TECHNICAL NOTE Lessons from Implementing a National Financial Inclusion Strategy FINANCIAL INCLUSION SUPPORT FRAMEWORK JUNE 2021 FINANCE, COMPETITIVENESS & INNOVATION GLOBAL PRACTICE TECHNICAL NOTE Lessons from Implementing a National Financial Inclusion Strategy FINANCIAL INCLUSION SUPPORT FRAMEWORK JUNE 2021 © 2021 International Bank for Reconstruction and Development / The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org DISCLAIMER This work is a product of the staff of The World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (Interna- tional Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. 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Since the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Pub- lisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@ worldbank.org. CONTENTS Acknowledgments iv List of Acronyms v INTRODUCTION 1 EXECUTIVE SUMMARY 2 1. CLEAR, WELL-RESOURCED GOVERNANCE ARRANGEMENTS 5 2. DIVERSIFY CHAMPIONS 6 3. REMAIN AGILE 7 4. INCREASING REPRESENTATION OF WOMEN 7 5. PLAN QUICK WINS 9 6. ENGAGE ACTIVELY—AND CONTINUOUSLY—WITH THE PRIVATE SECTOR 10 AND REGIONAL STAKEHOLDERS 7. MAINTAIN ROBUST M&E FRAMEWORKS 10 8. LEVERAGE TARGETS FOR BROADER POLICY AGENDAS 12 9. FACILITATE A ROLE FOR INTERNATIONAL PARTNERS 12 10. CONCLUSION 13   iii ACKNOWLEDGMENTS This note is a product of the Financial Inclusion, Infrastructure, and Access Unit in the World Bank Group’s Finance, Competitiveness, and Innovation Global Practice. This note was prepared by Helen Luskin Gradstein (Financial Sector Specialist) , I Gede Putra Arsana (Senior Financial Sector Specialist), Imtiaz Ul Haq (Economist, IFC), Mengistu Bessir Achew (Finan- cial Sector Specialist), Sarmad Shaikh (Financial Sector Specialist), Siegfried Zottel (Senior Financial Sector Specialist) and Uzma Khalil (Senior Financial Sector Specialist). The team is grateful for the feedback from peer reviewers Ajai Nair (Senior Financial Sector Spe- cialist), Douglas Randall (Financial Sector Specialist), and Silvia Baur-Yazbeck (Financial Sector Specialist, Consultative Group to Assist the Poor). Helen Gradstein (Financial Sector Specialist) originally provided peer-review comments to the note and contributed afterward directly as a co-author. The team thanks Charles Hagner for editorial assistance and Naylor Design, Inc for design and layout assistance. Mahesh Uttamchandani (Practice Manager) and Sheirin Iravantchi (Senior Financial Sector Special- ist) provided overall guidance to the team. The team would also like to recognize the contribution of the Secretariat of the National Council of Financial Inclusion (Indonesia) for inputs to this report. This report was made possible by the generous support from the Ministry of Foreign Affairs of the Kingdom of the Netherlands and the Bill and Melinda Gates Foundation. The support was provided through the Financial Inclusion Support Framework program. NOTE 1. The corresponding author can be contacted at hgradstein@worldbank.org. iv LIST OF ACRONYMS BoZ Bank of Zambia M&E monitoring and evaluation NBE National Bank of Ethiopia NFIS national financial inclusion strategy SBP State Bank of Pakistan WBG World Bank Group   v INTRODUCTION A national financial-inclusion strategy (NFIS) helps In 2018, the World Bank Group (WBG) released a tool- policy makers, in coordination with a wide range of kit that provides financial-sector authorities and other stakeholders, define objectives and outline a set of stakeholders with practical guidance on developing impactful, sequenced actions to accelerate progress and operationalizing an NFIS. The toolkit2 provides toward achieving financial-inclusion goals. Achieving overall guidance on the NFIS development process, greater financial inclusion requires a deliberate, coordi- a detailed template for drafting a comprehensive and nated approach to identify barriers and opportunities, and action-oriented NFIS, and guidance on operationalizing a platform for diverse stakeholders to coordinate efforts the NFIS—that is, the governance arrangements, action to achieve shared financial-inclusion objectives. plan, and M&E system. More than 55 countries have launched an NFIS as of After launching an NFIS, many factors influence and early 2020, and a further 34 countries are currently in shape progress and success, and no two countries the process of doing so. NFIS implementation typically travel the same path during NFIS implementation. This involves operationalizing governance arrangements to note aims to build on existing NFIS knowledge by sharing oversee implementation, establishing a framework for insights that have helped improve implementation post- monitoring and evaluation (M&E) to capture progress reg- launch.3 When used together with the WBG NFIS Toolkit, ularly, implementing action plans to achieve financial-in- this note aims to support countries that are working to clusion targets, and making necessary adjustments to draft, launch, and implement an NFIS effectively. address changing landscapes (due to political, economic, and financial-sector developments). NOTES World Bank Group, Developing and Operationalizing a National Financial Inclusion Strategy: Toolkit (Washington, DC: World Bank 2.  Group, 2018). Developing and Operationalizing a National Financial Inclusion Strategy: Toolkit is accessible at https://openknowledge.worldbank. 3.  org/handle/10986/29953.   1 EXECUTIVE SUMMARY This note draws from the WBG’s experience as a tech- bia, officials developed an NFIS drafting committee that nical partner in the development and implementation was eventually converted into an NFIS implementation of more than 36 NFISs across varying landscapes. In committee after the strategy had been launched. This particular, this note captures the post-launch experiences approach was instrumental in securing strong buy-in and of NFISs across countries supported by the Financial commitment to NFIS implementation, since the NFIS Inclusion Support Framework program, a WBG initia- action plan was based on priorities set by the same stake- tive that supported the design and/or implementation holders. of NFISs across seven countries: Côte d’Ivoire, Ethiopia, Indonesia, Mozambique, Pakistan, Vietnam, and Zambia. Mapping existing financial-inclusion initiatives and The note does so through individual country case studies opportunities across institutions is also a good practice that focus on implementation experiences, success fac- ahead of drafting a comprehensive action plan. This tors, implementation challenges, and the lessons learned helps ensure that institutions do not work in silos and that during NFIS implementation in Ethiopia, Indonesia, Paki- an NFIS can coordinate and prioritize initiatives. Key stake- stan, and Zambia. holders should always agree on actions, outputs, targets, and key performance indicators and commit to implement- It is important to note that effective NFIS implemen- ing actions for their respective institutions. These aspects tation is underpinned by incorporating international are covered in detail in the WBG NFIS Toolkit and, while good practices, contextualized for the local environ- not discussed in further detail in this note, contribute to ment, at the NFIS design and operationalization stage. the overall success of NFIS implementation. As noted in the toolkit, many effective practices carry through during NFIS implementation. Securing institu- While NFIS experiences vary considerably across coun- tional ownership and buy-in, for example, by involving tries, the authors have identified a range of nine good implementing partners in drafting helps ensure owner- practices (beyond those mentioned above) to facilitate ship during NFIS implementation. For instance, in Zam- effective NFIS implementation. 