Thursday, May 21, 2020
Pandemics and Financial Inclusion (Part 4)
Gain insights on how financial supervisors and regulators can help to mitigate the impact of COVID-19 on the financial system and preserve the gains that have been made in financial inclusion. This episode features:
- Chris Calabia – Sr. Advisor for Supervisory & Regulatory Policy, Bill & Melinda Gates Foundation
- Ernest Addison – Governor, Central Bank of Ghana
Full Transcript
May 21, 2020
Babak Abbaszadeh:
Good morning, good afternoon, good evening to our global audience. Hello everyone, thanks for joining
us today. I am Babak Abbaszadeh, CEO of Toronto Centre for Global Leadership in Financial Supervision.
I am very happy to welcome more than 30 agencies and 40 countries that have joined us, ranging all the
way from Botswana to Zambia and many countries in between, so we pretty much covered most letters
of the alphabet.
Babak Abbaszadeh:
Welcome to the fourth episode of our Pandemics and Financial Inclusion. Before I introduce our
speakers, I'd like to wrap up a little bit about what we've learned over the past three sessions. So that
the observations are crystallized. More than 1.7 billion people worldwide remain unbanked and the
majority are women. Crises disproportionally affect the poor. The experience with past pandemics such
as Ebola indicates the economic fallout and subsequent recovery are likely to hit women harder than
men in developing countries.
Babak Abbaszadeh:
Yet, as destructive as COVID-19 is, it has also amplified opportunities for financial inclusion which is
critical for poverty reduction. COVID-19 has created the urgency to accelerate the need for digital
payment systems as cash is considered a contaminate. Building a digital payment system is critical but
it's not just simply about building a technology platform, it requires an enabling environment with riskbased
policies and supervisory frameworks to ensure consumers and other stakeholders are protected
and safe from cyber attacks, privacy breeches, and money laundering.
Babak Abbaszadeh:
We also need to ensure regulators and supervisors are properly trained. This is where Toronto Centre
plays an integral role by providing much needed capacity building for supervisors and regulators in
partnership with our greatest partners.
Babak Abbaszadeh:
In the past decade, we at Toronto Centre have seen a steady increase in demand for our programs as
countries struggle to address the challenges of building safe and accessible financial systems. While we
deliver 70 to 80 programs and more than 2000 officials annually receive our training, so much more
could be done if additional resources could be committed to these efforts.
Babak Abbaszadeh:
In today's episode, we sit down with two special guests to cover financial sector regulation and
supervision as well as the financial inclusion dimensions of this challenge. We circulated their bodies to
you in advance, and in interest of time, I won't read them.
Babak Abbaszadeh:
Dr. Ernest Addison is the Governor of the Central Bank of Ghana and a prominent member of the
International Community of Central Bankers. I should also note for our Canadian audience, he received
his PhD from [Magill 00:03:20] University where my daughter just begun her studies last year.
Babak Abbaszadeh:
Chris Calabia is our special guest, senior advisor, supervisory regulatory policy financial services for the
poor at the Gates foundation. He's also the former SVP at the New York Federal Reserve Bank. Hello
gentlemen. We're glad you could join us today. Welcome.
Chris Calabia:
Thank you, hello.
Dr. Ernest Addison:
Hello.
Babak Abbaszadeh:
Finally, I would like to thank our funders, Global Affairs Canada, the Swedish International Developing
Cooperation Agency, IMF, USAID, Jersey Overseas AID and Comic Relief, without whom we couldn't
bring you this program and help our capacity building efforts.
Babak Abbaszadeh:
Before we start, I know that many of our viewers have questions and we have allotted time for
answering your questions. Please use the Q&A function in Zoom and type your questions as soon as you
can so that you can get into the queue.
Babak Abbaszadeh:
Gentleman, I want to address a question to both of you. World Bank literature has highlighted that a
financial crises can throw millions into poverty. That shouldn't be a surprise. So all good efforts on
financial inclusion can just go out the door with a major financial crisis. We still have fresh memories of
the 2008 financial crisis as well as other global and regional crises, but this one obviously feels different.
So Governor, let me start with you. What is different in your view about this crisis?
Dr. Ernest Addison:
Well, thank you very much and this COVID-19 crisis is different first and foremost because it's a health
crisis. And a health crisis that has led to an economic crisis which is impacting people's lives and ending
up also in a livelihood crisis. And I say so because even though Ghana does not have that many cases, we
have about 6000 cases of COVID-19, the mortality rate has also been low, it has impacted the economy.
It has impacted in terms of the measures that the government had to put into place to deal with the
COVID. We have had to lockdown nearly three weeks and we have restricted movements and significant
parts of our economy has been impacted on by this crisis.
Dr. Ernest Addison:
And we are seeing slower economic activity. We are seeing informal sectors where people depend on
going to the market every day, not being able to do that, and therefore not being able to earn an
income. Now if you are living on a day to day basis through selling a product in the market and you're
not able to do that, and also the need for social distance, that impacts on your ability to earn a living. So,
this is a crisis that goes beyond the issue of the economy, which it has. Even in terms of our financial
flows into our reserve flows as a country, we have seen the numbers go down. And apart from the
[markroll 00:06:35] impact, the impact on the government finances is also big on their revenue. Flows
have gone down, but on the expenditure side, the government has had to implement some COVID-19
related expenditures in a sense, pushing citizens against some of the hardships that we are facing.
Dr. Ernest Addison:
And then, at a household level, we have seen especially those who belong to the services sector being
significantly impacted on. Hotels are empty, restaurants are empty, informal markets have been empty
for two weeks and that has impacted on livelihoods.
Babak Abbaszadeh:
Thank you very much. And also it's important to note that while in relative terms, Ghana has not had a
major number cases with COVID, you still live within the world community and you're impacted by the
various slowdowns that are happening so everyone is really in this together.
