W’Bank: Fintechs, Key in Poverty Reduction

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Obinna Chima

The World Bank Group (WBG) has stressed the importance of financial technology (fintech) companies, describing them as key pillars in supporting sustainable growth and poverty reduction.

Fintechs, according to the multilateral institution can strengthen financial development and inclusion for
households and firms, as well as improving efficiency and competition in the financial sector.

The Development Committee of the World Bank stated this in a communique at the end of their meeting, during the just concluded World Bank/IMF Annual Meetings in Bali, Indonesia.

However, they pointed out that fintech may also pose risks to financial stability, integrity, and consumer and investor protection.

“We welcome development of the Bali
Fintech Agenda by the WBG and the IMF, which brings together key considerations for policymakers and the international
community.

“Working within their respective mandates, and in close collaboration with other partners, the institutions should help harness the potential of fintech to deepen financial markets, enhance responsible access to financial services, facilitate
cross-border payments, strengthen remittance systems, and better manage risks associated with use of these technologies,” it added.

They, stated that focus should be placed on low-income countries, small states, and marginalised communities, especially to close gaps in access to finance for women and for micro, small and medium enterprises (MSMEs).

They called for more private sector participation in the regard, in other to create jobs and well-functioning economies.

“Global economic growth remains strong, but uneven, while manufacturing and trade growth have moderated. Downside risks to global growth have intensified for multiple reasons. These include policy uncertainty, geopolitical developments, the gradual tightening of global financing conditions, as well as rising debt levels and currency volatility.

“We underline the crucial role of international trade for economic growth, job creation and sustainable development. We call on member countries, with support from the WBG and the International Monetary Fund to implement policies that ensure robust and inclusive economic growth, reduce risks, and foster competitiveness, while strengthening fiscal sustainability and financial resilience,” they added.

The committee further expressed concern about the rise of debt vulnerabilities in some emerging markets and low-income countries, which they noted risked reversing the benefits of earlier debt relief initiatives.

According to the committee, deteriorating debt outlooks were increasing in those countries’ vulnerabilities as global economic risks mount.

“This necessitates solid policy frameworks, adequate fiscal and external buffers, and sustainable and transparent lending practices. We ask the WBG and IMF, based on their respective mandates, to help member countries strengthen their fiscal positions by improving debt management capacity, increasing domestic resource mobilisation and deepening local capital markets.

“We support the WBG-IMF multi-pronged approach to work with borrowers and creditors to improve the recording, monitoring, and transparent reporting of public and private debt obligations, as well as efforts to strengthen creditor coordination in debt restructuring situations, drawing on existing fora.

“Our meetings had a strong focus on building human capital, particularly given the implications of technological advances on jobs, the financial sector, and other aspects of development.

“New jobs are being created that did not exist a decade ago, while some skills that were formerly relevant are becoming obsolete. We discussed the need to ensure that all individuals have access to the skills and capabilities to adapt and prosper in the face of digital disruption. Given the strains on public finance s’ystems, new approaches will be required.”

It added: “We welcome the World Development Report 2019: The Changing Nature of Work and its approach to facilitate policymakers’ understanding of near- and long-term challenges.

“Building human capital demands significant investment and evidence-based policymaking, which will require new and effective revenue mobilisation strategies and approaches, including for social protection, health and education systems with universal coverage.”