2 Lessons from Implementing a National Financial Inclusion Strategy   3 BOX 1 Background of NFIS Implementation in Ethiopia, Indonesia, Pakistan, and Zambia Ethiopia: In Ethiopia, 22 percent of adults had access 10 percent to 50 percent by 2020. It also targeted to an account in 20144 and Ethiopia lagged behind its an increase in women’s account ownership from 2.9 neighboring countries. This gap prompted the gov- percent to 25 percent over the same time period. ernment to launch a dedicated national strategy for It was championed by the State Bank of Pakistan boosting financial inclusion in the country. The launch (SBP), with shared leadership from the Ministry of of the national financial inclusion strategy (NFIS) in Finance and the Securities and Exchange Commis- October 2017 aimed to increase the number of adults sion of Pakistan. It came at a particularly opportune with a transaction account from 22 percent in 2014 moment, as new technology and the rapid expan- to 60 percent in 2020.5 The strategy was intended sion of branchless banking offer unprecedented to build upon the government’s five-year economic opportunities to transform financial inclusion in Paki- plan, the Growth and Transformation Plan (GTP II). stan. The country’s NFIS also set the tone for more While the GTP II contributed to broadening financial strategic and analytically grounded policy making access, the NFIS was the first national strategy that in several areas. For example, the Microfinance laid out a comprehensive framework for expanding Growth Strategy 2020, SME Finance Policy, and financial inclusion in Ethiopia. National Payment Systems Strategy were notable follow-ups to the NFIS, along with new initiatives to Indonesia: In Indonesia, several initiatives had been financially include women. undertaken to promote financial inclusion prior to the NFIS. However, a lack of formal coordination among Zambia: The NFIS in Zambia was launched in 2017 initiatives, institutions, and sectors reduced the effec- as a renewed commitment to financial inclusion, tiveness of these efforts. This led to the realization building on previous efforts and ongoing initiatives that a formal coordination structure was needed as by the Government of the Republic of Zambia at well as coherent regulatory framework. As a result, the time. Earlier initiatives included the Financial the NFIS was launched in 2016. The strategy pro- Sector Development Plans I and II and the Bank vides guidelines for leaders of ministries, institutions, of Zambia Strategic Plan of 2016–2019, all of and local governments in establishing policies and which included financial inclusion as a goal. How- activities supporting financial inclusion, as set in the ever, these initiatives were seen solely as an effort of National Medium-Term Development Plan. Several the Bank of Zambia (BoZ) and hence were unable to institutions were involved with both the development bring about wider reform across the financial sector. and implementation of the NFIS,6 which set an ambi- This motivated the need for a national-level effort tious target of 75 percent account ownership among that involved a range of stakeholders, which drove adults in five years from a starting point of 36 percent the development of the NFIS. The NFIS aimed to in 2014. address existing financial-inclusion gaps, with the overall goal of increasing account ownership from Pakistan: The persistence of low account ownership 59 percent to 80 percent by 2022. The NFIS gov- (only 13 percent of adults in Pakistan had a transac- ernance arrangement consisted of a steering com- tion account in 2014) in the face of long-standing mittee chaired by the Secretary to the Treasury, an efforts to promote financial inclusion led to the launch implementation committee, seven thematic working of a comprehensive NFIS in 2015. The NFIS set out groups, and a secretariat jointly led by the Ministry to increase account ownership among adults from of Finance and BoZ. 4   Lessons from Implementing a National Financial Inclusion Strategy BOX 2 Key Success Factors for NFIS Implementation 1. Clear, well-resourced governance arrangements. Engage 6. actively—and continuously—with Clear governance arrangements, in which roles, the private sector and regional stakeholders. responsibilities, and resources are clearly delin- Heavy engagement with the private sector and eated, underpin successful NFIS implementation. regional stakeholders is critical to NFIS success, given that policy actions translate into the avail- 2. Diversify champions. Identifying champions ability of products and services across all regions across a range of key institutions can help reduce and locations. unexpected delays, maintain the pace of NFIS reforms, and help reduce reliance on a single 7. Maintain robust monitoring and evaluation institution. In addition, identifying more than one (M&E) frameworks. Actively tracking NFIS imple- champion within each institution can help avoid mentation through a robust M&E framework is making an institution’s role in the NFIS reliant on necessary to maintain both visibility on progress one individual. and accountability. 3. Remain agile. Remaining agile is key to sustain- 8. Leverage targets for broader policy agendas. ing NFIS progress, particularly when competing Targets are more than a set of indicators to mea- against multiple national priorities or when bal- sure NFIS progress and impact; when leveraged ancing a changing political environment. Remain- strategically, targets help policy makers main- ing agile allows an NFIS to realign with emerging stream new policy priorities throughout the finan- priorities, reigniting political commitments and cial sector and can be used to make the financial ensuring continuity. sector accountable for a particular policy agenda more broadly. Increase representation of women. Reducing 4. the gender gap requires NFIS policy makers to 9. Facilitate a role for international partners. Gov- mainstream gender more systematically across all ernments, especially in developing countries, aspects of financial inclusion and better represent are often constrained in terms of capacity and women in key NFIS leadership roles. This will help financial resources. International development ensure that an NFIS maintains a focus on address- partners can support on both fronts. Their global ing women’s financial inclusion and improving experience can be especially valuable in building women’s participation in the digital financial-ser- capacity at local institutions, and their financing/ vices industry more broadly. technical expertise can be leveraged to imple- ment discrete policy actions. 5. Plan quick wins. Planning quick wins, an initial set of tangible and easy-to-complete actions in the first year of NFIS implementation, helps to bring stakeholders together and build momentum. NOTES Asli Demirgüç-Kunt et al., The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution (World Bank 4.  