BIIA was invited to attend the meeting of the APEC Business Advisory Council (ABAC) on May 22nd 2012 in Kuala Lumpur, Malaysia and participated in discussions on Financial System Capacity Building: Financial Inclusion.
Financial inclusion is a very important tool in creating employment and poverty reduction efforts. In the last decade microfinance institutions showed tremendous success in outreaching and serving poor. Millions of people with low income and micro businesses had a chance to improve their lives. However notwithstanding these efforts about 80% of households in the world are still excluded from formal financial services. Developing the outreach practices by improving their quality is a main direction of capacity development activities in the region. The work of APEC centers on topics of: (i) innovative approaches to promote financial literacy; (ii) information, credit bureaus and regulations; (iii) micro-finance regulations; (iv) consumer protection; and (v) facilitating cross-border microfinance.
In regard to financial inclusion for Micro, Small and Medium Size Enterprises (MSMEs) BIIA expressed, at the meeting, that significant impediments still exist which prevent access to credit for this segment:
- Trade credit is the largest source for short term capital (potentially larger than unsecured loans from financial institutions). Trade credit however is dependent on accurate, reliable and timely credit information, which is not universally available. Therefore, APEC should include this important segment in their current scope of infrastructure building in addition to focusing on the financial services sector.
- Infrastructure constraints, lack of regulatory frameworks, absence of mandatory and voluntary disclosure retard the process of building effective commercial credit information services. The inhibitors and potential solutions are outlined in the attached document.
- Negative attitudes towards disclosure are the biggest inhibitor in providing accurate, reliable and timely credit information on Micro, Small & Medium Size enterprises. A concerted effort in creating public awareness, financial and information literacy, especially a broader based mandatory disclosure and compliance mechanisms will be necessary to overcome these impediments.
To read the BIIA complete submission to the APEC Business Advisory Council (ABAC) discussions on financial inclusion please click on the link: AA – APEC Advisory Group on Financial Inclusion KL