Babak Abbaszadeh:
Chris, turning to you, so I'm sure you have a special vantage point as a former SVP at the New York
Federal Reserve Bank, you pretty much had a front view seat of the 2008 great financial crisis. And back
then I think the banks were the big culprits, but what is your view now? How is this crisis different for
you?
Chris Calabia:
Thank you, Babak, I'm honored to join the Governor today and you with the Toronto Centre Program on
Pandemics. I think Governor Addison said it quite well in that this is a health crisis and that's the major
difference between the COVID-19 pandemic and the 2008 crisis. And the loss of life on a heartbreaking
scale is one of many factors that makes it so incomparably different from the 2008 crisis. With that said,
as you alluded in 2008, I think many observers would have blamed the financial system as being the
source of the crisis.
Chris Calabia:
In 2020, the financial system might actually be part of the solution, especially in lower and middle
income countries. And Babak, as you said in your opening remarks, the costs of pandemics and these
types of crises often fall heavily on the poor, women, and the unbanked, and others. And if we can
improve the ability of the financial system to serve society's most vulnerable members, their financial
needs, women, the poor, and the unbanked, we may be able to help mitigate the economic hardships
that they would otherwise endure. We might strengthen the government's responses to the pandemic
and this in turn could lead to better health outcomes as well.
Chris Calabia:
Those are of course the short term benefits of making good decisions by supervisors and Central Banks
and governments, but we should remember from the 2008 crisis that there are long term benefits as
well sometimes from crisis. In terms of the response to the crisis, excuse me, not from the crises
themselves, but the responses to the crises.
Chris Calabia:
And we know that in 2008, we introduced some new tools. And so for me as a front line supervisor, one
of the most important tools that we introduced in 2008 was the development of stress testing, a new
tool that allowed us to look forwards to imagine how bank's balance sheets might perform if we couldn't
flatten the curve, if you will, of rising losses across so many different asset classes and rising
unemployment. And even after the financial crisis, we've found stress testing to be a useful tool,
especially for larger banks, because it allowed us to look forwards rather than to look back at past
results.
Chris Calabia:
And so I think that as supervisors and Central Bankers think about the responses to the pandemic, they
should try to think strategically as well and recognize that some of the decisions that they make could
leave the financial system in a stronger position and make it a more inclusive financial system as well.
Babak Abbaszadeh:
...Chris, and also it's important to keep in mind that there's a lot of discussion today about going back to
reopening. Many U.S. states are beginning to talk about that and some other countries as well. But if
you really even think about it, it's really trying to embark on a new normal. I'd like to ask my colleague,
Diana, to please put up a notice of an event that we are organizing. It's basically Supervising the New
Normal. In some ways it's kind of insensitive to talk about recovery so soon when the death rates are
still climbing, albeit at a slower rate, but there are a lot of challenges here.
Babak Abbaszadeh:
So I encourage our viewers to also tune in to our next session which is on May the 26th. We have three
prominent speakers, a Senior Official from the WHO, the Chair of our Board, Dr. Stefan Ingves of
Riksbank, and Socorro Heysen, the head of supervision in Peru, who's also a member of our board of
directors. We'll delve into those issues, and as Chris said, we have to look forward into a new system,
but perhaps it is a new normal. Thank you very much, Diana.
Babak Abbaszadeh:
Governor, turning back to you, looking at the current situation, with COVID-19 pandemic spreading
globally, and Central Banks responding to the situation by taking different regulatory measures, what
policies and supervisory decisions have you taken to reduce its impact on the financial sector and
businesses in Ghana? And while you answer that question, you're also plugged into the community of
Central Bankers within Africa and elsewhere, so if any other broader observations you have, we very
much would welcome that. Thank you.
Dr. Ernest Addison:
Thank you very much. Now, I think our response in Ghana is not different from what the global
response, global monetary policy, response has been. First, to try to reduce our policy rates. We reduced
the policy rate from 16% to 14.5%, hoping that that would signal an easing of monetary policy. We have
also reduced reserve departments for banks from 10 to 8%. We reduced the capital conservation buffer
for banks from 3 to 1.5%. And we have also relaxed the provisioning requirements for selected loans.
Dr. Ernest Addison:
Now, this is because we are taking earlier measures which we think that strengthening the financial
sector and a broad marked group policy in general. The information that come down, we were
beginning to see fairly robust growth prior to this crisis coming in. So in Ghana, we did have the policy
space to reduce the policy rates and reduce reserve departments. I know there are other African
countries that did not have the advantage in terms of where they were prior to the crisis. And Zambia
was one of those countries where they had not been able to use the policy rate or reserve requirements
to counteract the effect of this crisis on the economy broadly.
Dr. Ernest Addison:
In addition to that, we also had to look at the issue of digital payments which became very important
because people had to stay at home and then therefore trying to undertake transactions using digital
means became very important during this period when Ghana Mobile Money is one of the more
important digital forms of payments. So we decided to increase Mobile Money Wallet transactions and
waive some of the charges on Mobile Money accounts. Transactions that were below 100 CDs for
example, were made free, and that we thought had a major impact on financial inclusion. There's a
quite a lot of people without bank accounts in Ghana, and they do have Mobile Money accounts. And
therefore, being able to reduce the charges in a sense facilitated that segment of the sector.
Dr. Ernest Addison:
In addition to that we also asked banks not to pay dividends for two years, that is 2019 and 2020, in a
sense to conserve capital in anticipation of an outlook in which breached loans might not be performing
effectively. We do foresee a situation where impairments to credits in the financial sector could be
higher and therefore we requested the banks conserve capital in that sense. The banks themselves
would also have to keep some moratorium on debt servicing, so at six months, debts serviced with
moratorium for a customer base of banks, and then for customers that are operating particularly in the
service sectors and the hospitality industry.
Dr. Ernest Addison:
So a broad range of policy measures aimed at first dealing with the macro product and then also trying
to ease the burden of transacting digitally.