Group, 2018), https://globalfindex.worldbank.org. Though the NFIS was officially launched in 2017, the draft strategy was finalized and implementation of the strategy was started in 5.  2016—before its official launch. In the case of Indonesia, six main institutions led the process: the Coordinating Ministry of Economic Affairs, Bank Indonesia, Financial 6.  Service Authority (Otoritas Jasa Keuangan), Ministry of National Development Planning (Badan Perencanaan Pembangunan Nasional), National Team for the Acceleration of Poverty Reduction (Nasional Percepatan Penanggulangan Kemiskinan), and Ministry of Finance. 1. CLEAR, WELL-RESOURCED implementation; otherwise, secretariats have faced barri- ers to soliciting timely inputs from technical committees GOVERNANCE ARRANGEMENTS or publishing updates, newsletters, and progress reports. Establishing strong and clear NFIS governance arrange- For instance, in some countries, the responsibilities of ments is a key aspect to successful NFIS design and a Secretariat were split across multiple implementing operationalization. (See WBG NFIS Toolkit, sections institutions—with each Secretariat only accountable 2.4 and 3.1.) for the entities within their institution’s purview. How- ever, in these circumstances, policymakers and stake- An NFIS should already describe governance arrange- holders sometimes faced challenges when trying to ments that will facilitate implementation. Internation- push for shared agendas across a broad range of stake- ally, NFIS governance arrangements vary greatly from holders, including those outside their institution’s regu- one country to another, and policy makers should draw latory periphery. In other instances, NFIS stakeholders examples from other countries to the extent feasible. have not always understood their role within the NFIS Ultimately, effective governance arrangements align with or perceived their role to be consultative, rather than the political realities of a country, take into account institu- one responsible for implementing actions, monitoring tional strengths and weaknesses, and are led by effective progress, or tracking indicators. In such instances, public champions for financial inclusion. reporting on NFIS implementation progress can become a challenge and often times stakeholders do not receive Typically, NFIS governance arrangements include a national visibility for implementing reforms, nor are they held council (responsible for high-level coordination, guid- accountable for not doing so. ance on policy matters, and M&E) supported by an NFIS secretariat and various working groups that are respon- In Pakistan, a revised strategy was issued in 2019 that sible for pushing implementation of specific financial- leveraged the authority and independence of the prime inclusion actions and act as a convening platform for minister’s office to ensure contributions and accountabil- policy input, progress, and reporting on such topics. ity from a wide range of stakeholders, under the remit of the prime minister. This helped to reduce institutional In order to increase commitment and accountability uncertainties and ensure commitment across all related during the implementation of an NFIS, roles, respon- stakeholders. sibilities, and resources for institutions should be well delineated. A secretariat is often the entity responsible Securing adequate funding and resources to support for coordinating working groups, monitoring and evaluat- NFIS implementation is also critical. It sets the momen- ing the NFIS, and reporting progress. Ideally, a secretar- tum for NFIS implementation and is essential to ensure iat should include dedicated staff, sufficient resources, that the strategy document is translated into action. Suffi- and a clear mandate to coordinate across institutions to cient human-resources and technical expertise helps sec- undertake these NFIS functions effectively. A strong sec- retariats drive financial inclusion agendas and coordinate retariat is often an enabling factor underpinning NFIS effectively across multiple institutions.   5 6   Lessons from Implementing a National Financial Inclusion Strategy One success factor during the implementation of In the past, many countries opted for models that relied Indonesia’s NFIS was that the President assigned the on a single or small set of high-level individuals to drive Coordinating Ministry for Economic Affairs early on to the NFIS agenda (that is, ministers, governors, and so lead the national council and establish the secretariat, forth). However, relying on a few select champions can which demonstrated the strategic role of the secretar- pose challenges. For instance, individuals may not retain iat in leading the financial-inclusion initiatives. Having their position for the duration of the NFIS or may face a clear mandate from the highest authority in the gov- competing priorities, making convening an NFIS council ernment allowed the secretariat to coordinate between or driving NFIS progress forward a challenge. For some several institutions in a seamless process. In addition, to policymakers, competing priorities, such as emergent achieve this effectively, specified budget arrangements macroeconomic and financial-stability issues, may take were made available for the NFIS Secretariat and the sec- precedence over financial inclusion. This can result in an retariat was staffed with experienced and skilled technical inability to convene key NFIS governance arrangements professionals, ensuring high capacity. frequently, making it challenging for stakeholders to move forward with NFIS implementation or resolve bottlenecks. In Zambia, authorities chose to house the financial-inclu- sion secretariat at the Ministry of Finance (as opposed Diversifying champions can help tackle issues of com- to a central bank or other implementing institutions) mitment and institutional turnover and sustain momen- to ensure wider commitment by stakeholders, account- tum during times of instability. Some level of institutional able to the ministry. This decision was based on lessons instability is common in many countries, and policy mak- learned while implementing Zambia’s Financial Sector ers should consider the implications of turnover among Development Plan II, which ended in June 2015. During key NFIS champions. Otherwise, it will be difficult to sus- the plan’s implementation, some stakeholders reported tain NFIS implementation and maintain institutional mem- that the implementation was skewed toward the bank- ory when relying heavily on a few high-level individuals. ing sector and attributed this to the fact that the plan secretariat was housed in the BoZ. Hence, for the NFIS, Identifying multiple champions across a range of key the secretariat was housed at the Ministry of Finance and institutions helps reduce reliance on a single institu- co-supported by the BoZ. In addition, other Zambian tion, thereby reducing unexpected delays in the event agencies were included in the governance arrangement. of key institutional turnover or shifts in institutional This role taken on by the Ministry of Finance and other priorities. Champions across multiple institutions can also financial-sector regulatory agencies was seen to foster a work to embed NFIS actions more easily into their respec- prioritization of financial inclusion beyond the banking tive institutional plans and reduce reliance on convening sector and to facilitate allocation of sufficient resources governance structures prior to moving forward. for NFIS implementation. A high-level government com- mitment on financing was also secured prior to launching In Indonesia, for instance, the president issued a pres- the NFIS, while World Bank–funded technical assistance idential regulation to secure the political commitment ensured adequate technical support for implementation required to push the financial-inclusion agenda. The of the NFIS action plan. (See section 9: Facilitate a Role legal framework outlined the role and responsibility of rel- for International Partners.) evant public institutions, requiring them to maintain insti- tutional commitments despite potential internal changes and turnover over time. This required each NFIS institu- 2.  