Andin Hadiyanto

Secretary of the Fiscal Policy Agency,

Ministry of Finance of the Republic of Indonesia

SME initiatives of the G20

ADFIMI-SME Bank Malaysia Joint “International Development Forum 2012”

KL, Malaysia, 5-6 July 2012

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• Background• Global Partnership for Financial Inclusion• Financial inclusion under Mexican

Presidency• Common Global Issues and Challenges

Agenda

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The G20 Financial inclusion pillar addresses two fundamental challenges of the ‘access to finance’ agenda

> 2 Bn adults lack access to basic

financial services

> 70 % of SMEs in developing markets lack access to credit

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The Financial Inclusion in G20 is aimed to provide access to the formal financial system through adequate and affordable financial products and services that helpful for both families and enterprises to achieve an efficient administration of their resources. •Access and use of safe, secure and reliable financial systems is crucial for people to:Take advantage from their capacity to save Properly address eventualitiesAchieve a more stable spending patternBetter control of resources and growing step by step personal assets, and improving their standard of living.

•Also enterprises with access to financing and technology have a better management of their resources and project planning.

•This is specially relevant for Micro, Small and Medium Enterprises (MSMEs) which are frequently financially excluded but at the same time are the primary engines of economic growth and job creation.

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From the G20 Financial Inclusion Expert Group to the GPFI (1)

September 2009, Pittsburgh: Launch of the G20 Finance Inclusion Expert Group with two subgroups to adress the two identified issues.

Strong support from G20 Chairs, active participation from G20 members (governments and central banks), IOs and other partners led to fast progress

June 2010, Toronto: Adoption of the 9 Principles for innovative financial inclusion, launch of the SME Finance Challenge (Leadership, Diversity, Innovation, Protection, Empowerment, Cooperation, Knowledge, Proportionality; and Framework

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From the G20 Financial Inclusion Expert Group to the GPFI (2)

November 2010, Seoul: Launch of the Global Partnership for Financial Inclusion., a dedicated, inclusive, longer-term partnership.

The GPFI will (i) facilitate an efficient and effective information sharing mechanism; (ii) coordinate the various financial inclusion efforts (iii) provide systematic monitoring of progress over time (iv) mobilize financial support for activities as needed, and (v) launch and coordinate taskforces to address specific financial inclusion issues (e.g. financial inclusion data).

Seoul Multi-Year Action Plan on Development

November 2011 Cannes Summit, the GPFI documented the experiences of 11 countries that have already implemented some of the principles.

June 2012 Los Cabos Summit, Mexico has prioritized the commitment of G20 and non-G20 countries to create national platforms mandated with achieving financial inclusion, and to develop national strategic action plans to meet financial inclusion targets, alongside financial education and consumer protection measures.

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The Global Partnership for Financial inclusion

Key implementingpartners

Co-chairs:the G20 troïka

+Any other interested non-G20 country

(government or central bank)

+Any other interested stakeholder (international organization,

foundation, …)

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Financial inclusion pillar is a G20 Finance process within DWG

Market regulation

Reports to

Reports to

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GPFI includes three subgroups

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What has already been achieved?

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General axis for 2011-2012 work

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• Report on individual commitments regarding the application of the Principles

• Report on SSBs financial inclusion-related activities

• Demonstrated progress towards clearer IMF and WB guidance on incorporating financial inclusion in financial system/sector assessments

• Engagement with FATF on integrating financial inclusion into the mutual evaluation methodology and related evaluator training

Principles and link with the Standard Setting Bodies1

Main outcomes for 2011

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• Refined recommendations for the development of SME finance policy frameworks, and an approach for impact measurement

• Creation of the SME Finance forum, a virtual platform for knowledge sharing and monitoring

• Implementation of the global SME Finance Framework to fund the 14 winning proposals of the SME Finance Challenge and other successful models

• Specific targets regarding women-owned SMEs, SMEs in Less Developed Countries (creation of SME Finance Compact), SMEs in the agricultural sector

SME Finance2

Main outcomes for 2011

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• A comprehensive framework for assessment of financial inclusion

• Data on financial inclusion for a pilot group of countries

• First examples of national strategies and targets

• Leveraged the “Core Set” of financial inclusion indicators developed by the AFI Data Working Group

• Recommendations to G20 Leaders regarding the establishment of global targets

Data and Target Setting3

Main outcomes for 2011

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G20 Finance Ministers and Central Bank Governors also agreed to include the issue of financial education and consumer protection policies in the discussion of financial inclusion initiatives.

G20 Finance Ministers and Central Bank Governors have given endorsement to design and implement a strategy of financial inclusion among the G20 countries through Peer learning Program coordinated by the Global Partnership for Financial Inclusion.

The G20 Mexican Presidency has been fostering Financial Inclusion to promote economic growth and poverty alleviation.

• Welcome the progress made by the Global Partnership for Financial Inclusion (GPFI).

