Speaking at the National Financial Inclusion Council meeting held last week, governor of the Bank of Jamaica Brian Wynter noted that the push to improve the financial inclusion of citizens was hampered by data collection challenges to guage how effective the banking sector has been in terms of providing credit to the micro, small and medium-sized enterprises (MSME) sector of the island.

Wynter, at a gathering at the Terra Nova Hotel, stated: “We continue to lack good data on private sector credit being provided to micro, small and medium-sized enterprises, and this has impeded our ability to measure accurately the progress we are making towards being a more inclusive society. To remedy this, Bank of Jamaica is designing new reporting forms to capture the data that we need using the revised definitions of MSMEs set out in the recently updated National MSME Policy. We intend for this to present a strong complement to the council’s work on financial inclusion, as it will stimulate more competitive business practices and greater levels of investment in MSMEs, just as it will for larger enterprises.”

Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs — transactions, payments, savings, credit and insurance — delivered in a responsible and sustainable way.

The governor explained further, “The National Financial Inclusion Council held its inaugural meeting in March last year and formally launched the National Financial Inclusion Strategy. The strategy represented the culmination of four years of work to promote greater equity for all Jamaicans in their ability to access financial services and products. This effort to improve the financial empowerment of Jamaicans in their businesses and daily lives recognises how important that is to placing the country on a sustainable growth path.”

According to research done by the World Bank, being included in the formal financial system helps people:

• Make day-to-day transactions, including sending and receiving money;

• Safeguard savings, which can help households manage cash flow spikes, smooth consumption and build working capital;

• Finance small businesses or microenterprises — helping owners invest in assets and grow their businesses;

• Plan and pay for recurring expenses, such as school fees;

• Mitigate shocks and manage expenses related to unexpected events such as medical emergencies, a death in the family, theft, or natural disasters; and

• Improve their overall welfare.

The benefits of financial inclusion are not only significant for individuals but for economies as well. Financial inclusion is linked to a country’s economic and social development, and plays a role in reducing extreme poverty. Recent research indicates that financial inclusion is not only positively correlated with growth and employment, but it is generally believed to causally impact growth.

Moving on from the MSME sector, Wynter shared the wider scope of the central bank’s financial inclusion project.

“After a year of hard work, we have had mixed results. Our monitoring and evaluation of the annual impact indicators demonstrate that there have been improvements in five impact indicators from the 2015 baseline. The impact indicators include the number of deposit accounts with commercial banks, the reduction in unclaimed deposits held for a period of seven years or more, the percentage of electronic retail payments conducted via commercial banks on a per capita basis, and the number of access points per 10,000 adults. The initiatives of 2017 have yielded some dividends, such as the development of a National Financial Literacy Action Plan and Interim Strategy under the leadership of the Ministry of Education, Youth and Information.

“In addition, there has been the formulation of policy proposals for legislative amendments to allow for graded know-your-customer requirements as part of the development of a risk-based framework for anti-money laundering and countering the financing of terrorism. If these proposals are accepted, this will provide a basis for the development of financial inclusion products with specific design features that reduce the risk of the products being used for money laundering while, at the same time, facilitating access by those who are excluded or underserved merely because, for example, they may lack formal proof of address.

“We are still in the early stages of our journey, though. The complexity of the issues that necessitated the development of the strategy, such as the level of informality, the lack of financial literacy and the underutilisation of the secured transactions regime has prompted Bank of Jamaica to initiate a project on financial deepening that, we hope, will create a road map for greater market development.”