DIVERSIFY CHAMPIONS tion to identify high-level champions to be included in working groups, commit to activities under the strategy Following the launch of an NFIS, many institutions and be accountable for their implementation. appoint a high-level executive to be responsible for his or her institution’s contribution to the NFIS. The execu- Identifying a multitude of champions within each insti- tives often participate as representatives on an NFIS com- tution also helps to maintain commitment and tackle mittee/working group. (See WBG NFIS Toolkit, section issues with institutional turnover. Even if a high-level 3.2.) Despite this approach, many countries have faced champion is identified in each relevant institution, fre- challenges when trying to maintain momentum, institu- quent employee turnover at key institutions may mean tional memory, or commitment toward NFIS implemen- that the identified champions may not always retain their tation. position. This may leave gaps in institutional memory during the implementation of the NFIS. Lessons from Implementing a National Financial Inclusion Strategy   7 Identifying more than one champion for each institution For example, the National Bank of Ethiopia began can help avoid making an institution’s role in the NFIS the process of “refreshing” the NFIS to align the NFIS reliant on one individual. It is also useful to diversify better with the emerging policy priorities of new lead- across seniority levels to ensure the engagement of staff ership and to focus more squarely on leveraging dig- members with different decision-making powers in addi- ital financial services. This was an important step that tion to those directly responsible for implementation. enabled the new Ethiopian prime minister, elected to Otherwise, relying only on high-level officials may cause office in 2018, to increase the pace of NFIS reforms across delays, as such officials often face competing priorities the economy and expand access to financial services. and busy schedules. Remaining agile and flexible allows for the opportu- In Zambia, a new Minister of Finance was appointed nity to align an NFIS with a new government’s tenure shortly after the launch of the NFIS, in February 2018. or emerging political priorities. As in Ethiopia, many Implementation momentum was not significantly affected countries have termed this effort as a strategy “refresh” due to Zambia’s inter-agency approach, which included to respond to emerging demands. This approach helps champions from the BoZ, the Competition and Consumer involve new leadership by giving them an opportunity Protection Commission, the Pensions and Insurance to assume responsibility and take ownership of progress Authority, and the Securities and Exchange Commission, made under their term. in addition to the Ministry of Finance. Moreover, a “Finan- cial Sector Policies and Management Unit” was created A similar approach was adopted in Pakistan, where an at the Ministry of Finance to ensure continuous mapping NFIS refresh was undertaken at the beginning of the of staff responsible for activities related to financial-sector new political administration, which came to power in developments. This effort built on Zambia’s NFIS design 2018. The NFIS refresh aligned the strategy with the new process, which employed multiple representatives across prime minister’s tenure and capitalized on the incoming agencies such as the Ministry of Finance, the BoZ, the government’s priorities for digitization by including an Competition and Consumer Protection Commission, the emphasis on digital finance. These actions built critical Pensions and Insurance Authority, and the Securities and political support for the NFIS, strengthened commitment Exchange Commission to draft the NFIS. Inter-agency by the administration of the new government, and revital- involvement and clear champions helped to solidify a col- ized reform efforts8 while keeping original NFIS founda- laborative approach to the implementation of the NFIS tions and drivers intact. action plan. 4. INCREASING REPRESENTATION 3.  REMAIN AGILE OF WOMEN During the drafting stage, flexibility can be built into Digital financial services hold tremendous promise for an NFIS to accommodate and facilitate future revisions closing gaps in access to finance for women consumers and updates to the NFIS and action plan. This helps and advancing women’s financial inclusion. Experience ensure that NFIS priorities remain relevant over time. (See in the Sub-Saharan Africa region suggests that mobile- WBG NFIS Toolkit, section 2.6.) money services, such as M-Pesa in Kenya or MTN Mobile Money in West Africa, can close the gender gap in financial Remaining agile is a key factor to sustaining NFIS prog- inclusion more rapidly than traditional banking products.9 ress, particularly when competing against multiple Many policy makers explore NFIS actions and targets to national priorities or when balancing a changing polit- help address gaps in women’s financial inclusion. ical environment. Throughout the duration of an NFIS, many countries have faced political shifts that have some- For instance, actions to digitize government payments times hindered NFIS momentum and progress. New lead- made directly to women has helped advance wom- ership may have different priorities or be less enthusiastic en’s financial inclusion. Government payments (such as about continuing the legacy of the previous administration public-sector wages, pensions, and safety-net transfers) for political reasons. Remaining agile allows an NFIS to inspired roughly 140 million women globally to open their realign with emerging priorities, reignite political commit- first bank accounts.10 In Argentina, for example, approx- ments, and ensure continuity. imately 20 percent11 of women who have an account   7 8   Lessons from Implementing a National Financial Inclusion Strategy BOX 3 Ethiopia’s Financial-Inclusion Reforms Continue to Ramp Up Since 2018, key reforms undertaken have included, in Ethiopia. The number of financial access points among others, allowing the Ethiopian diaspora to increased in the country by approximately 40 per- invest in the local financial sector, facilitating the for- cent from 2016 to 2019. The Global Findex data- mation of full-fledged Interest-Free Banking to cater base estimated that access to a transaction account to the roughly a third