Towards an International Financial Inclusion Strategy, Institutional Frameworks and Enforcement: Setting Regulatory Benchmarks for the SADC Countries

Abstract

Financial Inclusion has been on the global policy agenda, including in the Southern African Development Community (SADC), for many years. Global standards-setting bodies, such as the United Nations, the Group of 20 countries, the Alliance for Financial Inclusion, the Financial Action Task Force (FATF), and the World Bank have committed to various financial inclusion policy initiatives. These bodies have recently introduced financial inclusion as part of their traditional policy and regulatory objectives, such as financial stability, integrity and consumer protection. Due to their varying mandates, these bodies often recommend conflicting approaches on the same objective when they pursue these objectives together with financial inclusion. Also, the international policy and regulatory framework on financial inclusion remains fragmented due to the haphazard policy and regulatory approach of these bodies. The Alliance for Financial Inclusion (AFI) and the Work Bank have developed policies and principles on how to develop national financial inclusion strategies. Various countries in Africa and in the SADC region have adopted different types of financial inclusion strategies based on the recommendations of these standards setting bodies. However, the AFI and the World Bank policies and principles are in the form of an international soft law. They are not effectively applied and implemented at regional and national level. These policies and principles do not impose specific national FI frameworks. This chapter critically analyses the current international policy framework on financial inclusion. It determines whether it is effective to impose obligations on countries to promote financial inclusion, focusing on setting policy and regulatory benchmarks for SADC countries. It discusses the framework and the principles introduced in the AFI and the World Bank’s National Financial Inclusion Strategy Reference Framework and the Template for the Design of National Financial Inclusion Strategy. The main aim of this chapter is to determine ways to formulate a responsive International Financial Inclusion Strategy with effective enforcement and institutional frameworks and how national financial inclusion frameworks, including in the SADC countries may implement and effectively enforce their financial inclusion frameworks. It further discusses a possible introduction of an Integrated Framework for Financial Inclusion that adopts an Inclusion-Stability, Integrity and Protection theory (‘I-SIP theory’) as an international standard. This theory requires national policy makers in the SADC region to pursue and optimise the linkage of financial inclusion with all the core objectives of financial stability, financial integrity and financial consumer protection. It also draws lessons of key enforcement mechanisms from the FATF’s anti-money laundering and countering of terror financing enforcement mechanisms to benchmark the regulatory, institutional and enforcement frameworks to promote global financial inclusion.