Princess Máxima, UN Secretary General’s Special Advocate for Inclusive Finance For Development, at the Global Savings Forum

Question:

Princess Máxima:

So yes, the microfinance industry has grown enormously in the last fifteen years from microcredit to microfinance to access to finance and then to financial inclusion. With this evolution, emphasis has shifted to provision of savings, insurance, payments and remittances, as well as loans. Also, the emphasis has been enlarged. So, not only individuals, but also small and medium enterprises, which are the biggest creators of jobs.

Another thing that has changed in the last five years is that we have always known that financial inclusion is a very strong tool to fight poverty and help develop economies. We know it is pro-growth and pro-poor. But the emphasis lies now a lot more on when it produces that positive effect. The importance of financially-aware customers, the right consumer protection measures, the right regulatory environment and the importance of a financial infrastructure/architecture in a given country have become very evident.

Another important progression is the focus on the right product that produces the right impact. This is why I am very happy that the Gates foundation has taken up the important issue of savings. Bob Christen and I met several years ago because of our interest in savings, something that was not really on people's radar at the time. Savings is probably the most powerful of financial services in terms of empowerment. It is a debt-free way to make investments in a house, in children, in fertilizers for the crops. And, it protects people from unforeseen shocks without forcing them to lose their livelihoods. So, savings is definitely something that needs more focus.

Question:

What do you think is the development impact of financial inclusion?

Princess Máxima:

As Melinda Gates mentioned, access to financial services can help people generate income, build assets and manage cash flow. It helps them do more with what they already have. The development impact can be big. Especially when women have access to a safe place to save. It goes to food, health care - just as those women told Melinda.

In terms of savings, there are several reasons one would save money. To make an investment, which requires a longer-term form of savings. Then, the additional income produced by that investment or the better living conditions is the impact. And that we need to analyze. Savings are also the simplest form of insurance. As Melinda just mentioned, savings have an extremely important role to play in protecting people against unforeseen shocks. The other reason to have savings is to manage cash flow, and therefore maintain a stable pattern of consumption.

That is why I am happy that Jonathan Murdoch is here to talk about what he and his co-authors researched in their book Portfolios of the Poor.

I was struck by a study a couple of years ago in Kenya. When poor women entrepreneurs had access to savings accounts, their productive investment and personal expenditures went up by 40% after just six months. They spent more on daily food. After just six months. Savings is certainly important. But we need more evidence.

Financial inclusion is not an end in itself. It is a means to an end. Thus, it is important that we consider more innovative ways to twin provision of financial services with provision of basic needs. Credit and savings can help poor people obtain water purifiers, improved cooking stoves or biogas digesters, safer housing, or commitment savings for the use of fertilizers or even health insurance.

We need to do more piloting, evaluate the results and roll out successful scalable models. Here, I think the foundation and other donors have a big opportunity to integrate financial inclusion into their work on infectious disease and maternal-child health, agriculture, and sanitation - and to create partnerships.

Question:

Both you and Melinda share an interest in taking an evidence-based approach to development issues. Can you talk a little bit about the ongoing efforts to understand where we are in financial inclusion - is there something we should be thinking about in this respect.

Princess Máxima:

I am optimistic we can get the data. One of our conclusions of the 2005 Year of Microcredit was the lack of data. Good data plays a critical role in policy design, identifying gaps, understanding impact on poverty and enterprise development, and enabling effective investments and programs.

I have been advocating for data since then. We have seen a lot of progress, including the Financial Access, the IMF data collection and the Gallup survey that the World Bank will be undertaking with the foundation's support. This will give us much insight into financial access issues.

But, we need more and better data. For example, the impact of access to savings on households, on local communities and on national economies. We also need a lot of data on the SME finance side, especially of the informal sector and in developing countries.

I welcomed the opportunity this past year, as Honorary Chair of the G20 SME Finance Data Group, to bring stakeholders together to improve, harmonize and streamline international data gathering and dissemination efforts. We have a good opportunity to do more.

National governments should do the data collection. The international community can play a role in guiding what indicators are important and are needed to make data comparable across countries. That said, there are some countries that are weaker on data gathering. It is the role of multinational institutions to support them, and build capacity.

This all will provide us with a fantastic start. Probably there are two things that we will need to concentrate on going forward. Those are impact measurement and also marketing research, to better understand why is it that sometimes we are not serving our clients properly.