of the population that is Mus- increased from 22 percent in 2014 to 35 percent by lim, fixing the regulatory bottlenecks of the leasing 2017. According the Ethiopian Socio-Economic Sur- sector to allow foreign-owned companies, approving vey, financial inclusion at the household level (i.e. at movable collateral registries law to improve access least one family member has access to a transaction to and usage of credit to micro, small, and medium account) also grew by over 10 percentage points, enterprises, and issuing a revised payment operators from 35 percent in 2016 to 46 percent in 2018. directive to facilitate expansion of mobile money. Women’s account ownership increased by over 6 percentage points across the same period.7 The regulatory reforms have lowered entry barriers for the financial sector and are expected to make In 2020, Ethiopia announced the introduction of it more competitive. As a result, 10 new banks had new banknotes. In addition, Ethiopia issued a new already applied for a banking license by December directive, the “Licensing and Authorization of Pay- 2019, and a foreign leasing company has recently ment Instrument Issuers Directive,” that regulates started operations. These changes are expected to e-money issuance, allows for non-banks to issue e- have a long-term impact on deepening the financial money, allows transactions to be performed through sector and boosting financial inclusion. The pace of mobile phones, and expands the abilities of agents. reforms has led to recent discussions about a poten- Soon after, in May 2021, EthioTelecom obtained tial NFIS refresh, with a greater focus on leveraging a license from the National Bank of Ethiopia and digital financial services, to exploit the changing launched its mobile-money service, telebirr. Reports financial-sector landscape in Ethiopia. suggested that one million subscribers had signed up for the mobile-money service only one week after These reforms, catalyzed by Ethiopia’s NFIS, helped the launch, and the National Bank of Ethiopia esti- to notably improve the level of financial inclusion mates roughly 3 million subscribers (as of June, 2021). opened their first account specifically to receive digital To tackle women’s financial inclusion, often as part of an government payments. In addition, digital ID and e-KYC NFIS, many countries opted to establish a gender the- reforms reduce bottlenecks for women without core ID matic working group. Upon implementation, however, documents. For instance, in 2014, Indian men were 20 many have faced challenges actively operationalizing the percentage points more likely than women to have an working group, identifying discrete actions, receiving com- account. In 2017, India’s gender gap shrunk to 6 percent- mitments from lead agencies, or assigning accountability. age points due to a strong government push to increase In some countries, the establishment of such groups also account ownership through biometric ID cards.12 placed women’s financial inclusion as a parallel policy agenda, inadvertently reducing the ability to integrate Despite advancements in digital financial services, adequately a gender lens across all policy discussions. women are not always well represented within the financial sector as consumers or leaders. The underly- While gender parity is on the agenda of most NFISs ing gender gap in mobile ownership remains a challenge. around the world, it is common for gender-specific Across low-middle-income countries, women are 8 per- issues to become siloed, particularly as few women are cent less likely than men to own a mobile phone, and 20 represented as key decision-makers within the NFIS percent less likely to use the internet on a mobile. This implementation process. This often reflects the demo- means 300 million fewer women than men use the mobile graphics of the broader financial sector. For instance, of internet in these markets.13 There also remains a persistent 185 central banks globally, only 18 are headed by women; 9 percent gender gap in financial inclusion.14 just over one-third of central banks have a woman in the Lessons from Implementing a National Financial Inclusion Strategy   9 position of deputy governor; and one in six central banks seem counterintuitive, such as modernizing payment have no women at all in senior management.15 As a result, infrastructures. Most financial-inclusion activities change and particularly during NFIS implementation, consider- the role money plays in society and therefore have spe- ations for women consumers are often passed over during cific implications for women. key design and delivery stages for new policies, products, and services. Moving forward, NFIS implementations should priori- tize actions proven to enable women’s financial inclu- One lesson learned through NFIS implementation world- sion. These include, for instance, reducing the gender wide is that policy makers must be intentional to prevent gap in official IDs, increasing mobile-phone penetration gender from becoming a stand-alone project or a “cross- for women, boosting the availability of mobile-money cutting issue” that simultaneously places responsibility services, digitizing government payments made directly on everyone and no one and removes clear account- to women, gathering sufficient gender-disaggregated ability of stakeholders. Instead, reducing the gender gap data to inform decisions, increasing intentionality to hire, requires NFIS policy makers to mainstream gender more procure, and invest in women within the financial sector, systematically across all aspects of financial inclusion. and increasing women’s representation as leaders and decision-makers within the NFIS process, as well as in the Better representation of women in key NFIS leadership financial sector more broadly. roles underpins inclusion efforts around gender equity. This helps ensure women’s participation in digital financial services as leaders as well as consumers more broadly. 5.  PLAN QUICK WINS For instance, in Pakistan, activating an NFIS Gender “Quick wins” are a set of identified activities or actions thematic working group in line with other thematic that are easier to implement, have a narrow and groups or integrating a gender-focused, cross-cutting focused scope, and can be executed within the first lens across all working groups was a challenge. As a year of NFIS implementation. Planning quick wins helps result, the SBP changed its approach by adding additional demonstrate the credibility of an NFIS, brings stakehold- resources to advance the women’s financial-inclusion ers together, and builds momentum. agenda. This included assigning a gender focal person in the secretariat who played an important role creating For instance, in Pakistan, policy makers prioritized a awareness around women’s financial inclusion. Along with series of quick legal and institutional reforms to be forced accountability from Pakistan’s NFIS gender-based implemented within the first year of operationalization. targets (see section 8 below), the secretariat also invested These included passing the Secured Transactions Law and additional resources to build data infrastructure to collect the Credit Information Bureau Law and revitalizing the gender-disaggregated data on access and usage. These Foreclosure Law. Institutional reforms also