increased.
Stronger income growth allowed global poverty and cross-country
gaps to decline.
However, very few citizens experience this positive force in their
everyday life. Inequalities still exist and are rising.
Local savings and retail banks’ undeniable role
The financial sector has an important role to play when it comes to
globalisation. Trade integration relies on financial links (for payments,
investments, etc.), creates additional financial links and stimulates
foreign direct investment (FDI). One can say that the financial sector
is symbiotic with global trade.
At the local level, globalisation allows citizens to access a greater
variety of goods too, while inward investment provides jobs and
skills to workers. Besides, while countries open to trade grow faster,
their living standards tend to increase too.
Globalisation has a positive impact on SMEs and local communities.
It provides more employment opportunities, gives them access to
wider markets and availability of a
greater variety of goods. In return,
businesses trigger innovation,
add new jobs to the economy,
which has a positive impact on
workers. Very often, the main
obstacle to such developments is
financing. Here is the role of retail
banking: providing such support.
Savings and retail banks are the
banks with the strongest regional
presence. A big branch network,
complemented by digital customer
channels is testament to that
presence. As traditional partners of their local private and
commercial partners, savings and retail banks are uniquely placed
to accompany their clients on their international expansion and relay
the benefits of globalisation to local communities. Indeed, retail
banks are ideally placed to help the private sector adjust to new
economic realities, with an extra focus on social sustainability.
They can provide financing to local SMEs so that they can go and
conquer the world. That is when global and local join hands in order
to create a better future for all of us. These banks base their
financial decisions on the needs of people and SMEs, and thus
positively finance businesses that benefit to society. In the current
context of post economic crisis, sustainable retail banking gained
prominence and appears as a fair trade-off between individuals,
business and investors.
So that everyone gets the most out of globalisation, domestic
policies must guarantee a more equal redistribution of the growth
generated and fuelled by globalisation. As stated by IMF Managing
Director Christine Lagarde: “Building a more resilient and inclusive
global economy, the world economy needs to be based on a
foundation of sound domestic policies, combined with a steadfast
commitment to international cooperation.
India: a gigantic retail banking marketin the making
India is undergoing a digital revolution thanks to which more and
more Indians will be included in the financial system. >
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The country is one of the most cash intensive economies in the
world, 97% of all transactions being made in cash. Reason why
India is among countries with the lowest access to digital payments
in the world. Yet, as said previously, digital technologies are an
opportunity to connect unprivileged and poor people – the
unbanked – to financial services such as savings, loans, insurance.
A blessing in rural areas in particular.
In 2014, Indian Prime Minister Narendra Modi announced the
launch of a program aimed at financial inclusion which priority was
to ensure that each Indian household has a bank account.
Accessible financial services had to become global and affordable.
In a developing country as India, banks have an important role
in mobilising savings and allocating credit in order to trigger
investment and production. Several measures have been settled to
reach such goals in India. The Financial Stability and Development
Council has been given a special mandate to promote financial
inclusion and financial literacy. The Reserve Bank of India and the
government also played an important role in terms of building
infrastructures and raising awareness.
Considerable investments in creating infrastructures have been and
still are made to offer various solutions such as mobile banking, e-
wallets or virtual cards. Digital-only banking in India is based on the
Aadhaar infrastructure, the world’s largest biometric ID system to
which 99% of the Indian population is enrolled to. This Unique
Identification Number (UID) can be used as a permanent financial
address and thus facilitates financial inclusion of the weaker
sections of Indian society.
As a result, over the past years, an enormous amount of bank
accounts have been opened in the country while studies show the
positive impact of bank branches and retail banks on the GDP on
India, financial inclusion being strongly associated with its progress
and development.
Why you should attend
Many speakers and panellists from all over the world will attend the
25th WSBI World Congress and share their experience and views
on the topic of globalisation, financial inclusion and the role of
savings and retail banks in this respect. It will be the occasion to
hear about how those banks can make their infrastructure in the
field of payments, credit decisions, financial advice work while
bringing the benefits of globalisation to every street and every
house. You will have the occasion to know better about robotic
breakthroughs in manufacturing and how to cope with the threats
those innovations bring: what’s left of the human dimension of
work, how to train the workforce, what about social protection and
what influence on banks? A particular focus will be made on India,
a country that has been able to provide an electronic ID to more
than one billion of its citizens in only ten years. Attendees will see
how this can lead to a higher level of financial inclusion. This will
allow attendees to compare different models, from financial
institutions in developing countries and their European counterparts.
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African financial institutions transformvia innovation
SUCCESS HIGHLIGHTED AT TUNIS WSBI REGIONAL GROUP MEETINGS
Fifteen African members convened in Tunisia on
11-13 April for the WSBI Africa Regional
Group meeting at the kind invitation of la
Poste Tunisienne. The event focused on rapid
and smart adaptation to digital banking
with mobile solutions for payments, savings
and micro-loans and parameters for a complete
management of their mobile accounts.
Day 1 included keynote addresses from Tunisian government digital
economy director Sami Ghazali and Yacine Fal, deputy director
general for the African Development Bank's North Africa regional
unit. MED Confederation President Jaloul Ayed led a morning
panel on regulation and digitisation. La Poste Tunisienne CEO
Moez Chachouk moderated the afternoon panel on digital
financial inclusion.
Day 2 focused on innovation, with morning panel sessions followed
by afternoon workgroups. On that day WSBI launched its first-ever
UFA 2020 best achievements award for 2017 was given to Post
Bank Uganda, Centenary Bank Uganda and Caixa Económica de
Cabo Verde. Day 3 included a visit to a la Poste Tunisienne branch.
Transforming financial institutions throughinnovation
The La Poste Tunisienne-hosted Africa Regional Group Meeting was
in cooperation with the Caisse des Dépôts et Consignations de la
Tunisie. The meeting comes at a time when financial institutions
worldwide are embracing the change fuelled by new technology,
changing rules and customer demands. Given this context, meeting
participants assessed what are the necessary business model
transformation requirements to be successful and sustainable in
disruptive innovation times and how the regulation should support
this transformation. Latest innovative developments in areas like
blockchain, crypto-currency, biometry and virtual banking were
covered from the regulatory and operational perspectives.
Discussions also focused on how innovation can at the same
time differentiate WSBI member institutions from competitors,
better serve their customer sand “bancarize” populations that
are poorly served.
The meeting also gave members an opportunity to compare the
various strategies deployed to develop an innovative offer through
the creation of a subsidiary or the purchase of a company or
through partnerships. Participants were also invited to reflect upon
key success factors of the bank of the future and how to take the
leadership of innovation on their respective markets.
PostBank Uganda Alex Kayaayo receives award.
Antonio Moreira , CEO, Caixa Económica de Cabo Verde receives award.
Charles Kabanda, General Manager, Financial Inclusion, Centenary Bank
Dedicated to retail banking.
www.wsbi-as.org