Yogyakarta is a city full of cultural heritage, and it was the venue where Indonesia's G20 Presidency hosted the third plenary meetion of the G20 Global Partnership Financial Inclusion or GPFI.
Digitalization has been a game changer and changed every aspect of our life. It has facilitated broader access to finance and new markets, especially for unserved and underserved groups, including women, youth, and micro, small, and medium enterprises (MSMEs). It can also promote productivity and ensure a sustainable and inclusive economy.
Therefore, digitalization is very much in line with two essential pillars of Indonesia's G20 Presidency: "productivity" and "sustainability and inclusive growth." In the area of financial inclusion, Indonesia's G20 Presidency put digital financial inclusion and SME finance as its focus, discussing it under the G20 GPFI working group. The GPFI held its third and last Plenary Meeting under Indonesia's G20 Presidency on October 5th, 2022.
One day prior, on October 4th, 2022, the Indonesian Ministry of Finance and Bank Indonesia held the G20 GPFI High-Level Symposium on Harnessing Digitalization to Increase Productivity, Sustainable and Inclusive Economy of Women, Youth, and MSMEs as a side event of the third GPFI Plenary Meeting.
The event was a valuable opportunity for the GPFI to share the progress of its work and to build better collaboration with its stakeholders. At the event, fundamental principals underlined several essential issues in digital financial inclusion.
Queen Máxima of the Netherlands, in her capacity as the United Nations Secretary-Generals Special Advocate for Inclusive Finance for Development (UNSGSA) and the honorary patron of the GPFI, highlighted the significance of improving digital infrastructures, both hard and soft infrastructure, digital technology, and finance ecosystem.
The Indonesian Minister of Finance, Sri Mulyani Indrawati, emphasized the need for more private sector participation and engagement in developing digitalization and the MSME empowerment ecosystem.
The Governor of Bank Indonesia, Perry Warjiyo, pointed out some crucial measures to increase the digital financial inclusion of MSMEs, such as expanding payment infrastructure, enhancing capacity and literacy, and strengthening consumer protection. The side event also became a platform for knowledge sharing between regulators, private sectors, and academicians. Several regulators shared their experiences in implementing the G20 High-Level Principles for Digital Financial Inclusion and building an inclusive financial ecosystem for MSMEs.
Private sector players shared their initiatives in utilizing data to facilitate easier access to finance for consumers and leveraging digital platforms to empower MSMEs. Meanwhile, some academicians shared their perspectives regarding possible solutions to improving interoperability in the digital era and the challenges, opportunities, and prerequisites for an effective policy on MSMEs.
The high-level symposium has certainly provided insightful knowledge and experience on the issue of digital finance and SME finance from the perspective of regulators, private sectors, and academicians. Such collaboration is something that is needed to be continued and strengthened in the future.
During the plenary meeting, GPFI Member Countries discussed the outcome Indonesia's G20 Presidency set to achieve, which is developing a Financial Inclusion Framework in Harnessing Digitalization to Increase Productivity, Sustainable and Inclusive Economy of Women, Youth, and MSMEs, which can also be called "the Yogyakarta Financial Inclusion Framework."
The framework brings together all deliverables undertaken during Indonesia's G20 Presidency, which are:
- Implementation Guide of the G20 High-Level Principles on Digital Financial Inclusion,
- Digital and Innovative Financial Products and Services for MSMEs Beyond Credit Products,
- Regulatory Toolkit for MSMEs' Access to Digital Financial Services, and (iv) Progress on MSMEs Data Harmonization to create an implementable action plan to support digital financial inclusion.
The new framework is a good way of demonstrating leadership through example. The G20 high-level principles implementation guide provides practical guidance for implementing financial inclusion while managing risks. The database of the SME landscape shows the types of firms that can be developed with an appropriate policy and regulatory-enabling environment. The regulatory toolkit helps regulators understand the key focus areas to support financial inclusion.
GPFI Member Countries and GPFI Partners have welcomed and supported this framework. It surely will be precious, not only for GPFI Member Countries but for other countries as well, in reaping the most benefits of digitalization. The plenary meeting also discussed the progress of the GPFI's MSMEs data harmonization agenda. In this regard, several data sources have been identified as the potential building block of the GPFI MSMEs data harmonization framework.
The GPFI Workshop held last July has also provided insights into successful initiatives in closing finance and data gaps. As this is a multiyear project, the GPFI will continue discussing MSMEs' data harmonization next year. During the plenary meeting, the World Bank also presented the findings of the 2021 Global Findex.
It is refreshing to see that financial inclusion based on account ownership has improved from 51 percent to 76 percent in the last decade. The gender gap across developing economies has also closed from nine percentage points to six percentage points.
The findings of the latest Global Findex also underlined the evidence of digital acceleration and the role of digitalization in further increasing financial inclusion. Last but certainly not least, while still being firmed up, India highlighted some topics that may become India's G20 Presidency 2023 priorities, such as women's empowerment and tech-enabled development.
All GPFI member countries look forward to more detailed discussions on the topics, as those are all critical issues that will contribute to realizing a more inclusive global economy.
Indeed, the global community's work in financial inclusion is far from complete. Much work must be done to advance financial inclusion, both by each economy and collectively. Of course, it is certainly not impossible to do, especially considering what has been achieved by the GPFI this year under Indonesia's G20 Presidency.
Adi Budiarso is the head of the Center for Financial Sector Policy, Fiscal Policy Agency at the Ministry of Finance. Yunita Resmi Sari is the executive director of MSME Development and Consumer Protection at Bank Indonesia. Opinions are personal and do not reflect the opinions or policies of the institution where the authors work.