included the efforts demonstrated the need for greater women’s rep- overhaul of wholesale-development finance in the coun- resentation throughout the financial sector to reduce the try, moving from traditional state-owned entities engaged financial-inclusion gender gap in Pakistan. Discussions on in direct provision toward public-private models that targets, activities, and NFIS actions to enhance women’s would leverage the private sector. Pakistan Microfinance financial inclusion became more mainstream during the Investment Company was created in 2015, and agree- strategy-revamping process. ments were reached in the same year for the creation of Pakistan Mortgage Refinance Company (established in The appointment of Ms. Sima Kamil in August 2020, the 2016). After a change in leadership (see section 3: Remain first woman to serve as deputy governor of the SBP, fur- Agile), the NFIS prioritized and implemented a new set of ther mainstreamed Pakistan’s women’s financial-inclu- reforms16 and made progress in the digital finance space sion agenda. Building on NFIS efforts, the SBP released specifically with the rollout of Pakistan’s National Pay- a gender strategy for Pakistan’s financial sector entitled ments Strategy in 2020 and the launch of Raast in 2021. “Banking on Equality Policy,” which set a timeline for financial institutions to induct women champions and A number of quick wins were also planned to follow the build infrastructures to make financial service providers launch of the NFIS in Zambia and enabled several nota- more approachable for women. ble achievements by the end of the first year of NFIS implementation. These included (1) progress in digitizing From a programmatic or action-level perspective, pol- government-to-person payments, with 59 public agencies icy makers have a responsibility to apply a gender lens migrating to a single treasury account to implement digital across all NFIS technical activities, even those that payments; (2) development of the Integrated Beneficiary 10   Lessons from Implementing a National Financial Inclusion Strategy Payments Systems to facilitate disbursement of wages In Zambia, engaging the private sector throughout the through mobile payments; (3) phased implementation of NFIS development and implementation process was con- the National Financial Switch to improve interoperability; sidered crucial by policy makers to ensuring ownership (4) removal of the import duty on ATMs and point-of-sale of NFIS action items and progress, particularly related to machines; and (5) operationalization of the Movable Col- digital financial services. lateral Registry, to increase credit to micro, small, and medium enterprises. These reforms helped to improve Participation of regional stakeholders is also critical but financial inclusion in Zambia, especially through mobile- often sparse during NFIS implementation. Generally, money services, for which transaction volumes increased national-level representatives participate on behalf of all by about 220 percent in the two years since the NFIS regional stakeholders in core NFIS governance arrange- launch.17 Moreover, the number of registered digital finan- ments. This is often complicated by the difficulty of trav- cial services agents increased by 8 percent in the first year eling to national meetings. However, financial inclusion of NFIS implementation. requires NFIS implementation at both the central and regional level. Building opportunities to engage regional stakeholders actively (for instance, through sub-working 6. ENGAGE ACTIVELY—AND groups) helps make the shift from relying on national-level CONTINUOUSLY—WITH THE working groups to building regional engagement and commitment. This can help better reflect the realities and PRIVATE SECTOR AND REGIONAL challenges of reaching hard-to-reach adults within partic- STAKEHOLDERS ular regions. Private-sector stakeholders play a significant role in One approach used in Brazil and the Philippines was providing inputs into the NFIS. (See WBG NFIS Tool- to collect direct contributions from stakeholders across kit, section 1.1.) A range of private-sector players (such public and private sectors and regions, by requesting as industry associations, major financial service providers, each institution to submit a list of planned, achievable fintech companies, mobile network operators, and so actions and initiatives. Institutions were required to pro- forth) are generally gathered to identify bottlenecks and vide lists of actions under related NFIS policy headings or offer solutions from a provider’s perspective. Regional thematic action-level categories. This approach created stakeholders also help to provide unique insights and the rails for clear accountability, quick implementation kick- constraints around financial inclusion that may differ from off, troubleshooting, and easy monitoring and reporting. region to region. Upon operationalization, however, private-sector and MAINTAIN ROBUST M&E 7.  regional stakeholders are not always involved as active participants in NFIS implementation. Sometimes they FRAMEWORKS are not represented in NFIS governance arrangements, and some authorities have had a disinclination to engage Actively tracking NFIS implementation through a these stakeholders based on the desire to focus on robust M&E framework is necessary to maintain visi- national, government-centric implementation efforts. This bility on progress and accountability. A robust M&E may also be complicated in economies where the govern- framework often requires NFIS champion authorities or ment plays an outsized role in the financial sector. a financial-inclusion secretariat to build critical data infra- structures for financial inclusion (that is, demand-side, That said, without the heavy and sustained engage- supply-side, and geospatial data infrastructure), collect ment of private-sector and regional stakeholders, it indicators needed to monitor national-level results, build may be more difficult to translate policy actions into tracking and reporting systems, and evaluate progress. tangible products and services that reach all regions and locations. Private-sector stakeholders in particular Demand-side surveying of individuals, households, and play an undisputable role, serving consumers directly. firms helps collect data needed to measure progress When private-sector stakeholders (or related associ- in financial-inclusion and to inform policies. Surveying ations) are actively involved in the NFIS coordination provides insights on a population’s uptake and usage structure, dialogue between the public and private sec- of financial services, the distribution of financial services tors can help ensure that priorities and actions realisti- across key consumer segments (for example, women, rural cally reflect market and operator realities. residents), and the relationship between financial behav- iors and other factors (for example, poverty, employment, Lessons from Implementing a National Financial Inclusion Strategy   11 and so forth). As part of the NFIS implementation process, account ownership, small and medium enterprise finance, many authorities have opted to collect demand-side data branchless banking, and more. In addition, the State Bank through stand-alone household surveys (like those con- of Pakistan rolled out a