Her Majesty Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, on financial inclusion and beyond.
In an engaging interview, Her Majesty Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), discussed the many aspects of financial inclusion, from its early roots in microcredit to the current pioneering work she is leading on financial health and inclusive green finance.
The first thing that strikes you when listening to the UNSGSA is her level of engagement and command of the topic of inclusive finance. Answers dive straight into the detail of the issue, revealing an impressive depth of technical knowledge, and are drawn from practical examples from the more than 45 countries that she has visited since beginning this work 14 years ago.
Adults accessing the formal financial system
Substantial progress on financial access has been made, with the percentage of adults in developing countries accessing the formal financial system increasing from 42% in 2011 to 71% in 2021, according to the Global Findex Database. “But the concept of financial inclusion is becoming less relevant. More than just being able to make a payment, it’s about the depth and utility of services: can people access services that will help them bridge income gaps, absorb climate shocks, invest in their business to make a living? Rather than focus solely on increasing access to accounts, we need to look at how financial solutions can be designed and delivered to support brighter, more resilient futures and improve development outcomes.”
“Households and small businesses require practical financial tools to build resilience in the face of rising climate shocks and participate in the green economy.”
Policy and infrastructure
The UNSGSA described how the journey for most countries begins with developing and implementing a national financial inclusion strategy. “It requires strong leadership on the one hand — from government, regulatory bodies and the private sector — to prioritise actions and investments. And strong results targets on the other hand to hold actors accountable to action.” The UNSGSA stressed that countries that have made progress on financial inclusion have done so in large part due to their investments in digital public infrastructure (DPI): the core set of enabling policies and infrastructure that underpin financial inclusion, and that covers areas such as digital connectivity, digital identification, interoperable payment systems and data exchange systems.
The UNSGSA cited Togo and its response to COVID-19, where authorities swiftly put in place a fully digital cash transfer programme, Novissi, that leveraged national IDs, payments and systems interoperability, as well as a vibrant mobile money sector, to provide instant cash support to informal workers. “As a result, Togo was able to support both its citizens’ basic needs and business continuity in the face of lockdowns, while also driving financial inclusion.” The World Bank estimates that between April 2020 and January 2021, over 170,000 new mobile money accounts were created in Togo. The UNSGSA emphasized that, as well as financial inclusion, a strong set of DPI can also help build services in other areas, such as e-governance, healthcare and voting. But here the design of the DPI is critical – it should prioritise putting people first, by safely and securely meeting the needs of the poor and underserved.
Data sharing and partnerships
When asked about the future of finance, the UNSGSA emphasized the role of fintech companies to bring new solutions to underserved customers in convenient and cost-efficient ways. “I was in Senegal last year, where rural women farmers showed me how their harvests have tripled thanks to agri-tech services that allow them to save small amounts towards the purchase of fertiliser and high-quality seeds throughout the year. Along with training and advice, for example on what crop to plant when, this has allowed them to sell more products at the nearby market, invest in livestock, and become more financially resilient.”
In other words, when responsibly managed and shared between actors, digital data can bring new insights that improve product offerings. “Previously people said, ‘poor people don’t save’. But in Kenya the advent of mobile money has shown us that in fact people with low incomes do put money away and gradually increase their liquidity. So the business is there. But rather than just serve the top 30%, the big challenge for the private sector is to ask themselves, ‘what are the underlying needs of this new type of client and how can we serve them better?’ And that’s about banks leaving the comfort zone of how they’ve operated all these years and instead, for example, sharing data and partnering with agriculture or medical insurance companies.”
Impression of the fireside chat with Her Majesty Queen Máxima of the Netherlands at FMO's Future of Finance.
“More than just being able to make a payment, it’s about the utility of financial services and how they can support brighter futures.”
When asked how she felt inclusive finance can support climate response, the UNSGSA shared growing work being done around inclusive green finance. Over the past decade there have been significant efforts to green the financial sector. In practice, this has translated into tools to help assess, disclose and manage climate risk for banks, as well as funnel financing and capital market investment into green activities. At the micro level, climate change risks and financial exclusion are closely linked. Of the world’s 1.4 billion unbanked adults, the majority — over a billion — live in the most climate-vulnerable countries, where 58% of the population are not financially resilient* (as compared to 25% in less climate-vulnerable countries and 41% globally).
