For nearly two years, an international group of 17 specialists on the finance frontier have been connecting digital technologies to new sources of money for the faltering Sustainable Development Goals. On Aug. 26, they unveiled an ambitious report on what can be done when traditional pools of capital are broadened and deepened by including investments from even the smallest contributors.
The report, “People’s Money: Harnessing Digitalization to Finance a Sustainable Future,” is not small in the scope of its hopes:
“Digitalization allows many economic activities to go online: services to substitute for physical goods, small and medium-sized enterprises to access world markets, and materials to be more effectively tracked in order to be reused and recycled. Health and education services can be digitalized, with reduced costs. . . Infrastructure becomes smarter, from buildings that can use less energy and clean and recycle water, to transport systems that are more flexible and less polluting.”
Estimating that mobile access is available to a large number of the world’s 7.8 billion people — 1.9 billion of them children — the report notes that ubiquitous cellphone and Internet use has been paving the way for more innovative functions, “changing the way that we interact and live.”
The next step, the task force says, is that the “allocation of US$382 trillion of assets managed by financial institutions and channeled through today’s global financial and capital markets should be guided by citizens’ preferences. . . . The Task Force has focused on how digitalization can support financing that meets the priorities of the people it is intended to serve, by empowering them as savers, lenders, borrowers, investors, and taxpayers.”
United Nations Secretary-General António Guterres announced the formation of the task force in November 2018. He named as co-chairs Maria Ramos, a former chief executive of Absa Group Limited, a South African-based financial services company formerly part of Barclays international banking system; and Achim Steiner, administrator of the UN Development Program, or UNDP. The group had prepared a draft report within a year. The new, final report builds on that.
Apart from Steiner, only three other UN officials — Under Secretary-General Liu Zhenmin, head of the Department of Economic and Social Affairs; Phumzile Mlambo-Ngcuka, executive director of UN Women; and Henrietta Fore, her counterpart at Unicef — were part of the task force, which was composed mostly of financial and banking experts. Deputy Secretary-General Amina Mohammed, who led the process that created the SDGs and the reform of UN development structures, was not included.
Speaking at the release of the task force’s final report on Aug. 26, Guterres stressed the particularly critical Covid-19 moment now and the post-pandemic era to urge the embrace of digitalization faster.
He said that groups not served by traditional banking need to access digitalized financial innovation. “Currently, 3.6 billion people worldwide — including a disproportionate number of women — lack the resources and capabilities to take advantage of the digital world,” he added.
“Today’s report also highlights the importance of institutional arrangements to steer digital finance into alignment with the SDGs,” Guterres said.
“The continued dislocation between our collective commitment to the SDGs, and decision-making around public financing, cannot continue. Digitalization must democratize the governance of finance, in order to democratize finance itself,” he added. “Developing countries need and deserve a much greater role in formulating the policies and decisions that will impact their citizens.”
Collectively, UN member nations have been notoriously slow to act on the organization’s activities in cyberspace, according to Samir Sanbar. As the UN director of communications and information centers around the world when the Internet age was taking off, he recalled being denied funding by the General Assembly to create a UN website.
The task force on digitalization and the Sustainable Development Goals was well aware of potential barriers and risks in a digitalized world. On pages 38-40 of the full 118-page report, it lists numerous examples of both:
“Today, for example, 750 million people remain without physical access to a mobile or broadband network,” the report said. “Poor ICT infrastructure in less developed countries is often compounded by economic, educational or energy access limitations. Challenges such as basic mobile device ownership or high service costs caused by market distortions continue to exclude the poor in digital finance, as does lack of education or consistent access to reliable energy sources.
“In low and middle-income countries, women are 23 percent less likely than men to use the internet,” the task force found. “This gap is growing and is largest in the Least Developed Countries. . . . Women and girls are less likely to have the education, skills and confidence to participate in digital financing, largely due to poverty and cultural norms.
“The elderly, a growing segment of most populations, will face increasing challenges as the pace of technology-driven financial innovation accelerates,” the report noted.
Patrick Njoroge, governor of the Central Bank of Kenya, is a member of the digitalization task force with direct experience in Africa and Asia. He acknowledges that a “disruption” in banking systems worldwide, however welcome, needs monitoring for unwelcome side-effects.
Kenya has led in Africa and beyond (most recently in a joint project with the Monetary Authority of Singapore) in adopting financial technology on a large scale. Since 2006, Njoroge reports, the share of the Kenyan population with access to financial services has grown from 26 percent to more than 82 percent.
Writing for Project Syndicate, a few days before the launch of the UN task force report, he said that effective oversight was essential to success.
“When people gain access to finance for the first time, they are vulnerable to manipulation and exploitation,” he wrote. “This is especially true when it happens on a large scale, as market concentration increases the power of large digital-finance platforms, many of which already operate globally.
“Unless those platforms are subjected to adequate regulation and monitoring, the consequences will be dire, not only for individual users, but also for sustainable and inclusive economic growth. Developing economies would bear the brunt of these failures.”
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Barbara Crossette is the senior consulting editor and writer for PassBlue and the United Nations correspondent for The Nation. She is also a member of the Council on Foreign Relations. She has also contributed to the Oxford Handbook on the United Nations.
Previously, Crossette was the UN bureau chief for The New York Times from 1994 to 2001 and previously its chief correspondent in Southeast Asia and South Asia. She is the author of “So Close to Heaven: The Vanishing Buddhist Kingdoms of the Himalayas,” “The Great Hill Stations of Asia” and a Foreign Policy Association study, “India Changes Course,” in the Foreign Policy Association’s “Great Decisions 2015.”
Crossette won the George Polk award for her coverage in India of the assassination of Rajiv Gandhi in 1991 and the 2010 Shorenstein Prize for her writing on Asia.