gender-disaggregated data-col- tracted by third parties). However, this is often costly and lection initiative that required financial service providers resource intensive and, for many policy makers, may not to segment data on access and usage of finance uniquely be a sustainable activity in the long term. by gender and provide data on the representativeness of women staff within their institutions. Instead, integrating financial-inclusion indicators or mod- ules into existing, relevant, and established surveys, Collecting geospatial data has also been employed in often run by national institutions such as statistical offices Ethiopia, Mozambique, and Pakistan and to map the dis- or local research entities, has proven to be an effective tribution of financial access points and help authorities method of sustainably collecting relevant financial-inclu- identify gaps in existing coverage, better target under- sion data. served areas, and optimize the placement of financial access points. Geospatial tools are becoming increasingly For example, the National Bank of Ethiopia opted to important as part of NFIS implementation to inform finan- integrate a financial-inclusion module within the Ethi- cial-inclusion policy making. opian Socio-Economic Survey, conducted by the Ethi- opian Central Statistics Agency.18 As a result, the bank Successful M&E implementation often relies on a finan- now has access to a reliable, country-owned financial-in- cial-inclusion secretariat to collect action-level data for clusion dataset every two years. The survey provides NFIS tracking. Effective approaches have included the time-series data on account access, savings, loans, infor- secretariat soliciting inputs across working groups to build mal finance, insurance, financial capability, and consumer an action-level NFIS tracking framework and maintain reg- protection. The module was also developed specifically ular coordination with each working group. When actively to track core NFIS indicators and evaluate the progress maintaining an NFIS M&E and reporting framework, a sec- of Ethiopia’s NFIS over time. The fourth wave of the sur- retariat can theoretically raise critical information to senior vey also evolved to include additional indicators around officials, an important step to ensuring accountability and financial capability to complement Ethiopia’s upcoming NFIS progress. National Financial Education Strategy. For instance, in Indonesia, the secretariat coordinated Supply-side data is particularly valuable for measur- with each working group to develop action-level track- ing levels of physical access (for example, the number ers and indicators to measure progress in each NFIS of branches, agents, ATMs, and so forth), transaction area. The secretariat then provided regular reports and numbers and volumes, institutional composition, key key indicators to Indonesia’s National Council for Financial products, level of innovation, and use of technology. Inclusion and submitted annual reports19 to the president Ensuring that data collected from financial service pro- that covered achievements and plans for the coming year. viders includes relevant financial-inclusion indicators is The council also reported annually directly to the pres- essential to analyze the financial-inclusion landscape and ident on financial-inclusion progress, ensuring visibility environment. This often requires revising the scope of the on progress and accountability all the way to the highest supervisory data-collection templates used by central banks public authority. and other financial-sector regulators so they collect rele- vant financial-inclusion data from regulated entities (that is, In Zambia, effective M&E enabled the secretariat to commercial banks, e-money issuers, non-bank institutions, flag early issues during NFIS implementation and reas- insurance companies, and so forth). Successful NFIS imple- sess NFIS priorities. During the first year of Zambia’s NFIS mentation efforts are often underpinned by policy makers implementation, an annual progress report found that who include key indicators (that is, unique accounts, wom- women and the rural poor were associated with a lack of en-owned products and services, account activity, volume collateral and credit history, resulting in more women and and value of transactions, number of access points, and so rural poor being denied credit by formal financial service on) into their data-collection activities. providers. A lack of ID documents was recognized as one of the main factors preventing these population groups For example, Pakistan expanded its supervisory tem- from gaining access to basic financial services. As a result, plates to collect data related to NFIS targets. This the second year of NFIS implementation included a series included leveraging Pakistan’s Computerized National of actions to facilitate access for underserved groups20 Identity Card to collect supply-side data around unique based on findings from Zambia’s NFIS Results Framework. 12   Lessons from Implementing a National Financial Inclusion Strategy LEVERAGE TARGETS FOR 8.  Indonesia also heightened the financial-inclusion agenda throughout the country by integrating its BROADER POLICY AGENDAS NFIS targets into the National Medium-Term Develop- ment Plan, a five-year plan that feeds into the 20-year Targets are more than a set of indicators to measure National Long-Term Development Plan. Doing so NFIS progress and impact; when leveraged strategi- potentially secured political commitment over the long cally, targets also help policy makers mainstream new term by expanding accountability across political tenures, policy priorities throughout the financial sector—for hence providing some immunity to changes in political instance, the financial inclusion of women. When main- leadership for NFIS implementation progress. streamed into broader policy agendas, these targets not only help push forward related NFIS actions but also make the financial sector accountable for the pol- icy agenda more broadly. Translating such targets into FACILITATE A ROLE FOR 9.  measurable actions, tracked during the NFIS imple- INTERNATIONAL PARTNERS mentation process, thereby becomes a priority—along with the necessary efforts to do so (that is, building data International development partners can provide com- infrastructures that measure women-owned accounts, for plementary support for NFIS implementation, partic- instance). ularly through capacity building and funding. Many countries have leveraged international partners to provide For instance, the M&E framework in Zambia helped better technical assistance to the secretariat to build capacity, identify and segment underserved target populations, a share knowledge, and pilot new financial-inclusion pro- crucial step for raising awareness among stakeholders and grams. Financial support from external partners also often bringing related actions to the forefront of policy devel- allows for the recruitment of professionals from the pri- opment. This was most prevalent with regard to women’s vate sector to supplement existing government personnel financial inclusion, wherein driving gender-based policy assigned to the secretariat. For instance, due to the global was given priority and brought to the forefront through exposure of the WBG in NFIS