Babak Abbaszadeh:
Thank you very much for laying that out and I'm sure we're going to come back to that again. Chris, you
bring an interesting perspective, when you talk about your supervisory background and also of your seat
at the Gates Foundation. So COVID-19, has created particularly challenging times for developing
economies that the Gates Foundation works with. How can supervisors in Central Banks best address
these challenges?
Chris Calabia:
So Babak, as you may know from the press, many Central Bankers and many supervisors will emphasize
the need to stabilize the financial system in the short run, and I think that's completely appropriate. We
want banks and other types of financial service institutions to operate normally, as normal as possible to
safeguard depositors savings and to continue to serve as an intermediary of credit to businesses and
consumers in the marketplace. And when financial institutions do those jobs well, that can help to
mitigate the impact on vulnerable populations.
Chris Calabia:
There are though, three areas I think where many supervisors including in Ghana are focusing attention
as well, and Governor Addison alluded to some of these points as well and I'm happy to emphasize them
in a little bit more detail. So first of all, as the Governor mentioned, there are people still in many
countries, about 1.7 billion people worldwide, who lack access to a financial services account of some
kind. And we need to enroll more of these people into financial services accounts so that they can
benefit from financial services during the pandemic and then also from government related programs.
And so for example, some governments are making cash transfers or COVID-19 related relief payments
to their citizens who've been furloughed or to small businesses and so on. And in order to receive those
payments, digital financial payment can be a very safe and effective way of getting them. It reduces the
need for individuals to line up in large crowds at say, government offices or bank branches and so on
and reduces the need for them to be in close proximity to each other during the time of a pandemic.
Chris Calabia:
But if you think long term, when people have access to these financial services accounts, they're better
able to engage in the formal economy. They're better able to make payments and receive payments in
the future. They're better able to save and invest in their family's futures. And eventually they're better
able to borrow, too, as they develop a credit history and so on. And so this is one area where you can
have a very long term effect when you think about a short term response to the pandemic.
Chris Calabia:
The second thing in many lower and middle income countries is that we need to think more about the
entire financial system. And one challenge in some parts of the world is that in rural or impoverished
areas, you can't find a bank branch or an ATM anywhere, but you can almost always find someone who
sells a mobile phone or a sim card, or that you can pay to top up air time on your mobile phone. And
about 15 years ago the idea of relying on mobile phones to provide financial services really took off. First
in places like Kenya, or the Philippines, and now have been deployed in many lower and middle income
countries around the world. And one very important part of this mobile money or mobile wallet
transactions is that it's difficult to get cash into the system or out of the system if there isn't an access
point nearby. And because there are these stores that sell phones or people that sell air time, in many
countries these third parties are allowed to receive funds from consumers and then deposit them into
digital accounts on their behalf.
Chris Calabia:
And these third parties are called agents, and the pandemic is renewing attention on the need to ensure
that there are agents and they can function in the marketplace. Many countries are beginning to
recognize them as essential workers, meaning that they can work during the pandemic and provide cash
in and cash out services for people who rely on mobile wallets and so on. But that also means that they
need access to health information and in some countries simply soap and running water or clean water
so that their customers can wash their hands when the come in to deposit cash or to withdraw cash.
Chris Calabia:
So thinking a little bit more about the incentives that exist for people to become agents and making it
possible for them to serve their function is important both during the pandemic and afterwards.
Chris Calabia:
The last area I'd mention is that as you know very well from your work at the Toronto Centre,
supervision is an intensely hands on profession. We spend a lot of time sending people out into firms to
look very closely at their books and records, to interview people, and to conduct onsite inspections and
so on. And in a pandemic you don't want to do that necessarily. You don't want to deploy people into
the field. Where the challenge is, that in some countries financial intuitions have difficulty getting the
information to the Central Bank or to the regulatory authority because they don't have electronic ways
or the capacity to upload regulatory returns and reports to the Central Bank or to the supervisory
authority. And even in those countries where they can do that, in some cases the Central Bank staff or
the supervisors may not have the ability to access those records from outside of the Central Bank, from
home if they need to work from home.
Chris Calabia:
And so the investments that supervisors in Central Banks are making today to development things like
secure web portals or APIs that allow financial institutions to upload data straight into the systems of
the Central Bank or supervisory authority. And the investments in the telecommunications
infrastructure to ensure that people work remotely and including supervisors and Central Bankers from
home when necessary.
Chris Calabia:
These are things that will pay dividends in the long run as well and lead to a more efficient and
potentially more effective approach to supervision and a healthier financial system after the pandemic.
Babak Abbaszadeh:
Thank you very much, Chris. You laid the waterfront out really, really concisely and I really appreciate
that. A couple of observations on the points you made was in one of the earlier episodes, our good
partner, Greta [Bull 00:21:17] of [Seagap 00:21:17] was mentioning to me that this getting payment to
people is so challenging that at least one world government has decided to mobilize their military to
actually take bundles of cash and hand them out to people. Right? So we see to the extremes that
people go, so what you say is very appropriate.
Babak Abbaszadeh:
One of the other points I want to touch base on was you mentioned supervision is very much a hands on
business. We call it a relationship business. It's very true, and there's a lot of challenge and we have
been able to offer a lot of virtual programs and trainings for supervisors and including helping them do
virtual onsite supervision as well. So it's something that is really ongoing and it's very appropriate for the
times. So thank you for laying this out.
Babak Abbaszadeh:
Governor, if I can turn back to you please, how has COVID-19 influenced your thinking about financial
inclusion globally and nationally? And what do you see as some of the priorities for supervisors in this
space under these difficult circumstances?
Dr. Ernest Addison:
Well, I think that the COVID-19 experience has make it more important for us in terms of the digitization
of the Ghanaian economy. This has been a major priority of the government and particularly in the area
of digital payments, the Bank of Ghana has been at the forefront where from a branchless bank are
guidelines. We now have approved payments and services which allows for sim techs to licensed to
participate in the payments systems at landscape.
