MICROCAPITAL BRIEF: Technology Recognized as Tool to Improve Property Rights, Payment Platforms, Reduce Transaction Costs at International Monetary Fund (IMF) Seminar: “Future of Finance – Technology and Financial Inclusion”

The International Monetary Fund (IMF), a US-based arm of the United Nations, and the US-based World Bank Group, recently held a seminar on technology and financial inclusion as part of its seminar series entitled “The Future of Finance,” panelists discussed the role of technology as a tool to amend market failures in the provision of financial services for low-income people such as via the documentation of property rights and reductions in transaction costs. Other topics included the rise of new payment platforms, policies to increase financial inclusion and measures to correct issues with interoperability among financial systems. The seminar attendees included Peter Sands, CEO of UK-based Standard Chartered Bank; Mauricio Cárdenas, the Minister of Finance of Colombia; and Bill Gajda, the Global Head of Strategic Partnerships of US-based services financial company Visa.

Mr Sands argued that reforms to include low-income people in the financial system should focus on improving property rights, including those relating to houses or consumer goods, to ensure they are recognized and can be used as collateral for credit. New payment platforms including BitCoin have significant potential to target the unbanked, as these systems can perform transactions and document assets without the need for banks. He also stressed that the banking sector has not yet seen many of the positive operational and commercial outcomes that can be brought on by technology. Mr Gajda argued that innovation in the financial sector ought to focus on reducing transaction costs for micropayments and addressing issues of interoperability. Dr Cárdenas claimed that transaction fees commonly reach up to ten percent and that people should be educated to take advantage of lower-prices financial services.

As of January 2014, the International Monetary Fund had total assets of SDR 303 billion (USD 646 billion).

The World Bank Group has 10,000 employees and operations in approximately 120 countries as of 2014. World Bank Group had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees as of December 2013.

By Simon Pfanner, Research Associate

About the International Monetary Fund

The International Monetary Fund (IMF), part of the United Nations, is an organization with 188 member countries and territories working to foster global monetary cooperation, secure financial stability, facilitate international trade, boost employment, promote sustainable economic growth and reduce poverty around the world. IMF was created after the Second World War to oversee the international monetary system, promote exchange rate stability and encourage members to eliminate exchange restrictions that hinder trade. As of January 2014, the IMF had total assets of SDR 303 billion (USD 646 billion).

About the World Bank Group

Headquartered in the US, the World Bank Group (WBG) is a multilateral development organization that aims to improve living standards for people in developing countries. As of 2014, WBG encompasses the International Bank for Reconstruction and Development (IBRD), owned by 188 member nations; the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). WBG has 10,000 employees and operations in approximately 120 countries as of 2014. WBG had commitments of USD 52.6 billion in loans, grants, equity investments and guarantees as of December 2013.

Sources and Additional Resources

[1] Coindesk, IMF and World Bank panel: Bitcoin Block Chairs Boost Financial Inclusion

MicroCapital, October 24, 2014, International Monetary Fund (IMF) Releases 2014 Financial Access Survey (FAS)

MicroCapital, October 15, 2012, African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), World Bank Group (WBG) Issues Joint Statement on Climate Finance

MicroCapital, August 27, 2014, World Bank Group to Provide Funding of $42m to Lao People’s Democratic Republic to Support Small and Medium-Sized Enterprises (SMEs), Hydropower and Mining Sectors

MicroCapital Universe Profile: International Monetary Fund

MicroCapital Universe Profile: The World Bank Group

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