development and imple- the NFIS. mentation, the WBG was able to provide knowledge transfer to national institutions as part of their NFISs on Pakistan set a gender-based NFIS target strategically to several technical fronts (for example, building a payment elevate women’s financial inclusion as a priority policy and credit infrastructure, drafting supportive legislation, agenda. The target was first introduced in 2015 as part of and boosting consumer protection). This was often highly Pakistan’s NFIS to ensure that at least 25 percent of adult valued by the institutions, as it expanded local capacity women owned a bank account by 2020. To measure for effective NFIS implementation. progress against key targets, the State Bank of Pakistan integrated gender-disaggregated data indicators into its Additionally, governments also relied on the financial supervisory templates, using Pakistan’s unique ID to facil- support of such international development partners. In itate new insights into women’s ownership of financial Indonesia, donor funds from the Bill and Melinda Gates product and services. These efforts enabled authorities Foundation enabled the NFIS secretariat to recruit exter- to develop more evidence-based policies for women’s nal professionals to support efficient operations. In Paki- financial inclusion and highlighted key supply-side con- stan, WBG financing for projects included a $137 million straints and gaps. Building on these efforts, the women’s lending project to bolster domestic financial infrastructure financial-inclusion agenda was revamped under Paki- and a $150 million lending project for housing finance. stan’s NFIS refresh efforts (see Government’s 100-Days In Zambia, the minimum funding needed for NFIS imple- Agenda),21 and the Government of Pakistan adopted mentation came from the WBG and allowed the govern- new and enhanced NFIS targets, actions, and timelines ment to build critical momentum early on. to achieve more than 20 million active digital transac- tion accounts owned by women by 2023. These efforts catalyzed the “Banking on Equality Policy,” which set a timeline for financial institutions to induct women cham- pions and build infrastructures to make financial service providers more approachable for women. Recommenda- tions in a similar vein are also provided for the branchless networks. Lessons from Implementing a National Financial Inclusion Strategy   13 10. CONCLUSION better with the emerging policy priorities of new lead- ership and to focus more squarely on leveraging dig- More than 55 countries have leveraged an NFIS to ital financial services. This was an important step that develop a comprehensive approach to coordinate enabled the new Ethiopian prime minister, elected to actions, assign responsibilities, and outline a road map office in 2018, to increase the pace of NFIS reforms across for achieving financial-inclusion objectives. Each of the economy and expand access to financial services. these countries has had a unique implementation experi- ence, due to varying country contexts. Remaining agile and flexible allows for the opportu- nity to align an NFIS with a new government’s tenure Despite the diverse experiences across countries imple- or emerging political priorities. As in Ethiopia, many menting an NFIS, several common success factors and countries have termed this effort as a strategy “refresh” challenges emerged that policy makers seeking to imple- to respond to emerging demands. This approach helps ment an NFIS should consider. involve new leadership by giving them an opportunity to assume responsibility and take ownership of progress Policy makers can learn from NFIS implementation made under their term. experiences, including from the four countries detailed in this note. Doing so can help to identify relevant obsta- A similar approach was adopted in Pakistan, where an cles, critical success factors, and potential mitigation NFIS refresh was undertaken at the beginning of the approaches for more effective implementation of the new political administration, which came to power in NFIS in the policy makers’ own countries. This will depend 2018. The NFIS refresh aligned the strategy with the new heavily on the domestic context, and policy makers are prime minister’s tenure and capitalized on the incoming thus encouraged to leverage the insights from this note government’s priorities for digitization by including an within the local contextual framework to maximize the emphasis on digital finance. These actions built critical impact from implementing an NFIS. political support for the NFIS, strengthened commitment by the administration of the new government, and revital- For example, the National Bank of Ethiopia began ized reform efforts8 while keeping original NFIS founda- the process of “refreshing” the NFIS to align the NFIS tions and drivers intact. 14   Lessons from Implementing a National Financial Inclusion Strategy NOTES 7. Financial access point data is from the National Bank of Ethiopia, while financial-inclusion data is from Wave 3 and 4 of the Ethio- pian Socioeconomic Survey. 8. The updated NFIS can be accessed at www.finance.gov.pk/NFIS.pdf. 9. https://blogs.worldbank.org/psd/how-can-digital-financial-services-help-world-coping-covid-19 10. https://blogs.worldbank.org/psd/how-can-digital-financial-services-help-world-coping-covid-19 11. Demirgüç-Kunt et al., Global Findex Database 2017. 12. Demirgüç-Kunt et al., Global Findex Database 2017. 13. GSMA, Connected Women: The Mobile Gender Gap Report 2020 (GSM Association, 2020). 14. Demirgüç-Kunt et al., Global Findex Database 2017. 15. Official Monetary and Financial Institutions Forum, OMFIF Gender Balance Index 2021 (OMFIF, 2021). 16. In Pakistan, the NFIS strengthened the credit infrastructure, launched a national payment systems strategy, and established hous- ing finance and SME credit guarantees institutions. These reforms assisted in boosting financial access by about 65 percent for bank and ATMs and 132 percent for banking agents from 2014 to 2019. Account ownership increased from 13 percent (2014) to 21 percent (2017), although it is still short of its 2020 target of 50 percent. 17. Data is from the Bank of Zambia. 18. Central Statistical Agency of Ethiopia, Ethiopia Socioeconomic Survey: 2015–2016, Wave 3 (https://microdata.worldbank.org/ index.php/catalog/2783) and Ethiopia Socioeconomic Survey: 2018–2019, Wave 4 (https://microdata.worldbank.org/index.php/ catalog/3823). 19. National Council for Financial Inclusion, Annual Report on Financial Inclusion: 2017 (Jakarta: DNKI, 2017),http://docplayer.info/ 95259835-Laporan-tahunan-keuangan-inklusif.html. 20. New actions included implementing the Integrated National Registration Information System to reduce the gaps caused by Zambians without ID documents; encouraging financial service providers to offer simpler, affordable financing; promoting agent inclusivity; incentivizing the provision of financial products in rural areas; and expediting the erection of communication towers in rural Zambia to facilitate access to≠æ≠ digital financial services. 21. Government of Pakistan, Government’s 100-Days Agenda: National Financial Inclusion Strategy (Islamabad: Ministry of Finance, Government of Pakistan, 2018), http://www.finance.gov.pk/NFIS.pdf. Annex C: Financial Capability   15