Dr. Ernest Addison:
As I said earlier on Mobile Money, it's one of the areas that we have made a lot of improvements. It's a
major form of payments in Ghana. Most of our informal operators operate using Mobile Money. And we
have seen the Mobile Money transactions nearly double during this period that we have had in
lockdown in the [inaudible 00:23:25] and in the bigger cities in the country.
Dr. Ernest Addison:
At the same time, we have seen cash transactions go down, so it became very clear to us what the
substitution between cash and digital payments obviously because the cash itself was seen as a source
of risk as the virus can be transmitted through cash. So we are focusing very much on the digital agenda,
trying to even make it more inclusive and allow that to rope in a lot more of informal market operators.
This also takes the form of in a sense, the agenda I'd mentioned because most of the participants will be
informal sectors of market women. Women who do not normally have access to banks and do not
normally have access to products of banks.
Dr. Ernest Addison:
So now that we are using the mobile technology, we are beginning to see a lot more access of women
into finance. And therefore some of the products that are being generated, mobile credit for example,
which does not require credit but is based on the payment histories, seem to be doing well. Those that
are targeted are woman entrepreneurs. And I think that broadly this is the impact on inclusion as we've
seen.
Dr. Ernest Addison:
And globally, we would need to move that into a space in which we also begin to see merchant
payments coming online and digital. That a big challenge that we have back home here where we do not
have a lot of online payments for goods, and we're trying to encourage merchants to introduce digital
forms of selling their goods and services as well. So broadly, this is how I see the impact on financial
inclusion and the assets can be widened to informals like this. And these informals like this are the
buyers towards the ability of women to get access to finance.
Babak Abbaszadeh:
Governor, these are impressive initiatives and I commend you for meticulously approaching this matter.
I do know that from our activities and involvement in Ghana with regulatory authorities there's a very
high degree of professionalism there. In fact, some of our trainers are folks that retrained in Ghana and
now are helping us train other countries. So, this is fantastic to hear.
Babak Abbaszadeh:
Chris, turning to you, what are the main projects the Gates Foundation's leading under the financial
services for the poor project? And why did you pick these focus areas? Thank you.
Chris Calabia:
Thank you, yes, at the Gates Foundation, we believe that every person deserves the chance to lead a
healthy and productive life. And when Bill and Melinda set up the foundation, they wanted to address
those things that make it harder to lead a healthy and productive life, including by addressing inequities
in health and medicine, education, as well as economic growth and opportunity and especially for
women and girls around the world. And there's a growing body of research, Babak, that shows that
when you have access to appropriate digital financial tools you're better enabled to lift yourself out of
poverty. And when crises struck, as you mentioned from the World Bank research that you've reviewed,
you're more financially resilient. You and your family are less likely to backslide in poverty if you have
access to appropriate tools.
Chris Calabia:
And the most powerful tools for financial inclusion in many countries have been digital payments
platforms. And so we focus on three areas in particular to promote digital financial inclusion of women,
the poor, and the unbanked. And so the first areas that we emphasized the adoption of an appropriate
regulatory framework that enables and properly supervises digital financial services. And so we provide
advice to supervisors in response to research into enabling regulations such as licensing, customer
onboarding, the role of agent networks as I mentioned earlier, as well as consumer protection.
Chris Calabia:
We also look more broadly at the wider range of prudential and supervisory issues that countries should
consider as they enable digital financial inclusion. And in fact, together with several partners including
the World Bank, and different agencies with the United Nations, we recently published our reference
guide for regulators on supervisory topics related to innovation and financial inclusion which is meant to
give broad insight into the types of questions and then a range of responses that different supervisors
have adopted in different countries.
Chris Calabia:
The second area that we look at and make grants in is in the digital infrastructure of a country. And
there are two aspects in particular. One of the biggest blockers of inclusion in many countries is the lack
if identity, and what that means is that in many countries the poor and marginalized groups including
women, especially women, may lack access to the documents that you and I have to prove who we are.
Those are things like birth certificates or driver's licenses and passports. But with digital identities, it's
possible for them to demonstrate who they are and it's easier for them to be able to access financial
service accounts. And so as you may know in traditionally under customer due diligence requirements,
you'd need to bring us a whole set of documentation to prove who you are. And many poor people
don't have those types of documents.
Chris Calabia:
But the Financial Action Task Force, the Global Centers sitting body for anti-money laundering has
recognized that an overly strict approach to customer due diligence can lead to exclusion of the poor.
And since about 2012, they've encouraged supervisors to think about risk adjusted approaches to those
standards including the use of what's called simplified due diligence when you're looking at low risk, but
vulnerable consumers in terms of opening accounts for them. And so simplified due diligence is one of
the areas that we look at in identity as well as thinking about how to promote modern digital identity
systems in response to research into design choices that governments can consider. And we have an
open source platform as well that we have developed with other partners that could form the basis of a
modern digital identity system.
Chris Calabia:
The other side of the digital infrastructure is looking at the payment systems itself, and we advocate for
the adoption of modern payment systems that will enable the use of digital payments by the poor. And
we have developed an open source payments platform called [Mojoloop 00:29:54] based on the Swahili
word for "one" or "together". And Mojoloop is a reference architecture for supervisors and financial
institutions to look at and consider adopting or to look at the principles that make it possible for people
with very low value accounts to make small transactions in a modern financial system. And so we
advocate very strongly on behalf of these interoperable digital payments platforms, and recently
announced a very exciting partnership with Google and with other technology providers and donors to
promote more research and support for these types of digital platforms that are interoperable and open
to the poor.
Chris Calabia:
And finally, the last area that I'd emphasize that we focus on are all the use cases for digital financial
services. Having a financial account that lies dormant most of the year probably isn't improving your life
or making it possible for you to lead a healthy and productive life, and so we want to make sure that
there are lots of good uses for financial services when they are offered in country, so we encourage and
sponsor research and experiments into digitizing wages for workers. We encourage governments to
consider making social welfare payments to their citizens using digital means to increase efficiency and
reduce corruption and ensure that people receive the payments that they are due. And we encourage
merchants in the development of merchant acceptance networks for digital payments so that it's easier
for people to make use of digital cash and easier for farmers to bring their products to market and
receive payments digitally when those things exist.
