CGAP East Asia Digital Financial Inclusion Program: Will digital financial services be a game-changer for financial inclusion?

In September 2016, Citi partnered with the Consultative Group to Assist the Poor (CGAP) a global partnership of 34 leading organizations that seek to advance financial inclusion, on a pioneering program that aims to support and enable financial inclusion through digital channels.

The East Asia Digital Financial Inclusion Program, funded by Citi Foundation, will leverage policymakers' experience with digital financial inclusion in three countries – China, Indonesia and the Philippines – which are exploring innovative digital financial inclusion strategies and the challenges and opportunities they represent.

The extraordinary progress in financial inclusion made by China, for example, is largely attributable to policies that promote government-to-citizen subsidies to low-income and rural areas through 900,000 agents deployed in 400,000 villages. The policy and regulatory environment in the country has encouraged a number of payment companies to build on the deep penetration of the internet, smartphones, and e-commerce to increase the use of financial services by broad swathes of the population that formerly were unbanked. Several private companies are also playing a key role in expanding the provision and usage of financial services across the economic and demographic spectrum.

The Philippines, to take another example, was the first country to launch mobile money in 2000 with Smart Money (years before MPesa in Kenya) followed by the debut of GCash in 2004. In 2009, the Bangko Sentral Pilipinas (BSP) – the country's central bank – issued a circular laying out guidelines that govern the issuance of electronic money in the Philippines. Yet the comparatively limited success of Philippine pioneers GCash and Smart Money compared with African mobile money deployments like MPesa certainly merit further study.

In Indonesia, the government has embarked on a comprehensive policy that aims to expand digital financial services across the population, and in particular to reach low-income segments. The Indonesian government has also reorganized its approach to financial sector supervision to take issues of financial inclusion into account. As these changes unfold, the country promises to be a test-bed of which approaches to the regulatory and policy supervision of digital financial inclusion holds the most promise for broadening the reach of digital finance.

The strategy of the East Asia Digital Financial Inclusion Program is to engage with relevant global forums, including the G20 Global Partnership for Financial Inclusion (GPFI) and the Basel Consultative Group Financial Inclusion Workstream, to achieve three basic goals.

First, to strengthen mechanisms for peer-to-peer learning, information sharing, co-operation and co-ordination of activities related to financial inclusion among Program participant countries and their peers, as well as global bodies that set standards and create regulatory frameworks. Second, the Program aims to improve the capacity of policymakers and supervisors to promote financial inclusion, financial stability and consumer protection. Third, the Program aims to raise global awareness of digital financial inclusion policy in the region to fundamentally benefit the vast unbanked populations of East Asia.