Press release

5 Mar 2012

Beirut

Inclusive Finance in the ESCWA Region: Current Status and Future Prospects

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Beirut, 3 May 2012 (ESCWA Communication and Information Unit)— The ESCWA 27th Ministerial Session, which will be held on 9-10 May 2012 at the U.N. House in Beirut will be discussing inclusive finance in Western Asia in a round table to take place from 9:30-11:30 a.m. on Thursday 10 May. The Regional Commission has prepared a report entitled “Inclusive Finance in the ESCWA Region: Current Status and Future Prospects” that discusses the status of financial inclusion in the ESCWA region and the way forward; provides an assessment of individual access to finance; examines small and medium-sized enterprise (SME) access to finance; and examines the financial infrastructure in the region. The report also proposes a set of policy recommendations to advance financial inclusion. The report says that functional, productive financial systems allocate resources efficiently to spur economic development, improve income distribution, and equalize opportunities. Deficiencies in the financial sector result in missed growth opportunities, worsening poverty and widening inequality. Thus, finance matters not only for growth but also for inclusive growth. Inclusive finance is an essential development issue comprising individual and enterprise finance that allows households and businesses to manage cash flows, build assets and guard against risk. Recently, there has been rising interest in financial inclusion across the globe. In June 2010, the Group of Twenty Finance Ministers and Central Bank Governors (G20) developed and endorsed the “Principles for Innovative Financial Inclusion”, committed to improving access to financial services for the poor. Fundamentally, greater access to finance is not about increasing the number of people with bank accounts, but about removing price and non-price barriers to financial services. All economic agents, whether individual or institutional, need access to credit, savings, payments settlements, insurance, pension plans and remittance facilities. According to the report, financial systems in the ESCWA region lag behind other regions, thereby limiting positive spillover that would result from greater finance availability to the real economy. Capital markets are incomplete and are not deep enough to encourage capital formation. The main providers of credit (banking institutions) are generally reluctant to expand credit to individuals and businesses because deficiencies in financial infrastructure and regulatory frameworks make expanding access to finance costly and risky for banks. Other serious barriers to financial depth include: the lack of competition in the delivery of financial services; weak credit information systems and enforcement of creditor rights; inefficient judicial systems; and existing collateral regimes that are unreliable and not readily enforceable.
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