Babak Abbaszadeh:
Thanks Chris, these are certainly a comprehensive array of services and activities that you are working
on and Gates is doing. But it's interesting given where we come from, it's very refreshing for me to hear
to heart the perspective and the words that you are using for supervision. I feel like we don't need to
use Google to translate to talk to one another as one supervisory training agency to someone. So to that
extent, the Gates Foundation should be commended to have someone like you with that expertise
there.
Babak Abbaszadeh:
And I want to point out that IMF research suggests that risks to financial stability increase when access
to credit is expanded Without proper regulation and supervision. Therefore, investigating high quality
supervision can pay big dividends as financial inclusion expands. So obviously the voracity of the
statement for the mission of Toronto Centre is self evident, but it's very useful to hear that echos of this
also exist in some of the things that you were talking about.
Babak Abbaszadeh:
Governor, coming back to you, according to the World Bank, despite an increase in overall access to
financial services, women are less financially included than men. Ghana, for example, falls far behind
global standards. Could you please tell us how you are addressing this issue at the Central Bank, and
what are the main challenges in enhancing financial inclusion in Ghana? Thank you.
Dr. Ernest Addison:
Well, thank you very much, Chris, I think that the issue of women's access to financial is a broader one,
and the issues that you used to address that tends to be in a sense, cross cutting. I mean, the reasons for
women not being able to have bank accounts, some of them are social/cultural. Depending on which
part of the world in which you are, women have different rights than men. And I think the same
argument can be brought into the Ghanaian countries, where women do not own most of the easiest
collaterals such as houses, and the type of assets that banks would require in order to extend a loan.
Dr. Ernest Addison:
So we have been working broadly with plans to try to gather the data that the banks are beginning to
submit gender desegregated data. And then on the basis of the gender desegregated data that we have,
we will be able to more carefully craft programs which would go to benefit women broadly. But the
traditional collaterals, we are dealing with it through promoting digitization, digital phones or credit,
which would require that women do not have to produce the more difficult forms of collateral.
Dr. Ernest Addison:
We are also trying to simplify the issue of identity. Typically the identity problems for women tends to
be higher, so we are looking at a simplified PYC arrangements, looking at tiered arrangements for
identification, and also in a sense trying to put into place simplified frameworks for the banks in order to
be able to assess lending to women. So these are the main issues that we face in terms of the issue of
women, which I say has to be cross-cutting in terms of the approach because there are several reasons
that account for that women not depending on men for their living. And that dependence also in a sense
does not allow them to be able to independently access credit.
Dr. Ernest Addison:
There is the issue of limited literacy for women. Women are not fully literal compared to men. And then
the lack of products and services that are also designed to work women. And for us, I think that the data
base that we are putting together would very much help us in trying to design products and services
which would be most appealing to women.
Babak Abbaszadeh:
Thank you very much. And we also always try to apply a gender lens to activities that we do. And it is
very unfortunate that we were not able to have a woman speaker at today's session. It wasn't due to
lack of trying, but we will rectify that. So, that's something that we are very much cognizant of. And
Governor, thank you very much for elaborating on that.
Babak Abbaszadeh:
Chris, I'm going to pose this question to you, then we'll go to the audience, because there's quite a lot of
interesting questions there. Together with partner organizations, Financial Services for the Poor
program has developed a reference guide as a public go to assist regulators who are exploring policy
options for enabling the development of inclusive digital financial services. I believe you alluded to this
in one of your earlier answers. Have you received any feedback from supervisors on how helpful is this
document?
Chris Calabia:
Yes, absolutely, I'm happy to address that. If I might just add on to some of the issues that Governor
Addison mentioned about the financial inclusion of women. Of the 1.7 billion people in the world who
are financially excluded today, about one billion are women and many of them are based in Africa. And
so the initiatives that Governor Addison mentioned are so important, because countless studies show
that when we give women access to financial services and they have their own account, it's a win-win
for everyone. Women who have access to their own accounts are more likely to spend more on
nutrition and education needs of their families and their children and that leads to better health and
education outcomes for both boys and girls. And interestingly, research also shows that when women
have access to accounts, they increase their stature in their families and in their communities as decision
makers. And they're more likely to seek formal employment in the economy. And so it's a fascinating
development and we could spend most of our time focusing on women and we would achieve most of
the results that we want in financial inclusion.
Chris Calabia:
With regard to the reference guide, thank you so much for mentioning that. This is a document that we
had developed with partner organizations, because we were meeting often with Central Bank staff or
regulators in countries who had questions about what is the range of practice, what are some examples
of good regulatory policies that different countries have adopted? And we decided that we would
collaborate to do some research on the basic questions that many regulators face and then offer insight
into a range of practice of actual regulations that have been adopted in different markets and offer
some insights into how well those have worked in terms of the impact on access to accounts and
improvement of access to services for many different groups including women.
Chris Calabia:
And so this reference guide looks at everything from the basic enabling environment that is who is
licensed to provide financial services? How do you onboard consumers for the first time into financial
services? How do you supervise the agent network that I talked about, those third parties who provide
basic cash in and cash out services? And what can you do to improve the protection of consumers, many
of whom are new to financial services? And as Governor Addison mentioned, may be illiterate and in
some cases in some of the communities we work in, they may also be innumerate, and not able to read
or understand numbers, and so these are very important considerations when you're thinking about the
population.
Chris Calabia:
But the reference guide also covers a much wider range of topics, looking at the full range of prudential
issues that supervisors and Central Bankers think about when they open their markets to digital financial
services and including things like, what are capital and liquidity standards? How do you monitor for
money laundering issues and prevent money laundering and terrorist financing and fraud? What can we
do to to secure these ancient systems against cyber attacks and so on?
