Video Script: How Improving Financial Systems Can Help Fight Global Poverty

Below is the complete script to the CFSP video titled, "Development Economics: How Improving Financial Systems Can Help Fight Global Poverty."

Today millions of individuals in developing countries lack access to basic financial services. They don’t even have a safe place to put their savings, or a convenient way to pay their bills. And borrowing presents a problem as well. Banks in many parts of the developing world simply do not offer products and services for poor households. Their customers are almost exclusively the rich and middle class, and their corporate clients are mostly large firms.

But when the poor are excluded from the mainstream financial system, the entire sector is smaller and less efficient. This hurts everyone. When poor people struggle to save, their lives are harder and many opportunities to build businesses and create jobs go unrealized.

But what if banks served their country’s entire population, instead of this small percentage of already affluent citizens? What if they created savings products that worked for everyone and made loans to large and to small businesses alike? This would help poor households and small firms, and it would help to ease poverty. This is how it can impact a country as a whole...

When the savings of the poor are moved from jars and mattresses into the formal financial sector, banks can make even more loans, including loans to small firms. Increasing the capacity for the financial sector to make loans means that more businesses can be created and grown. These new and expanded businesses will hire workers. These new jobs will help lift people out of poverty. This process, replicated on a large scale, can generate economic growth and in turn reduce poverty. However, this vision is not yet a reality.

This is where the Consortium on Financial Systems and Poverty comes in. Consortium members share this vision of inclusive financial systems that eliminate inefficiencies, promote growth and reduce poverty. The Consortium brings together researchers, policy makers and practitioners who are dedicated to connecting rigorous research to sound policymaking that can make this vision a reality.

Currently, a lot of research on how to eliminate poverty is specialized on just one part of the system: on households, on the financial sector or on firms and businesses. Others who work on ways to help the poor often specialize as well. They focus on particular products such as micro credit or mobile payments. This specialization can mean that we ignore the system as a whole and insights that rely on an understanding of the system as a whole go unrealized.

While members of the Consortium are experts in particular areas and methods within economics, they come together to share ideas and insights. The Consortium breaks down silos of thinking and considers the whole economic system. This allows the Consortium to build on the best ideas from many areas and combine them to deliver holistic policy recommendations. These policy recommendations will make the vision of an inclusive, efficient economic and financial system a reality, and deliver on the promise of helping poor households and small firms. And this, in turn, will create growth that helps everyone.

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