How we work: Our three-part approach to advising on policy

 

Collaboration is the foundation of how we work with governments on their policy-making process.

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At the UNCDF Policy Accelerator, we work closely with our government counterparts to enrich their policy-making process and to support them in deciding what is best for their country.

Our three-part approach includes:

  1. Reviewing the policy and regulatory landscape in the country to identify regulatory enablers and inhibitors

  2. Comparing these to peer markets and best practice defined by international standards and Standard-setting Bodies (SSBs)

  3. Contextualizing some of the solutions to the socio-economic and political realities of the country

Our policy advice is guided by this process, and is focused on clear outcomes:

Different countries experience their own unique combination of regulatory inhibitors to leverage DFS. It takes a flexible approach — and a lot of listening — to match each market’s set of priorities and needs.

Here’s how we do it.

1. Assess the current market, policy and regulatory landscape

We start by conducting an in-depth review of the current landscape to identify what is working and what is not.

This exercise includes:

  • Reviewing the market as well as policy and regulatory landscape governing DFS in a country

  • Engaging with relevant stakeholders to ascertain what they perceive as challenges

  • Identifying key inhibitors — market or regulatory — that may be mitigated with government intervention

Sample scenario

Let’s suppose a problem at hand is onerous Know-Your-Customer (KYC) requirements to open a bank account or mobile money wallet that have kept a large percentage of the population from accessing financial services. In this case, we would review relevant national regulations and speak with relevant public and private sector entities to (i) validate if indeed our understanding of the problem is correct; and (ii) listen to the private and public sector stakeholders’ perspective on the role the government.

Put another way, through this process, we are trying to answer the question, “What role can the government play if it assumes a policy stance or introduces a policy or regulatory change in the market?”

2. Learn from other countries and Standard-setting Bodies (SSBs) 

Let’s turn to the second part of our approach: drawing lessons from how other peer markets have addressed a similar challenge or synthesizing guidance provided by international standards-setting bodies.

Peer markets that we refer to are often countries that have similar demographics or socio-economic composition. This list of countries may also include specific countries that have set good or bad examples in how they’ve handled similar challenges. We also seek guidance from Standard-setting Bodies on resolution of the challenges at hand. For example, Financial Action Task Force (FATF-GAFI) is our go-to SSB for issues related to Anti-money Laundering/Counterterrorism Funding  (AML/CFT) and Know-Your-Customer (KYC) requirements.  

This step is important, but not an absolute must. Sometimes national challenges are so unique that they require their own specific “out of the box” solutions. And we are always up for the challenge. 

3. Develop customized policy and regulatory options  

Whether we borrow lessons from peer markets and international best practice or develop a tailored set of options, we review key insights drawn from our findings and make a list of policy options that would help mitigate the challenge at hand.

But we recognize not all solutions have merit. Some align with the country’s national priorities while others may not. To carry out this critical assessment and streamline our policy objectives, first we refer to CGAP’s Financial Inclusion, Stability, Integrity and Protection (I-SIP) Toolkit to understand the synergies and trade-offs that each of these policy options may have on a country’s objectives of financial inclusion, financial sector integrity and stability and consumer protection.  

For example, a country may feel that pushing for a tiered KYC requirement for financial accounts to promote financial inclusion may lead to a trade-off with the government’s goal of maintaining financial sector integrity. However, this trade-off can be mitigated if tiered KYC is introduced with limits applied to account balances. It is our job to conduct such an analysis and provide the government with clarity on what these synergies and trade-offs may be so that they may make an informed decision.

We work with governments for as long as it takes for them to determine which policy options that we provide are adopted.

Final thoughts (and metaphors)

To use a metaphor of a locked door, we help governments identify why the door is locked, check the existing trove of keys to find one that matches or cut a set of new keys.

It is ultimately for the government to decide which key they will use to unlock the potential of digital financial services and set them on the pathway to achieving their financial inclusion objectives.



Authors

Seharish Gillani

Alexis Ditkowsky

 
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Mauritania’s journey towards increased financial inclusion

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