The digitalization of payments, advancing inclusive finance, and pioneering the implementation of the Global Goals for Sustainable Development

by Vanessa Zabala

On Friday, September 25, 2015, the Sustainable Development Goals (SDGs) were officially adopted by all of the United Nations’ (UN) member states. The 193 countries accepted the 17 SDGs as part of their national agendas and pledged to achieve a more sustainable and equitable society by 2030.  This event was followed by conferences addressing each of the goals through exemplifying country initiatives, methods, and entertaining new proposals to accomplish the ambitious goals.

On Saturday, September 26, 2015, I attended one of the conferences held at the UN headquarters entitled, “Governments Leading The Way: Digitizing Payments and Advancing Inclusive Finance to Achieve the Sustainable Development Goals.”  This conference continued the conversation of the Third International Conference on Financing Development in Addis Ababa, Ethiopia about financing the SDGs. Private actors were the main focus of the Addis conference due to the current global economic slowdown and inability to rely on governments for funding. On the contrary, the New York conference shifted the focus to what current governments are already doing, plan to do, and to include policy and compliment private sector initiatives. 

Financial inclusion has the potential to achieve 7 of the 17 SDGs.

        – Ms. Helen Clark, UNDP

The Governments Leading The Way conference began with a panel entitled, “Leadership to Achieve the SDGs,” which focused on Peru and Tanzania. Tanzanian President, Mr. Jakaya Mrisho Kikwete, boasted about his country’s advancement by describing how government intervention will provide leadership and facilitate private sector involvement by de-risking the country’s investment rating. The Ambassador Luis Miguel Castilla of the Republic of Peru, praised his country’s detailed strategy of access, usage, and quality through the platform of public-private partnerships. Tanzania and Peru have already begun digitalizing payments and want to further encourage other nations to follow suit.

Currently, 42 UN members have followed Tanzania and Peru in pledging to make efforts to transition from cash to digital payments. The UN has partnered with The Better Than Cash Alliance to provide services to UN members and accelerate the shift to digital finance. The digitization of payments has the potential of profitability and social inclusion. Some benefits include:

• Cost savings: increased efficiency and speed.
• Transparency and Security: by increasing accountability and tracking.
• Financial Inclusion: by advancing access to all financial services.
• Women’s Economic Empowerment: by giving women control over finances.
• Inclusive Growth: through integrating digital payments into developing economies.

The second panel of the conference featured eight ministers from a variety of countries addressing how their actions towards mobile payments would not only help financial inclusion, but also assist in  realizing the other SDGs. Even though government initiatives were praised, there were also major concerns.

The SDGs suggest rates of progress outside of any historical norm, from infrastructure rollout through economic growth to poverty reduction and the fight against infectious disease. World leaders are also right to suggest that meeting such goals, if it is possible at all, will take urgent and dramatic changes in the way the planet operates.

                                          – Charles Kenny, Center for Global Development

New initiatives include Colombia’s use of digitalized payments to distribute government subsidies and address Goals 1 and 2 – Eradication of Poverty and Hunger. The Minister of the Republic of Rwanda expressed how his country is approaching Goal 8- Inclusive Growth, through mobile payments and reinforcing banking systems to increase savings, and therefore leading to increased lending. Bangladesh has begun to address Goal 16 – Peace, Justice and Strong Institutions – by making mobile payments available with a combination of financial assistance with more than 5,000 information centers that offer 70 different kinds of services.

Still, there is trepidation over country dynamics and their abilities to provide institutional and financial support to its citizens. Fragile nations, such as Sierra Leone, face bigger challenges in digitalizing payments and fulfilling the SDGs. Finance Minister Dr. Kaifala Marah , explained that since the outbreak of Ebola, high interest rates have been hindering financial inclusion and have increased administrative costs due to high risk ratings. Understanding the social, economic and political hardships of nations is essential to accomplishing the SDGs in both developed and developing countries.

Risks are not unique to fragile states and each country faces different jeopardies. The Minister of the Republic of South Africa expressed concerns about leaving the vulnerable unprotected through either under and over-regulation. He was also disturbed by the fact that only 1 percent of low-income families have access to mobile payments, how there is a lack of understanding of financial education when switching from cash to credit payments, and that less than 45 percent of women have access to the internet, contributing to gender inequality.

The Minister of the Republic of Belgium mostly expressed concern over the inherent nature of banking and financial systems. The Minister emphasized on the private sector’s role in the provision and expansion of services. He stated that “it is not a bad thing for companies to profit” and it is the best way to have a sustainable product, service, or institution. Concerns should not be placed on the nature of business, but on the nature of the financial system. Exposing the poor to a system that was designed for middle and high-income individuals requires a change in regulation and implementation to avoid the exploitation of the most vulnerable. The opportunities presented by the digitalization of finance are not without risks.

The conference concluded with the hopes of solving economic and social problems through digital payments. Furthermore, the inertia of mobile banking seems inevitable, but the conversation must continue to incorporate the way safeguards and regulations will avoid unwanted secondary effects. It is clear that the digitalization of finance and payments offers positive tools for society, but it can also leave negative consequences that usually affect the most vulnerable, the poor. As the UN continues to promote the digitalization of payments, it is up to the member countries to implement these tools to advance financial inclusion and inclusive growth.

Author’s Bio: Vanessa Zabala is a member of the UNA-NCA’s Sustainable Development committee and reports and writes on current events. She holds a Master's in International Development from the London School of Economics and Political Science and obtained her Bachelor’s degree in Economics and International Relations from the University of Central Florida.