Chris Calabia:
And so this is a first iteration of this document, it's available on the Gates Foundation website. It's called
The Reference Guide for Regulators. It's meant to be a highly accessible and highly visual document, so
it's not at all a traditional regulatory document like you and I are used to. It's got lots of graphs and
diagrams and so on to make it very easy. And it's not a stand alone reference guide either, you do need
to do additional reading and we provide links to a number of other resources out there that our partners
have developed and to actual Central Bank websites and so on for regulations.
Chris Calabia:
The feedback from the initial use of this document in our meetings and technical assistance missions
was highly favorable. And when we showed it to academics, and to regulators, and international
financial institutions as well, they all asked if they could have copies, and that's why we decided to make
this pubic. It's the 1.0 version right now, and so we are seeking input and suggestions from people about
things that we could improve or things that we could cover differently and better, and so we eager to
receive feedback on it.
Babak Abbaszadeh:
Thank you very much, Chris. And if feedback from us is welcome, we'd be happy to take a look at it and
also provide you with some of that. So let's go to the audience and I see a number of very interesting
questions.
Babak Abbaszadeh:
First, a statement of praise from Habib Cabo, who liked one of our previous sessions. It says today's
another rich experience being shared. So thank you very much, Habib, appreciate it. And I bet you the
critical comments are going to my email, so I'd like to read the ones that are coming here forward.
Babak Abbaszadeh:
Governor, let me pose this question to you. What is the Central Bank of Ghana doing to ensure the
financial inclusion drive is sustained in the midst of COVID-19? So, in other words, how do you make
sure that COVID-19 doesn't just erase all the gains that you've had?
Dr. Ernest Addison:
Oh, well I think that we in the digital agenda broadly is a priority for this government and we are
ensuring that we continue with our policies in that sector, particularly with the setting up of digital
infrastructure, improving the network and connectivity, as well as looking at the issue of cost, really,
which imparts an access to digital services. We have had to come up with a schedule for financial
intermediaries and terms of trying to minimize the cost of transfers, for example. And we have put in a
range of values for which we advance and order specialized depositors solutions to not charge anything
at all. I think that has where the biggest gain is. If we're able to manage the costs associated with the use
of mobile money, for example, that should help us sustain the interests of the non-included in the
financial services sector.
Babak Abbaszadeh:
Thank you very much for that. Chris, this question is specifically for you. You're actually mentioned by
name in that question. So, one of the fallouts in India due to this pandemic is the dislocation of huge
numbers of migrant workers. Please share your thoughts, comments on how this impacts banking needs
while people are constantly on the move, some of them on foot. Do you have any insights that you can
share on this?
Chris Calabia:
Yes, the pandemic has led to a large number of people returning home to their countries because they
can no longer work in the communities in which they used to work, whether that's in India or beyond.
And that's true not just in India, but also in other countries as well, so there's a mass migration taking
place of people who are highly vulnerable who live day to day on wages that they would earn in the
informal sector sometimes in many cases. And that's why programs like the cash transfers are likely to
be quite important in many countries going forward to help close the gap in the lost income and wages.
And it may also help to reinforce physical distancing requirements if families have access to some
resources to help meet their daily needs so that they're not forced to work and expose themselves as
much in the open to the virus.
Chris Calabia:
And we think that cash transfers are going to continue to be an important part of the responses in many
countries to the pandemic, and that's why we think that wherever possible, they should be done
digitally, and that's why we emphasize enrolling as many people as possible, as Governor Addison
mentioned, into financial services accounts using appropriate measures. Things like simplified due
diligence to prevent problems that could emerge. And these types of digital transfers are very safe. It's
much more effective, it's often much more efficient, and it costs a lot less, rather than have as you said,
have the army deliver cash house to house or have people gather in crowds outside of government
offices or bank branches. And so cash transfers are going to be an important part of that solution.
Chris Calabia:
But digital financial services themselves may also be part of the solution in these cases. If it's easy for me
to make a payment to a friend or a parent who might be in need of help, and that person lives very far
from me, digital financial services make that so much easier, and make it easy for me to sort of leverage
my friends and family network, if you will, and bridge my needs or help others bridge their needs. And
so that support can also be quite helpful to families and to individuals. But it's a very big challenge and
it's one that I encourage supervisors and Central Bankers to think about as well.
Babak Abbaszadeh:
Thank you very much, Chris, for that. And this next question is from one of our colleagues, Loretta
Michaels. Before I ask her question, I'm really glad she's on. On one of the last episodes, I compared the
two speakers that we had favorably to Jack Nicholson, the American actor who only has one speed, and I
don't think Loretta liked that, so my apologies to Loretta on that, and I do think he's a great actor.
Babak Abbaszadeh:
So coming back to your question, has Ghana's Central Bank taken any measures specifically aimed at
non-bank financial institutions like micro-finance institutions?
Dr. Ernest Addison:
Yes, we have taken a lot of measures at non-bank financial institutions. Some of them have had
minimum requirements, secondary requirements, which we have reduced. We've also reduced the
reserve requirements for rural banks in Ghana also. So all of this is to help improve liquidity that is
available to these other financial institutions, the rural banks, savings and loans societies, and the Bank
of Ghana has also set up a liquidity support arrangement where the bank would be making liquidity
available on the basis of collateral to these institutions if they faced any tightness in their liquidity.
Dr. Ernest Addison:
And at the same time, we've also been promoting some kind of arrangement between the Mobile
Money companies and the micro-finance institutions to give out micro-credit. and we have had the
[Jumo 00:46:12] arrangement in Ghana which has over two million customers that are being served
digitally. A credit to two million customers in the last few years. And these are customers that are, in a
sense, remotely been able to access credit at a much lower cost.
