GENEVA — (Marketwire) — 03/15/12 — Governments throughout the developing world can use mobile financial services, not only to advance financial inclusion, but also to deliver significant efficiencies and cost savings, says a new World Economic Forum report. Developed in collaboration with The Boston Consulting Group (BCG), “Galvanizing Support: The Role of Government in Advancing Adoption of Mobile Financial Services,” follows the publication of the “Mobile Financial Services Development Report 2011.”
Despite the broad recognition that mobile financial services can serve as a means for financial inclusion on a global basis, wide scale adoption has yet to be achieved. One of the primary reasons is the absence of a champion who can coordinate activities across various actors and ensure an integrated approach. The report identifies government as a key enabler and highlights key steps and strategies that it can undertake to enable a mobile financial services ecosystem — strategies that can help governments reduce costs, mitigate risks, and begin harnessing the many benefits of connecting individuals to the formal economy.
The report shows that within emerging economies, government disbursements account for roughly $1 trillion per year. However, an estimated 20 percent of those funds, or $ 200 billion, fail to reach the intended recipients owing to mismanagement, fraud, or corruption. With its ability to act as a secure, authenticated, reliable, and personalized delivery platform, mobile finance can significantly help minimize those leakages, thereby leading to significant efficiencies and cost savings for government. Redirecting just a sliver of these “lost funds” back to their intended recipients could result in billions of dollars being saved.
“Mobile financial services represent a fundamentally transformational opportunity to connect billions of people to the formal economy,” said William Hoffman, head of the Telecommunications Industry, World Economic Forum USA. “A renewed commitment by all stakeholders to not only discuss the potential of mobile financial services but to actually use them is needed to ensure that the promise of this opportunity is realized.”
Across various stages of the development cycle of mobile financial services — during its formative stages as an enabler and later as a participant — government can help promote critical activities:
As an enabler, it can facilitate creation of a secure framework for personal data, implement a balanced regulatory framework, make adjustments while launching new initiatives, and carefully manage its evolution.
As a participant, once mobile financial services scale up, it can make use of them for government disbursements to create efficiencies for welfare programs and for salaries paid to government employees who do not have bank accounts.
“Governments in the developing world have a huge opportunity on their hands. However, it needs dedicated focus from government and private sector alike. A few countries, like India, for example, have started taking steps to enable the full potential of mobile financial services, but there is still a long way to go,” said Neeraj Aggarwal, a New Delhi-based partner at BCG. “These first experiments can provide significant lessons, not only for India but also for other developing economies.”
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The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and headquartered in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests.
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