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Forum Underlines Vast Potential of Fintech to Bridge Asia’s Financial Divide

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Digital technologies could bring new opportunities to provide financial services to vast underserved populations in Asia and the Pacific. People need to be well-prepared for this wave of emerging technologies, but governments should also ensure appropriate policy efforts to counter potential risks, participants at the Asian Development Bank’s (ADB) Asia Finance Forum heard today. 

“Technologies applied in the context of regulatory sandboxes for testing financial innovations, distributed ledger technology such as blockchain, establishing digital IDs through the use of biometrics, and so on have the potential to efficiently address long-standing obstacles and make real progress in expanding financial access,” said ADB Vice-President for Knowledge Management and Sustainable Development Mr. Bambang Susantono.

Around 1.7 billion people worldwide have no access to the formal banking and financial system, with around half of them in Asia and the Pacific. This financial exclusion has a variety of causes including people living in remote locations, lack of required identification or collateral, high fees, and services that do not match banking needs.

While financial technology, or fintech, can provide solutions to such challenges, it also brings some risks. Asian financial markets are increasingly interconnected both regionally and globally. Fast digital technologies could accelerate the contagion from a negative event in a single country. As such, regulators and other financial authorities in Asia and the Pacific should cooperate and coordinate their oversight of fintech.

“We not only need to proactively search for ways to ensure the new technologies are financially inclusive, but we also need to ensure information security, data, consumer protection, and financial stability are at the center of preparation for digital financial services,” Mr. Susantono added.

ADB has been supporting innovations in fintech in Asia and the Pacific. In Mindanao in the southern Philippines, ADB has helped roll out a cloud-based banking pilot. ADB is working on a digital access tool through the use of a biometric ID system in Papua New Guinea to provide access to financial services for people without formal documentation. ADB has also implemented a weather index-based crop insurance pilot project using mobile banking services for over 9,500 small rice farmers in Bangladesh.

The forum, the third held by ADB, gathered around 500 participants from fintech innovators, technology companies, banks, regulators, and other experts to share expertise and lessons.

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Peru Will Receive US$ 50M from the World Bank to Strengthen Key Social Protection

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The World Bank Board of Directors today approved a US$ 50 million loan to strengthen key policies and strategies to increase human capital accumulation in Peru, particularly in the most vulnerable social sectors.

The Human Capital Development Program will focus on improving the delivery of social protection and early childhood development services, especially at the local level, and in strengthening professional development and management systems in education. Guaranteeing access to quality social protection, health and education services throughout the lifecycle is crucial for ensuring that individuals can develop the basic knowledge and skills they need to become productive members of society.

Over the past two decades, Peru has sharply reduced its poverty and inequality rates. It has also made significant strides in education and learning, as well as in decreasing chronic malnutrition and in implementing early childhood development policies. Notwithstanding, the country needs to reinforce its investments in human capital to further narrow inequality gaps and to guarantee that prosperity reaches all social sectors.

“The Peruvian government has undertaken the challenge of making multisector efforts to guarantee that all children reach their enormous potential and that they can become key players in the country’s development,” saidMarianne Fay, the World Bank Director forBolivia, Chile, Ecuador and Peru. The World Bank is accompanying Peru in this effort. “We provide technical and financial assistance for development policies that invest in people and that help to unlock and accelerate the generation of human capital, as well as to create synergies in the investments made in early childhood development to maximize results,” she added.

To this end, the program seeks to improve the comprehensive delivery of social protection and early childhood development services, as well as education quality and management. It will also support priority political and institutional reforms in the social sector and the linkage of policies implemented by the Ministry of Development and Social Inclusion and the Ministry of Education.

The Ministry of the Economy and Finance will implement the program using a multisectoral and territorial approach, in close coordination with the Ministry of Development and Social Inclusion and the Ministry of Education.

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AIIB To Scale Up Public Health Infrastructure in Wake of COVID-19

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Recognizing that countries with fragile infrastructure have less capacity to handle health crises, the Asian Infrastructure Investment Bank (AIIB) is working to scale up infrastructure investment—including in public health, healthcare and information and communications technology (ICT)—to better serve members impacted by COVID-19.