May 21, 2020
Babak Abbaszadeh:
Chris, I'm going to pass this question to you. It's an interesting question. It looks like the questioner has a
logical way of looking at things, a logic frame. Is there a correlation between countries with high banked
rates and those who trust their governments? So high bank rate, trust government. And is there a
correlation between countries with low bank rates and those who do not trust their governments? If so,
are there different strategies for countries with high versus low trust?
Babak Abbaszadeh:
Is this something that you've been looking at at the foundation and others within the financial inclusion
community?
Chris Calabia:
So, at the foundation, we haven't studied this particular issue to my knowledge. It is an important one,
because financial services are all about trust, and you want to ensure that people trust the people that
they're sending their savings to, and that they can trust that the systems will work well for them. And so
things like consumer protection regimes are so important, especially when you're introducing new
consumers to financial services who may not understand what their rights and responsibilities are. And
so things like transparency in terms of pricing, and fees that consumers might pay, make it easier for the
consumers to understand what obligations and rights they may have and how the system will work for
them if they open an account. And likewise, having a good means of addressing complaints and making
clear how financial institutions are required to receive complaints from consumers. And if those aren't
resolved, what access to address all they may have to help from other organizations with a seal society
or the Central Bank or consumer protection agency and so on. These are all important measures to
promoting trust in financial services.
Chris Calabia:
Because at the end of the day, financial services is a lot about confidence in the financial system, and if
you don't trust the system, you won't want to use an account and that doesn't then serve the needs that
we have in terms of trying to get people access to good tools that will help them improve their lives and
to lead healthy lives as well.
Babak Abbaszadeh:
Very true. So without trust, money is just a piece of paper or just a bit of information.
Chris Calabia:
Exactly. I would add that no matter how much capital in bank, or in a financial system you have, all that
is eroded if consumers don't trust the system.
Babak Abbaszadeh:
Yeah, and it also ties back into some of the earlier things that you were talking about. The fact about
mobile operators and others who are coming, which is great, they're expanding access. But it does beg
the question, and I don't want to necessarily open that gate, but it does beg the question of fiduciary
responsibility. It does beg the question of who is at the end of the day, looking after the stability of the
system? Is it the Central Banks, or is it some other entity that might be regulated, but then their financial
activity's not regulated. Right? So these are very interesting interrelated questions in the rush to provide
access to people which is very legitimate. These broader questions obviously have to remain very much
at the forefront of our mind.
Babak Abbaszadeh:
Governor, I'm going to pass this question on to you. It's not just about Ghana, it's actually a global
question, but I think you, based on your network of Central Banker around the world and the fact that
you have worked in international organizations and are in charge of the monetary policy in your country,
you may have a view on this to help us out.
Babak Abbaszadeh:
It's a question about equity in a sense. During any type of crisis, whether it be pandemic, natural, or
financial, the humanity at a lower socioeconomic scale, minorities, marginalized populations, and the
poor are impacted the most. However, time and time again, 90% of the efforts are directed at capital
markets. Why is that?
Dr. Ernest Addison:
Well, I'm not sure whether that is entirely correct. I mean if you look at the response to this pandemic,
they are focused on the big macro issues. And then we have also focused on the micro and household
issues. I mean, if you look at the global responses, this has been targeted at capital markets, interest
rate policy responses, et cetera. In terms of the ability to stabilize markets and redirect best plans and
capital flows, that's important at the macro level. But then at the micro level, you have had
governments, institutes, all types of programs, particularly to deal with those segments of society that
are more vulnerable. Coming to our part of the world, a lot of the government response has been in
trying to feed the poor. There has been cash transfers all around that are directed at people whose
livelihoods have been disrupted. We have had a lot of other interventions which are aimed particularly
at the less endowed in society, and we've seen a lot of the interventions that the government has put
into place looking at directing this issue of equity.
Dr. Ernest Addison:
So my broader response to that is that I do not agree. I think that we are at a balance. A balance of
addressing the big macro issues that are associated with capital flows as well as the focus on the micro
part of the problem.
Babak Abbaszadeh:
Thank you very much for that. It's a good question coming from one of our board members which starts
with, "Great webinar!" So as the senior of Toronto Centre, I'm grateful for that kind of an opening from
one of our board members. But it's an interesting question. Should global standards setters, like the
Basel Committee, IIS, IOSCO, or even the FSP play a more involved role in promoting financial inclusion?
Chris, let me pass this on to you.
Chris Calabia:
They already are playing a role in promoting financial inclusion. So, under the leadership of Queen
Maxima of the Netherlands, who serves at the United Nations, Special Advocate for inclusive finance for
development, she has convened meetings regularly at the Bank for International Settlements with the
major centers sitting by, including many of the ones that you mentioned as well as [FATIF 00:52:42], to
talk about how global standards affect financial inclusion. We know that in its past, a very strict
application of things like know your customer rules, or customer due diligence could lead to exclusion,
then FATIF, to it's credit has recognized that challenge many years ago, and has encouraged countries to
adopt risk based approaches that may be more appropriate for their local circumstances and that might
consider the needs of including citizens in their financial system, while also respecting the fact that they
are potentially lower risk, and they're very small transactions, so less risk of things like money
laundering taking place.
Chris Calabia:
And it's the same that can be true for the other center sitting bodies as well, and many of them have
written papers on how standards affect financial inclusion and how regulators and Central Bankers can
think much more about financial inclusion. And there's some research, and I'd like to see more, but
there's some research that suggests that when more of a population is included, it's easier for Central
Banks to carry out their functions of promoting sound monetary policy and ensuring that the payments
systems works well and so on. Like I said, there's more research that could be done here and I'd like to
see much more research on the link between inclusion and stability. But there is some research to
suggest that.
Chris Calabia:
But more broadly, the research is hugely compelling. That when people have access to appropriate
digital financial services, they are more likely to be able to lift themselves out of poverty, and when
they're out of poverty, less likely to backslide into it because their financial resilience increases. Just as
when we increase the capital reserves for banks, they're better able to weather storms, when people
have access to good financial tools and the ability to borrow and save and to make payments to each
other and to participate more fully in the economy, they are less likely to box light and they have greater
financial resilience as well.
