Naomi Wanjiku, right, works with a customer at a M-Pesa booth, a Kenyan cellphone-based money transfer service that is changing the face of banking in East Africa, in Nairobi, Kenya, March 26, 2014. Using smartphones to make payments for transit, food, clothing or even to pay bills is commonplace overseas but not in the U.S., where such a system would be extremely expensive.Sven Torfinn/The New York Times
Generally speaking, reporters should steer clear of policy advice. We know less than half of what we think we know, and we're undereducated and inexperienced compared with the people we write about.
That said, allow me to suggest a way Ottawa and Bay Street could make a difference in the world. For those of you on Bay, there even may be a little profit in it.
This week in Washington, an outfit called the Alliance for Financial Inclusion, or AFI, will be looking for donations from richer countries, including from Canada's Department of Foreign Affairs, Trade and Development.
The AFI is a nice story. It's a group of central banks and financial regulators that has been steadily growing since it was created in 2009. The mission: To make the 2.5-billion "unbanked" people in the world part of the financial system. We want this to happen because bank accounts tend to correlate with jobs and wealth. In other words, more bank accounts result in less poverty. The World Bank found Mexico increased employment by 7 per cent and boosted gross domestic product by 3 per cent by generating a 10-per-cent increase in financial inclusion.
There now are more than 100 members in the AFI network, including banking regulators from China and Mexico and the central bank of Brazil. These emerging-market powers mix with authorities from places such as Yemen, the Philippines and Trinidad and Tobago. Unlike at the International Monetary Fund and similar institutions, no member of the AFI has more clout than another. But neither does the group insist on forcing "consensus" resolutions on its members. The AFI's organizing principle is peer pressure. It sets out its goals, and attempts to help various countries learn from others.
And if a little competitive pressure occurs along the way, that's all for the good, says Alfred Hannig, the AFI's Bangkok-based executive director. So far, the AFI has identified 53 policy changes that are the direct result of the alliance's efforts. "When others move forward, you want to move forward," Mr. Hannig told me Tuesday in an interview in Washington. "When your neighbour is moving, you want to move too."
Mr. Hannig's group is about to join the big leagues. It got off the ground with donations from the Bill & Melinda Gates Foundation and the German government. The AFI has recently decided to become a full-fledged international association under civil law. Members will pay dues to support the group's day-to-day operations. But Mr. Hannig would like to do more than facilitate annual meetings and keep the group's web site fresh. He would like also to arrange secondments, training and a wider range of technical assistance. For those kinds of value-added exercises, he will need help from donors.
Canada should help. Prime Minister Stephen Harper helped generate interest in financial inclusion by making it part of the Group of 20 agenda when he hosted the Toronto Summit in 2010. The G20 has kept on talking about the issue, with a great deal of input and help from the AFI. When Mr. Hannig asks for help, Christian Paradis, Canada's Minister of International Trade, should listen. The Harper government has sought to brand Canada as a financial centre, and it likes to tie its international aid to initiatives that offer some commercial opportunities.
Bolstering financial inclusion satisfies both aims. Regulation is perhaps the biggest barrier to getting poorer people bank accounts. The spread of mobile banking has allowed millions of people who have no access to branches to join the financial system. Yet lots of regulators remain wary, and for good reason. The AFI's strength is its ability to overcome these obstacles by sharing best practices. Canada, surely, should attach itself to this work.
And the commercial opportunity? The number of mobile money services increased to 150 in 2012 from one in 2001, according to the AFI. Kenya is a leader. The M-Pesa microfinance service launched by Safaricom and Vodafone is now used by millions of Kenyans. Vodafone this year took the service to Romania, showing there is business potential outside the poorest countries.
Mr. Hannig hypothetically considered the possibility of Standard Chartered, with its many ties to developing countries, teaming with Vodafone or others to profit from the rise of mobile banking. Canada's banks are positioned to do the same. Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Royal Bank of Canada know the Caribbean well, which happens to be a region where the AFI remains relatively poorly represented.
The risk is minimal – mobile accounts are measured in hundreds of dollars, not hundreds of thousands. But for mobile account holders, the change is dramatic. No longer do these people need to waste hours seeking out a bank branch. Their inclusion in the financial system leads to credit which leads to investment which leads to more loans. Suddenly, for the banks, there is profit where no before existed.