AIIB President and Chair of the Board, Jin Liqun, said: “There has never been a greater need for a multilateral and truly global coordinated effort to ease the economic burden experienced by all.”

He continued, “We have a responsibility to our members who face tremendous pressure to maintain the health and safety of their citizens while managing the impact of an economic downturn. It is our duty to be flexible and responsive in a time of crisis so our members can continue investing in sanitation, healthcare and technology-enabled infrastructure.”

Recent analysis by AIIB1 highlights a direct correlation between quality of overall infrastructure and health security, indicating that infrastructure development is a key part of health security and epidemic preparedness. The COVID-19 virus has exposed the critical need for countries to also ensure preparedness for the needs of an aging population.

Lower income countries are particularly vulnerable as they are already struggling to keep up with their infrastructure needs. Layering an economic downturn and additional fiscal stresses from COVID-19 on top, many of them will fall short of the 6 percent to 10 percent GDP investment needed to maintain economic growth.

Continues President Jin, “We will work with our Board of Directors, members and partners to adjust to this new reality, providing scaled up and targeted investment in critical sustainable infrastructure to protect the people we serve and the generations that follow.”

AIIB will announce a number of public health infrastructure financing options for its members in the coming days and weeks, to help build up economic resilience and mitigate the impact of future health crises.

Comments Dr. Ngozi Okonjo-Iweala, Chairperson of the Board of GAVI: “Multilateral banks like AIIB will play a critical role in supporting countries, helping them address challenges presented by COVID-19 as they build towards sustainable long-term infrastructure development.”

“The support that a bank such as AIIB can provide its members is invaluable, reducing risks, absorbing longer-term exposures and cushioning the impact from increases in borrowing costs.”

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World Bank Supports Madagascar’s Investment in Human Capital

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The World Bank Board of Executive Directors approved today a $100 million development policy operation to support the Government of Madagascar’s investment in human capital. The operation will help improve human resources in health and education, enhance the availability and predictability of financial resources in the social sectors and strengthen legal protections for women and children. This is the first in a series of two operations.

According to the Human Capital Index (HCI), a child born in Madagascar today will be 37 percent as productive when she grows up as she could be if she enjoyed complete education and full health. Between 2012 and 2017, Madagascar’s HCI decreased from 0.39 to 0.37, placing it below regional and income group averages. Children in Madagascar can expect to complete 7.5 years of schooling by age 18, reduced to 4.2 years when adjusted for quality of learning. Globally, Madagascar has the fourth highest rate of stunting among children under five (42 percent). Moreover, Madagascar’s nascent, under-financed social protection system reaches only 5 percent of the extreme poor.

Madagascar’s strongest asset is its people. The government has expressed a strong willingness to advance reforms to invest more in its human capital through the Emergence Plan of Madagascar”, said Marie-Chantal Uwanyiligira, Country Manager for Madagascar. “This operation seeks to support the government in this endeavor in order to reverse alarming trends in poverty and human capital development.”

The operation is structured around three pillars critical to improving the human capital of Malagasies: (i) better qualified, distributed, and performing human resources in education and health sectors, (ii) more transparent and predictable investments in human capital; and (iii) stronger legal frameworks for the protection of women and children. Standards for the teaching profession have been approved while quality control measures in the recruitment of community teachers have been rolled out. Regulation and quality control mechanisms of pre-service training of health workers will also be strengthened.

A single window of entry into the public service has been created for better management of human resources throughout the public service, resulting in a streamlined system to efficiently deploy staff where they are most needed. This operation will also seek to make new and existing resources in the social sectors more predictable and transparent. This includes expanding the coverage of the social safety nets by 30,000 households, and rendering budget execution more transparent, along the principles of Open Data Budgeting. It will also help strengthen the legal frameworks for better protection of children and advancing gender equality.

The two elements most critical for schools and clinics in Madagascar are their human resources, and the financial resources with which they operate”, says Peter Holland, Task Team Leader for this operation. “The Government has launched important reforms in deciding who gets to be a teacher, and how medical professionals are trained. These are important first steps to investing in Madagascar’s human capital of tomorrow.”  

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