Chris Calabia:
So the Toronto Centre's playing an incredibly important role here as do the Centre's implementers,
Central Banks and regulators, and I'm delighted that there's been a very good dialogue including at the
bank for [Genasso 00:54:28] Settlements as well as INFATA for other organizations and other Centre
setting bodies.
Babak Abbaszadeh:
Well, Chris, you are definitely a scholar and a gentleman, because if I was going to answer that question,
I would take off with some of the things you said, but in our experience, sometimes we see two sides
that was financial inclusion and financial stability and sometimes they don't really interrelate together.
So, probably more could be done, but I'm glad to hear that the efforts that they have taken and the
goodwill that they're showing is beginning to effect some change here.
Babak Abbaszadeh:
Governor, a question specifically for you. What are the specific strategies implemented by your Central
Bank to popularize digital payments and increase awareness on risks of using digital payments amongst
the low income groups of the society?
Dr. Ernest Addison:
Well, as I said, digital payments are a major part of the policy of the country, broadly. I mean, Ghana is
implementing a national identification program where there's going to be a biometric issue of a national
I.D. which contains the information of almost everybody in the country. In addition to that, we're also
pursuing a national digital property addressing system that is also aimed at digitizing the economy.
Dr. Ernest Addison:
Certainly, we have designed a retired KYC arrangement to minimize compliance challenges also in the
country. And as I said earlier on, we have a new payment and system of services act which allows us to
license think tanks. So currently we have received several applications from many promoters that are
trying to register think tank organizations in the country, and these think tanks are working in
collaboration with the banks to develop different types of applications that will simplify digital
payments. Especially, we do have the Mobile Money arrangements and interoperability between the
Mobile Money and bank accounts and what we call the E-switch account which is a Central Bank
inspired project. We call that the financial inclusion triangle.
Dr. Ernest Addison:
So in Ghana, at the moment if you have a bank account, and you have at an E-switch card, and you have
a mobile phone, you can have interoperability between your mobile phone and a bank account as well
as the E-switch card. And all of that in a sense, brings in a lot of people in this country who are not in the
cities, in the rural areas, who have assets and mobile phones are automatically able to be roped into the
banking system, because once they have a Mobile Money account, these Mobile Money accounts can be
replicated using a banking account and opening a banking account for that Mobile Money account.
Dr. Ernest Addison:
And we think that this is the way in which we will sustain interest in digital payments broadly. But also to
promote all of this agenda.
Babak Abbaszadeh:
Thank you very much. We're coming pretty close to the end, but Chris, I'm going to ask you to please
take a stab at this question. Is there any immediate palliative, in any form, for microfinance institutions
in developing countries to ameliorate the effect of COVID-19? Because obviously a lot of them are in
panic, they may not be able to exist. Is there anything that you see certain governments do or incentives
to keep these institutions afloat?
Chris Calabia:
Yeah, that's a challenging question, and I should emphasize that we don't focus a great deal of our work
on microfinance institutions. We do work with some, and we do have some insight into these types of
issues. I think, first of all, I would look to the responses of many Central Banks and supervisor authorities
in the early weeks of the pandemic and that was to get information out to the institutions about the
health and safety measures that they needed to take and about the need for physical distancing. And
then as I mentioned in many cases, governments are trying to get soap and water to branches and to
agents and so on so that consumers who come to make deposits or to make withdrawals and so on, can
wash their hands before engaging in those types of things.
Chris Calabia:
So, the first, access to that information. I think a second thing that I would emphasize is, we'd like to see
more investment in thinking about liquidity in branches and liquidity of agents. And with modern
technology, it seems like it should be relatively straightforward to be able to keep track of say, where an
agent is located, because sometimes these people change their locations. They might be an individual
standing under an umbrella who sell air time and will also take deposits from consumers for these
Mobile Money accounts, these very small accounts. And with better technology, and we have some
experiments in the field currently, it would be easier for providers to monitor liquidity of these agents,
and for Central Banks to have a better insight into those things. So those are the things that I would
emphasize, just thinking a little bit about the health and safety measures as well as understanding better
the state of liquidity.
Babak Abbaszadeh:
Thank you very much. Gentlemen, we're coming to the end almost. I would like to thank you very much
for being articulate, concise, and thoughtful, which really made my job very easy. You were very
generous with your time, and very complete with your answers. So thank you very much, I enjoyed
interviewing you.
Babak Abbaszadeh:
To our audience, my apologies for leaving some questions on the table. That's inevitable, but your
questions will not go to waste. These webinars are very important to us in a sense that not only do they
help raise awareness of the audience, our multi-stakeholder audience, but also they provide important
input into our capacity building courses. So we will try to work with your questions in one form or
another as we enhance the quality of our offerings, whether they're courses, whether they're guidance
notes or things of that nature.
Babak Abbaszadeh:
And for those of you in the supervisory community, I know a lot of you have questions about business
continuity plans and would like to improve them. Please visit This email address is being protected from spambots. You need JavaScript enabled to view it.. We do have
dedicated communities of practice for business continuity plans, financial inclusion, and others to
enhance the dialogue amongst the supervisors and tie you to various activities and initiatives that will be
helpful to you.
Babak Abbaszadeh:
So, Chris and Governor, thank you again, I really appreciate your time-
Dr. Ernest Addison:
Thank you
Chris Calabia:
Thank you.
Babak Abbaszadeh:
Goodbye everybody.
Dr. Ernest Addison:
A real pleasure.
Chris Calabia:
Thank you, it was an honor. Thank you. Thank you, Governor. Thank you, Babak.
Dr. Ernest Addison:
Thank you, thank you.
Babak Abbaszadeh:
Thank you.
Dr. Ernest Addison:
Bye.