• Acknowledge the efforts to those G20 and non-G20 countries committed to “G20 Financial Inclusion Peer Learning Program”

• Endorse the G20 Basic Set of financial inclusion indicators developed by the GPFI.

• Recognizing the key role of SMEs play in economic development, and poverty reduction.

• Welcome the launch of the SME Finance Compact that will support developing innovative models and approaches to address the specific access to finance challenges and constraints faced by developing countries with regards to SME finance.

• Support the ongoing effort to create a fourth GPFI subgroup that will focus on consumer protection and financial literacy issues.

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• Objectives:

To increase knowledge and awareness of consumers on financial products and services.

• Coverage areas:• Knowledge and awareness on financial products

and services;• Knowledge and awareness on risks associated with

financial products;• Adequate consumer protection; and• Skill in financial management.

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To provide the availability of flexible redress mechanisms which gives users the possibility to enforce their rights as consumers.

To create an environment of adequate protection derived from strict legal and regulatory requirements.

To create consumer confidence to promote financial stability, growth, efficiency and innovation in the long run.

To protect financial consumers who still do not have sufficient knowledge about financial risks in the transactions.

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G20 Financial Inclusion Peer Learning Program is designed to:

a) Create a high-level coordination platform or mechanism.

It aims to improve access to financial services and their usage. An essential element is engagement from both financial authorities and the private sector.

b) Develop a National Strategy on Financial Inclusion

It aims to achieve specific goals or targets.

(Mexico, Uruguay, Indonesia, Kenya, Peru, Turkey, Uganda)

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Voluntary commitment of different G-20 and non G-20 countries, willing to design and implement a national financial inclusion strategy and/or create a coor dination mechanism or council for deploying such a strategy:

“G20 FINANCIAL ICLUSION PEER LEARNING PROGRAM”Countries – different regions – Different stages of financial inclusion

3 Phases:

1) Building a national commitment

3) Implementing the plan and sharing the periences wit countries

2) Designing a national strategic action plan

Raise financial inclusion to the highest level in the national agenda, establish a body for consultation, advice and coordination, and develop and/or implement a national strategy

Define specific goals and targets according to particular country characteristics, development and priority needs.

For a successful implementation, countries could be accompanied if they so wish, by implementing partners.

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For this program we intend to work together with the World Bank and the Alliance for Financial Inclusion (AFI), and expect the Global Partnership for Financial Inclusion (GPFI) to have a relevant role both in the implementation and in the monitoring of the results.

Implementing Partners GPFI Participation

World Bank’s Practice on Financial Inclusion. Supporting countries work with guidelines and through implementation

AFI Documenting, implementing and facilitating countries interaction.

Input on the strategies outline given the current status of the countries.

Promoting the collaboration among players, monitoring data and planning national strategies

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During the G20 Los Cabos Summit, Mexico arranged a financial inclusion event to formalize the commitment of the Leaders of G20 and non G20 countries.

This event has two objectives:

a)The announcement of countries’ commitments under the Financial Inclusion Peer Learning Program. There are 7 countries has announced their commitments, namely: Mexico, Indonesia, Chile, Uruguay, Kenya, Peru, Turkey and Uganda.

b) The Launch of the G20 Financial Inclusion Challenge: Innovative Solutions for Unlocking Access.

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• The SME Finance Compact aims to provide a way to move from principles and recommendations to actions that make a difference. The Compact will be a vehicle for the G20, through the GPFI

• The SME Finance compact will support developing innovative models and approaches to address the specific access to finance challenges and constraints faced by developing countries with regards to SME finance.

• The SME Finance Compact aims to provide a way to move from principles and recommendations to actions. The Compact will be a vehicle for the G20, through the GPFI, and implementing SME finance strategies that focus on the enabling environment for SME finance.

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• Three guiding principles: Voluntary Membership Country Driven Content will focus on Enabling Environment

• Content: Establishing an enabling environment for SMEs’ access to financial

services; Working in partnership with selected LDCs in sharing experience

and successful models; Providing capacity-building and technical assistance to support

implementation of SME finance strategies and policy framework ; Providing an efficient network platform through the GPFI website

and the Global SME Finance Forum. 24

• Roadmap to establish a policy framework:

Analyzing the country specific environment with their challenges, requirements and SME Finance market efficiency;

Consultation on technical assistance and implementation stages for (i) legislation, regulation, supervision; (ii) financial market infrastructure, and (iii) public intervention and support mechanisms.

Monitoring and pilot implementation stages in volunteer committed countries.

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• Policy menu

Assessment and Diagnostics. Regulation and financial Infrastructure (regulatory review and

reform, supervision, financial infrastructure. Expanding sources of SME Finance (equity and supply chain

financing, partial credit guarantee schemes, leasing). SME Capacity and Creditworthiness Women-owned SMEs Agricultural SMES

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Common Global Issues and Challanges

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Common Global Issues and Challanges

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