Inclusive Finance: A Path to the MDGs Luncheon

Hillary Rodham Clinton
Secretary of State
Hemsley Hotel
New York City
September 22, 2010

Well, it is a real pleasure to be here, and let me begin by thanking Princess Máxima for her leadership on this very important issue. And, Prime Minister, thank you for bringing together such a distinguished group. I also want to thank two members of our team, our Under Secretary Maria Otero and Assistant Secretary Jose Fernandez, for highlighting the importance of financial inclusion. And thanks especially to President Lobo of Honduras and Foreign Minister Martinez of El Salvador for joining me today and then meeting with all of you to launch an innovative initiative that will advance both financial inclusion and financing for development in their two countries. And we hope when we get it off the ground and operating, that it may well serve as a model for similar efforts elsewhere.


Because like so many of you, I see in my travels across the world that talent is universal, but opportunity is not. And we are here at this very important event to highlight one of the biggest obstacles to making the most of everyone’s talents and their hard work; namely, a financial system that leaves out some 3 billion people, many of them women, rural farmers, small business owners, people with disabilities, ethnic minorities. Most of us in the developed world take the financial system for granted, whether it’s easy access to credit or a safe place to deposit our money. But without a bank account, parents can’t save for a child’s education. Without loans, small farmers can’t buy fertilizer for the start of the growing season, and entrepreneurs can’t expand and grow their businesses. And when people cannot participate in the formal economy, they often are taken advantage of, they are often left without recourse, and the effects of that undermine their own ambitions and hopes for families, communities, and even countries.


But thanks to many of you in this room, and thanks especially to Her Highness for highlighting this important issue, we’re finally getting the attention on the role that financial inclusion should play in alleviating poverty and in improving economic opportunity. We are building on the lessons learned from the success of microfinance: the poor are actually credit-worthy; they are reliable and they can help drive development if given the chance. And they can, if we work with them, be part of growing the financial system.


Now, many countries and institutions have developed promising ideas. For example, by updating some of its banking regulations, Kenya’s Central Bank helped spark the expansion of the most successful mobile phone banking program in the world, giving 8 million low-income Kenyans the tools to begin saving and building that better life. Brazil now allows street-corner kiosks to process financial transactions, so that financial services are no longer confined to bricks-and-mortar banks in big cities. And the G-20 is studying ways to advance financial inclusion and will be making recommendations this November in Seoul.


Now, we in the Obama Administration have made financial inclusion a priority. Last year, President Obama announced a new Microfinance Growth Fund, which has committed more than $100 million to provide credit to individuals and small businesses, especially those run by women. Beyond that, we are encouraging partnerships to open up new opportunities for mobile banking. We are supporting innovations like secured-transaction reform, so that small businesses can use movable assets, like the tailor his sewing machine, or the farmer her tractor, as collateral for loans – something that is not permitted by a lot of formal banks throughout this hemisphere and elsewhere. We are also supporting consumer-protection efforts, so that we can protect the newly banked from becoming victims of predatory lending practices.


Now, each of these ideas is based on the principles that underlie our development work. First, the initiatives must be led by the countries that will benefit from them, because we believe that’s the only way you can get initiatives to become sustainable and really part of the fabric of a society’s economy. They also will bring together partners from a wide range of fields, because there’s a lot of expertise that is still too stove-piped; it’s not adequately shared across sectors. And they are designed to spur long-term economic growth.


The initiative that we are launching today is called BRIDGE, which stands for Building Remittance Investment for Development, Growth, and Entrepreneurship. BRIDGE is a partner between our development agency, USAID, our U.S. Overseas Private Investment Corporation, OPIC, and the Inter-American Development Bank. It demonstrates one of the benefits of actually bringing more people into the financial system. And it reflects the vision of President Lobo and President Funes of their countries and governments. In partnering with us on BRIDGE today, both leaders in Honduras and El Salvador have shown a commitment to advancing financial inclusion.


And here’s how it works. Every year, millions – actually, tens of millions – of people around the world leave home to find work. They settle in countries where they think they have a better economic future, then they begin sending money back home. And they send it to their families for all kinds of purposes. Now, if they send these remittances through the formal financial system, they create huge funding flows that are orders of magnitude larger than any development assistance we can dream of. By harnessing the potential of remittances, BRIDGE will make it easier for communities in El Salvador and Honduras to get the financing they need to build roads and bridges, for example, to support entrepreneurs, to make loans, to bring more people into the financial system.


Through BRIDGE and its in-country partners, local banks will be able to leverage their remittance flows. This is similar to what our banks do with the money we deposit in our accounts: They use it to make loans and raise capital, but it’s always there for you to take out if you need it.


With the leverage from remittances, the local banks will be able to get lower-cost, longer-term financing for investments in infrastructure projects and small businesses. Nothing changes for the people sending or receiving the remittances, and their money should never be at risk. But because the money is moving through the formal financial system, the local banks can use it to secure financing for development projects that will benefit entire communities.


This is one of the examples of the power of financial inclusion. But to make the most of that, we all have to contribute and stay committed. I have worked on financial inclusion for about 20 years, and I’m always trying to convince bankers in the formal banking system that poor people are actually good credit risks. We now have a lot of evidence of that. In fact, we have, some might argue, better evidence for poor people than rich people. (Laughter.)


So I would hope that we would start being creative about how to bank the unbanked. It is a win-win if it is pursued. Some bankers argue, oh, but the amounts are so small, the transactional costs are so great. But with technology and all that it brings, there certainly are ways of both expediting that and decreasing the costs.


So we are very excited about this partnership that the United States is announcing today with the governments and people of two of our neighbors, Honduras and of El Salvador. And I’d now like to introduce you to the president of Honduras, someone who has brought his country back to a very stable basis, who is working hard to bridge all of the development gaps that exist for the people of Honduras, and is very committed to the sustainable economic growth and therefore the greater opportunity for the Honduran people. Please join me in welcoming President Lobo. (Applause.)

PRN: 2010/1325