10 Dec 2019
Green Finance and the Unbanked Add Interest to Asia Fintech Festival
- Photo: Fintech: Will virtual finance see the handset replace the high street bank branch? (Shutterstock.com)
- Photo: Cyber-cash flows and digital deposit systems enjoy star-billing in Singapore.
- Photo: Innovative India: Will a new generation of apps replace the rupee?
- Photo: The 2019 Singapore Fintech Festival: Big change for small change.
Is it possible to grow the global economy through sustainable green financing and are the world's formerly unbanked now set to trigger a mini-boom? Yes, well at least according to attendees at this year's Singapore Fintech Festival.
Apart from the usual focus on financial inclusion – or banking the unbanked, as it's more conversationally known – and new tools and apps for enhancing the flow of money, this year's Singapore Fintech Festival had one overarching theme: Green Financing. Striking an appropriate note from the off was Ong Ye Kung, Singapore's Minister for Education, who maintained the city-state was best able to combat climate change by flexing its financial muscles.
Outlining his strategy as part of his keynote address, he said: "Our ambition is to leverage green finance as a way of making the world greener. Finance fuels business and the wider economy. It determines investment decisions. It drives action. We must adopt green finance as a way of driving climate action and as a means of mitigating and adapting to climate change. As one of the world's leading international financial centres, Singapore will do the right thing when it comes to reducing carbon emissions and promoting sustainable development on a global basis."
Acknowledging both the need for a fundamental shift in the energy mix and the importance of maintaining economic growth, the Minister issued a clear challenge, saying: "We must dare to believe that we can deliver sustainable growth. This, however, will require something of a quantum leap when it comes to improving energy efficiency and shifting the energy mix, including prioritising investing in renewable energy.
"Finance, innovation and technology can be a force for good, helping to overcome challenges and improve lives. Countering climate change, of course, is the ultimate challenge. It's not conceivable that you can't both adopt a green agenda and pursue growth. Through the apt deployment of imagination, innovation, technology and determination, the two objectives can be reconciled."
Keen to ensure that his keynote address was more than high-minded rhetoric, the Minister detailed a number of specific measures the Singapore government was now committed to, saying: "In the very near future, the Monetary Authority of Singapore [MAS] will launch a US$2billion Green Investments Programme, which will allocate funds to investment strategies that have a decidedly green focus, all under the auspices of asset managers with a genuine commitment to climate-friendly finance initiatives. The MAS will also allocate $100 million to the Bank for International Settlements' Green Bond Fund."
Next up – and similarly evangelical when it came to those currently unbanked – was Queen Máxima of the Netherlands, the UN Secretary-General's Special Advocate for Inclusive Finance for Development. Highlighting the need for financial inclusion, she said: "Today, almost 70% of all adults have a financial account, an increase of 1.2 billion adults over the course of the past eight years. Financial inclusion matters because it improves people's lives. Rather than being an end in itself, it's a means to create jobs, to participate in the increasingly digital economy, to hedge against risks, to improve development outcomes, to empower women and to enhance the financial well-being of all concerned."
While acknowledging that great progress had already been made, Queen Máxima emphasised the need to persist, with a substantial proportion of the world's most economically disadvantaged people still lacking access to the most basic financial services. Expanding upon this, she said: "There are still 1.7 billion adults currently unbanked, while many more do have some kind of access, but not to the kind of products and services that meet their needs.
"There are now 272 active mobile money providers across 90 countries, serving almost 900 million registered users, which is great. Usage of these services, however, is still very low. In fact, two out of every three mobile money accounts are inactive or dormant, with the number of active users of saving and borrowing facilities having plateaued. This basically tells you all you need to know about the quality of these products."
Looking at problems in the wider financial system, meanwhile, Anshu Jain, President of Cantor Fitzgerald, a New York-headquartered institutional equity specialist, said: "Some $14 trillion dollars of debt has gone negative, a ton more are near zero, while a trillion dollars of corporate debt is also negative. Basically, the hunt for yield is driving investors further and further afield, pushing deeper and deeper into private equity, to the tune – currently – of about $3.5 trillion.
"This year, the queue of tech IPOs is 30% or 40% higher than last year. Let's face it, these companies are not as foundationally transformative as, say, Google or Facebook. Overvalued companies post-IPO are down 30% or 40%."
Regardless of his cautionary view of the general financial landscape, Jain remained upbeat about one emerging economy in particular – India. Outlining just what had inspired such confidence, he said: "There's a very interesting coalescence of government policy underway, with the combination of a universal ID system and new payment interface set to handle a billion transactions a month. There are also huge business opportunities for hundreds of virtual banks to help bank the unbanked. Add in to that the prospect of 800 million smartphones and a population where 40% are 28 or younger and it's clear that India is heading for very interesting times."
For Joop Wijn, Chief Strategy and Risk Officer for Adyen, an Amsterdam-headquartered payment company, it was the plethora of new players in the market that the established banking sector needed to be on their guard against. Detailing his concerns, he said: "Fintech players are certain to continue winning market share from the traditional sector, largely because they are focusing their innovation on the particular needs / experiences of prospective customers, rather than rigidly sticking to an established product-oriented hierarchy.
"Traditional banks will even lose out in the battle for the offline world due to their lack of innovation. For banks, handling payments is capital intensive and they would rather focus on more lucrative opportunities."
The 2019 edition of the Singapore Fintech Festival took place from 11-15 November at the Singapore Expo.
Ronald Hee, Special Correspondent, Singapore