The importance of governance amongst policymakers has grown immensely as it is seen as a critical factor in the formulation and implementation of public policy goals. It is important to see governance as a dynamic process that changes over time with the inclusion of diverse actors and their interaction within different institutional structures. Governance is the tools and instruments employed by an organisation to govern. The rise of network governance, contrary to the “hierarchical governance” that one is normally accustomed to, focuses on collaboration with a wide range of policy actors in an attempt to maximise desirable outcomes. Governance through networks extends the possibilities of exploring how various forms of public-private collaboration and networking can assist in dealing with the modern day challenges of governance.
Proponents of networks governance see it as an acceptable, genuine and effective form of governance. Network governance is an all-encompassing and relevant approach to finding solutions to a problem. For instance, it provides a negotiated response to a policy problem which is not rigid however, reasonable. Moreover, it is a collective decision across a range of stakeholders upon consultation as a result allows for buy-in from stakeholders thus minimising opposition during implementation phase. The factors highlighted above resonate with the financial inclusion journey undertaken in a number of Pacific Island Countries (PICs) as part of the Alliance for Financial Inclusion (AFI) Pacific Islands Regional Initiative (PIRI). Good governance is an essential element to having an inclusive financial system.
An excellent example of the importance of network analysis has been in the attempt to provide affordable and accessible financial products and services under an enabling regulatory environment to the unbanked and underserved sections of the society. As part of this financial inclusion goal, one of the key objectives is to address the notion of client centricity. Two core values of governance: inclusiveness and accountability have been at the heart of a number of successful financial inclusion strategies.
Good governance in the area of financial inclusion depends on a number of key factors and looking at the case study of the PIRI model highlights some of those pertinent in the context of financial inclusion:
Establishment of a National Financial Inclusion Taskforce (NFIT)
Many of the PICs formed a NFIT to oversee and undertake the national financial inclusion strategies in their respective countries. The Central Bank has taken the lead in close association with the Government and other key stakeholders from private and public entities, non-governmental organisations, civil society groups, microfinance institutions, and development partners for a holistic approach. Central Bank of Solomon Islands (CBSI), Reserve Bank of Fiji (RBF) and Reserve Bank of Vanuatu (RBV) have seen success with having a Taskforce in driving financial inclusion in their respective countries. Having a strong framework such as the NFIT provides credibility and direction to a common goal, which in this case is to reduce the number of unbanked and underserved individuals. This collaborative and collective model adds robustness to the development.
An Enabling Regulatory and Policy Approach to Financial Sector Development
If the unbanked and underserved are to be financially included, it is integral to have a framework in place that not only ensures an increase in the access and usage of financial products and services but also maintains stability of the financial system. This includes improving the effectiveness of the financial institutions such as microfinance institutions, credit unions and non-banking financial institutions. On the other hand, consumer protection and empowerment must also be included as part of the governance framework. The regulatory institutions have been accommodative of innovations in the financial sector such as mobile financial services where development has preceded regulations. For instance, in Papua New Guinea under the secured transactions processing, lenders are now accepting moveable property such as vehicles for loans, making it easier for many businesses to access credit. In addition to this, with the support of developing partners, capacity building within the sector has also been prioritised. The idea is to steer rather than a top-down approach to attain best results of all the initiatives.
The Passion and Desire to improve the status of Financial Inclusion
While it may sound abstract, the passion to have an inclusive financial system is a critical component to the whole financial inclusion journey. There are a number of Pacific Islanders who have made significant progress in their lives after receiving financial literacy training along with access to finance to start their own businesses. Over the years, the Pacific Microfinance Week (PMW) has continued to highlight the success stories of entrepreneurs who have improved their livelihood post access to sustainable financial services. This alludes to the fact that there is a dire need to address the barriers to access and use of financial products and services. Investing early through financial education in the school curriculum and supporting it with opportunities to enable youth to be in the pool of investors are part of the long-term vision of an inclusive financial system. The Fiji Financial Education Curriculum Development (FinED Fiji) is a classic example, which involved integrating financial education in the national school curriculum for primary and secondary schools. Millennials are seen as global change makers and is no different in the area of financial inclusion.
Creating Appropriate Investment
It is not enough to invest only within the financial sector. The role of government is crucial as a number of these initiatives depend on macro factors such as infrastructure, budget allocation for Micro, Small and Medium Enterprises (MSMEs), supporting government –to-person transactions, and general economic growth that has spillover benefits at the micro and meso level. Likewise, capacity building and creating a pool of innovators is catalyst to growth. Of particular importance is the advancement in technology that must be embraced and used to proliferate accessibility to financial services and products. It is pleasing to note that governments in the region support this and have made financial inclusion a national agenda. At a recent AFI PIRI meeting in Vanuatu, the Honorable Deputy Prime Minister of the Republic of Vanuatu emphasised “…the Government is taking effective measures and policy initiatives to provide support to businesses including SMEs…”
Monitoring and Evaluation Framework
It is essential to have a comprehensive monitoring and evaluation framework from the formulation to post implementation phase as part of good governance practices. While data (both quantitative and qualitative) may be useful for benchmarking and as a tool for evidence-based policymaking, it also acts as a barometer to gauge the policy success or failure of initiatives and reforms. As mentioned earlier, governance is a dynamic process so it is critical to learn and adopt as we go along. The peer-learning model that exists within the AFI members provides an excellent platform to exchange ideas and share the success stories to be replicated accordingly in different jurisdictions.
The 8th AFI Global Policy Forum currently being held in Fiji provides an opportune time to reiterate the importance of governance within the financial inclusion frameworks amongst member countries. With the ever-changing financial inclusion landscape, it is important to keep abreast of these developments and adjust accordingly to address them. While the financial inclusion journey in an economy depends on overall governance circumstances of a particular nation, there is a need to at least ensure the governance within the financial inclusion approach is not overlooked nor understated. At the end of the day, we are dealing with a vulnerable section of the society thus; every effort must be made by all the stakeholders in a collaborative manner to ensure sustainability and success of these financial inclusion initiatives.