Financial resilience and climate vulnerability
“The challenge is to give people with low incomes access to financial products and non-financial support that allow them to build their resilience to climate shocks, while at the same time opening new opportunities for them to participate in the green economy. As is already happening across Africa, for example, where people are being helped to move from paying daily for a jerrycan of kerosene to paying in instalments for a solar panel that gives them access to electricity.” In two other examples, the UNSGSA described first how in the Philippines, following typhoon devastation, microinsurance combined with a cash transfer enabled people to quickly rebuild their houses and livelihoods. And how across Africa technology companies are boosting the climate resilience of smallholder farmers by providing climate-risk insurance (to cover, for example, weather, livestock and production risks) coupled with farming inputs (seeds, irrigation, machinery) and better market access. “But in all these cases, the key questions are how we scale such promising innovations, and what types of regulation and pricing will facilitate that scale-up?”
UNSGSA Queen Máxima visits ZamZam Medical Services in Ngong, on the outskirts of Nairobi, on 24 October 2023. Digital financing helped transform this small clinic in a family residence into a healthcare center, serving around 13,000 patients annually, primarily from lower-income groups. Photo: Patrick van Katwijk
UNSGSA Queen Máxima meets with Loubna Laqioud (second from right), an entrepreneur who opened a baking business, while on a field visit in Casablanca, Morocco in March 2023. Loubna was aided in part by microfinance institution Arrawaj Foundation, Photo: Patrick van Katwijk
Building resilience, driving outcomes
The UNSGSA discussed the importance of viewing development through a financial health lens to ensure financial inclusion actually improves people’s lives. “A financially healthy person has the tools to meet day-to-day consumption needs, the capacity to absorb and recover from financial shocks, is on track to reach future goals, and feels secure in their financial future. And poor financial health is not only a concern in developing countries. Over a third of European consumers, for example, don’t have any savings products, and more than half are concerned that they won’t have enough money for a comfortable retirement.”
The UNSGSA believes applying a financial health lens can help executives stand in consumers’ shoes when designing policies and products. “Is offering a customer ‘buy now, pay later’ products really making them better off? Why push someone into over-lending if ultimately they won’t be able to pay you back?”
As an example of smarter product and policy design, the UNSGSA pointed to how more and more banks in the United States are eliminating overdraft fees. “While it may be costly in the short-term, in the long-term clients are more financially healthy and can invest more productively in long-term products, such as commitment savings accounts and mortgages. These banks are also creating greater customer loyalty, less churning, and more stability.”
In São Paulo on 5 June 2023, Luciana Reís (first from right) and her staff, show UNSGSA Queen Máxima around Reís' restaurant. Reís has been navigating the ups and downs of running a restaurant during a pandemic and economic downturn. Photo: Patrick van Katwijk
UNSGSA Queen Máxima is pictured with smallholder farmers to learn about their experiences using a digital insurance product from a company called Pula while in Kisumu, near Lake Victoria, during a three-day visit to Kenya on 23 October 2023. Photo: Patrick van Katwijk
A call to action
Looking forward, the UNSGSA stressed the urgency of the situation. “Whether it’s in the public or private sector, we need to focus on making sure people have access to a suite of financial and non-financial services that will allow them to improve their lives and prospects. Financial health and inclusive green finance are important in ensuring these positive outcomes, particularly given the continuing rise in economic and climate shocks. For financial institutions, they can also be a source of economic competitiveness, developing more resilient and loyal customers who can bring long-term value.”
The UNSGSA concluded by saying that, whatever their role, everyone in the sector has a contribution to make to creating a financial future in which we leave nobody behind. One suspects that by the end of her heartfelt interview few in the auditorium would have disagreed.
Sources / further reading: *Financial resilience is defined here per the Findex survey as being able to come up with a moderate lump sum in an emergency (1/20th of gross national income), see for more info the Global Findex Report 2021