MICROCAPITAL STORY: Outdated Regulatory Frameworks and Inadequate Business Models Identified as Key Challenges to Financial Inclusion at World Economic Forum's Inaugural Summit on the Global Agenda

The redesign of regulations, development of innovative business models that promote inclusion, financial literacy, expansion of delivery channels, and lowering of transaction costs were highlighted as key challenges for expanding the inclusivity of the global financial system by the World Economic Forum‘s Global Agenda Council On Financial Empowerment. The inaugural Summit on the Global Agenda recently assembled 700 of the world’s leaders from academia, business, government and society to set priorities on key global challenges, the outcomes of which will be integrated in the World Economic Forum Annual Meeting 2009 for further discussion.

The Council on Financial Empowerment, which was co-chaired by MPower Ventures founder Roy Sosa and development expert Ricardo Hausmann, was one of 68 Global Agenda Councils to convene at the Summit. Each council released a work in progress report at the end of the summit which answered two key questions : “What is the state of the world on this issue and how is the economic crisis impacting this issue?” and “What should be done to improve the state of the world on this issue/region/industry and by whom?” The Council identified the three billion people globally who lack access to formal financial services and went on to praise microfinance as an initiative which has “opened the door” to credit and savings for over 100 million people worldwide and for demonstrating the “power of extending financial services for the economic advancement of individuals under various sustainable models”. The report also highlighted inadequate business models and outdated regulatory frameworks as key challenges for the “delivery of financial empowerment”. The report discusses the need for regulatory bodies who supervise the telecommunication and banking industries to review and update corresponding policies to take advantage of opportunities for financial inclusion. The report as it stands currently is very general with broad statements as opposed to detailed recommendations and conclusions, although it remains a work in progress and the website states that the report will continue to be updated.

Roy Sosa is the founder and Chairman of MPOWER Ventures, Founder and CEO MPOWER Labs and founder of NetSpend Corporation. MPOWER Labs is a research and development organization which was founded in 2006 as the first portfolio company of MPOWER Ventures, a venture capital fund whose mission is to empower the world’s underserved.

Ricardo Hausmann is Director of Harvard’s Center for International Development and Professor of the Practice of Economic Development at the Kennedy School of Government. From 1994 to 2000 he served as Chief Economist of the Inter-American Development Bank, where he created the Research Department. He has also served as Minister of Planning of Venezuela and as a member of the Board of the Central Bank of Venezuela. He served as Chair of the IMF-World Bank Development Committee and he was Professor of Economics at the Instituto de Estudios Superiores de Administracion (IESA) in Caracas, where he founded the Center for Public Policy.

The World Economic Forum was incorporated in 1971 and is an independent international organization based in Geneva, Switzerland and under the supervision of the Swiss Federal Government. The World Economic Forum began in 1971, when Professor Klaus Schwab, then a professor of Business Administration at the University of Geneva, gathered European business leaders in Davos, Switzerland, for a discussion on global management practices. The success of this first conference led Professor Schwab to create the European Management Forum, which in 1987 changed its name to the World Economic Forum.

The World Economic Forum created the Global Agenda Councils to further its mission. These councils are multistakeholder groups of the most innovative and relevant minds and convene for the purpose of advancing knowledge and collaboratively exploring actions to the most important issues in the global arena.

By Lori Curtis, Research Assistant

Additional Sources:

World Economic Forum: “Home” “Summit on the Global Agenda” “Council on Financial Empowerment” “Council on Financial Empowerment Report”

MPOWER Ventures: “Home”

Real Wire: “MPOWER Ventures Founder Roy Sosa To Co-Chair The World Economic Forum’s Global Agenda Council on Financial Empowerment”