Pioneer governments lead the way on shifting from cash to digital payments

As the year comes to a close, we’d like to look back at some of the powerful speeches that governments delivered at the UN Global Goals Summit earlier this year. At a high-level side event on September 26, government officials gathered to discuss the adoption of the 2030 Agenda, and how its implementation could be aided by the digitization of payments and financial inclusion.

The President of Tanzania, Mr. Jakaya Mrisho Kikwete, as well as Ministers and other high level officials from Peru, Belgium, Bangladesh, Colombia, the Philippines, Rwanda, Sierra Leone and South Africa stressed how digital payments and greater financial inclusion are helping their countries reach key Sustainable Development Goals (SDGs), including ending poverty and hunger by 2030 and ensuring gender equality and sustainable economic growth.

Tanzania

“Prospects for digitization of payments and inclusive finance are promising in Tanzania,” said President Kikwete. “We see the possibility to leapfrog on our poverty reduction targets if we harness the potential of mobile technology to promote financial inclusion.” He also noted, though, that digitizing payments and inclusive finance have to be addressed by partnerships of governments and the private sector working together in order to succeed, forging collaborations that are “built on shared understanding and mutual interest.”

President Kikwete also highlighted the importance of advancing the agenda for financial inclusion and digitizing payments as “important vectors to realizing the SDGs,” adding that “the SDGs have given due focus and attention to financial inclusion as a tool to accelerate poverty eradication,” particularly goals one, two, five, eight and nine (eradicating poverty; ending hunger; achieving gender equality; economic growth; and innovation, industry and infrastructure).

Peru

The Peruvian Ambassador to the United States of America Dr. Luis Miguel Castilla, speaking on behalf of Peruvian President Ollanta Humala, announced that Peru would promote a draft UN resolution on financial inclusion for development. He also said that the digitization of payments was particularly vital for citizens living in remote parts of his country, and noted the importance of focusing on women, especially in rural areas, as being in particular need of economic empowerment, particularly in terms of opportunities for saving, insurance, pensions, and access to microcredit.

He also highlighted a pilot project on electronic money launched by the private sector, Modelo Perú, which was created to “enable a new safe and low cost means of payment with large coverage,” adding that an estimated five million Peruvians will make use of the service over the next five years. Speaking of the new 2030 Agenda, Dr. Castilla also noted that digital financial services “have many positive ripple effects, such as enabling people to save money for their families’ health and education, or invest in their businesses, all of which are vital for achieving the SDGs.”

Indonesia

Mr. Toferry Soetikno, Director for Economic Development and Environment of the Ministry of Foreign Affairs of Indonesia, speaking on behalf of the Minister of Health H.E. Dr. Nila F Moeloek, said that his government hoped to achieve “a financial system which is accessible to all, to promote not only economic growth, but also to address poverty reduction and income inequality.” In particular, he noted the impact that financial inclusion has on women.

Mr. Soetikno also spoke about the use of technology by the Indonesian government in its Social Security Agency and National Health Insurance programme. He noted that “by using this innovative smart card system [as part of Digital Indonesia’s Health Hub program] we are working to ensure the most vulnerable are covered,” adding that it will aid Indonesia in its goal to provide universal health insurance.

Sierra Leone

Dr. Kaifala Marah, Minister of Finance and Economic Development for Sierra Leone stated that, as part of his country’s social inclusion strategy, it was providing safety net payments using mobile money. His government, he said, was planning to deepen the scope of this initiative and expand it to other sectors such as health, agriculture and education across the country.

He also noted that the issue was a crucial one for fragile states such as his own, saying that “the SDGs are more about us fragile states” than others. “Sierra Leone is a member of the G7+ group of fragile states,” he said, adding that he believed it would be useful to extend the Better Than Cash Alliance partnership to the G7+ group of fragile states, “so that many more fragile states will be part of this program.”

Colombia

Colombia Minister of Finance and Public Credit Dr. Mauricio Cárdenas Santamaría said that financial inclusion had “an unquestionable impact in economic development and welfare, especially in marginal sectors of the population,” and also highlighted the disadvantages faced by people who lacked access, noting that by obtaining financial services from informal providers meant that they were subject to higher costs, less information and no consumer protection.

He also spoke about Colombia’s digitization of government benefits payments, and the positive impact this had on its three million participants. Additionally, he noted that the beneficiaries of the Familias en Acción welfare program spend less time collecting their money, as they no longer have to queue but can use an ATM network or banking agents instead.

Philippines

Mr. Arsenio M. Balisacan, Socio-Economic Planning Secretary and Director General of the National Economic Development Authority of the Republic of the Philippines, spoke of his country’s national strategy for financial inclusion, to deepen access to financial services that were increasingly digitized. He said his government had introduced “the use of digital payments for intra-governmental transactions and also for transactions between government and the private sectors, toward cash-less, check-less and bank-to-bank transactions.”

Rwanda

The Minister of Finance and Economic Planning of Rwanda, Mr. Claver Gatete, said that Rwanda had set itself a national target for 90 percent of the population to be financially included by 2020. To reach this ambitious target, according to the Minister, all payments would need to be connected digitally, “whether it is taxes, services, paying for your water, paying for your hydro [electricity], paying for your transport, paying for your agricultural inputs, paying for anything now using your mobile phone or using any other form.”

Bangladesh

Bangladesh’s Minister of Finance, Mr. Abdul Muhith, said that Digital Bangladesh was a successful initiative resulting in the digitization of birth registration, money orders, utility bill payments and food purchase orders throughout the country, which had helped the economy and cut associated time and costs dramatically. The average time to receive services, for example, had been reduced by up to 80 percent, and the average cost by 50 percent. At 26 million people, Bangladesh “has the largest market in the world in financial services customers” according to the Minister, and digitization is essential in order to reach them.

Belgium

Digital payments can also contribute to greater transparency asserted Mr. Alexander De Croo, Belgium’s Deputy Prime Minister. He noted that “digital today is the most important factor for development on the worldwide level,” and that it was “a force that is helping transparency,” as well as fighting corruption and giving access to information on prices. He also spoke about Sub-Saharan Africa, noting that women were much less likely to have access to the internet than their male counterparts, hampering efforts to close the gender gap on financial inclusion.

South Africa

South Africa’s Special Advisor to the Minister of Social Development, Mr. Zang Dangor, spoke on behalf of the Minister of Social Development, Ms. Bathabile Dlamini. He spoke of the progress his country had made in terms of financial inclusion, saying that it not only reduced costs but helped people in terms of access too. Mr. Dangor noted that, now that state pensions payments are made digitally, people no longer had to physically stand in line to receive the funds they were owed. He also noted the importance of financial inclusion for women, highlighting the fact that “our social assistance program on the whole benefits women and children more than they do men…we have found that when women receive the money, the money is spent better, and more appropriately.”

United Nations

The UN Secretariat itself is making the transition from cash to digital, and hopes to lead by example. The Assistant Secretary-General and Controller of the United Nations, Ms. Bettina Tucci Bartsiotas, announced that the UN Secretariat had just joined the Better Than Cash Alliance. “By being part of this Alliance, we are underscoring our commitment to transitioning payments within the UN system from cash to digital, and to help inspire others within the UN system to follow our lead,” she said. Ms. Helen Clark, UNDP Administrator, gave a number of examples of successful digital payments initiatives, including its use during the Ebola response. “The challenge of making secure and reliable payments was absolutely paramount during the response to the Ebola outbreak in Guinea, Liberia, and Sierra Leone,” she said “And, UNDP, with support of our associated programme, UNCDF and their technical support worked with the governments of the affected countries and private sector technology and mobile phone companies on these payments. As a result, over 23,000 Ebola response workers were paid efficiently and transparently.”

Ms. Clark also highlighted what she called “the potential of digital payments and inclusive finance to contribute to achieving the SDGs,” noting that “inclusive finance alone is included in the targets of seven of the seventeen SDGs.” As a result, she said, it will make “a huge contribution to sustainable development.”

World Bank

World Bank Vice President of Equitable Growth, Finance and Institutions Dr. Jan Walliser delivered a message from World Bank President Dr. Jim Yong Kim noting that now is the right time to “leverage the transformational power of digital technology to drive progress on the SDGs.” He also recalled that his organization had set “an ambitious goal to achieve Universal Financial Access for working-age adults by 2020.” He noted that one powerful area for reform was that of digitizing government payments. “Globally, more than 20 percent of unbanked adults—more than 400 million people—receive wages or government payments in cash, and can be financially included by shifting from cash to electronic payments through accounts.”

Conclusion

One message came across loud and clear during the side event: the importance of partnerships between governments, organizations, the private sector and development actors, in order to ensure that digital payments and financial inclusion are used as powerful tools to accomplish the ambitious targets of the SDGs, ending poverty and hunger and achieving gender equality, economic growth and further innovation.