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RBF Takes Lead In Greening Economy

Reserve Bank of Fiji (RBF) and Alliance for Financial Inclusion (AFI) have joined forces in global green financial inclusion to help build resilience of the vulnerable and mitigate climate change
27 Nov 2018 11:00
RBF Takes Lead In  Greening Economy
Participants attending “Smart policies for green financial inclusion” conference, co-hosted by Reserve Bank of Fiji and Alliance for Financial inclusion at the Sheraton Fiji Resort & Spa on Denarau in Nadi on November 26, 2018. Photo: Reserve Bank of Fiji

Reserve Bank of Fiji (RBF) and Alliance for Financial Inclusion (AFI) have joined forces in global green financial inclusion to help build resilience of the vulnerable and mitigate climate change threats. Below are ex­cerpts of an interview with Alliance for Finan­cial Inclusion Executive Director Alfred Han­nig.

Mr Hannig is here attending the two-day Smart Policies for Green Financial conference at the Sheraton Fiji Resort on Denarau, Nadi.

The event, is co-hosted by the Reserve Bank of Fiji and the Alliance for Finance Inclusion un­der the theme “Securing Development Gains and Building Resilience”.

Why is Alliance for Financial Inclusion hold­ing its first green financial inclusion confer­ence in Fiji?

Fiji has held the presidency for COP23 from 2017 – 2018 and is playing a major role in global advo­cacy on tackling climate change. Reserve Bank of Fiji, AFI’s distinguished member, is passionate about the role financial inclusion plays in miti­gating and adapting to climate change.

RBF is championing policies that expand access to financial products and services for the un­banked, enabling Fiji’s most vulnerable popula­tions to become more resilient to adverse climate and consequently economic and social condi­tions.

In addition, Fiji and the Pacific region, have played an important role in the history of our Al­liance. Together with the Reserve Bank of Fiji, we have had important milestones for our Alli­ance:

Here in Nadi, we held our flagship event 2016 AFI Global Policy Forum (GPF), the only global gathering of financial inclusion policy makers. During this meeting, we launched the Denarau Action Plan on gender and women’s financial in­clusion, which is now embraced by our network.

n Our first regional initiative, PIRI – Pacific Islands Regional Initiative, previously known as the Pacific Islands Financial Inclusion Working Group (PIWG), was formed in 2009 at the request of the central banks of Fiji, Samoa, Solomon Is­lands, Vanuatu, Papua New Guinea, Timor Leste and Tonga. The ultimate goal of PIRI is to enable all low-income Pacific Islanders to have access to formal and informal financial services.

It seems natural for us to be here when we want to begin with a new segment or workstream in our network.

With Fiji’s COP23 Presidency, its global role in tackling climate change, along with the Reserve Bank of Fiji pioneering polices that have allowed the most vulnerable segments of society to be­come resilient to climate change shocks, as well as AFI’s history in this region, Fiji a great set­ting to start with discussions on green financial inclusion within and beyond our Alliance.

 

What is the goal of the confer­ence?

The conference is featuring pre­liminary findings of AFI’s research in financial inclusion and climate change, and taking stock of good policy examples within and beyond our Alliance.

We are launching AFI’s green fi­nancial inclusion workstream, along with recommendations on how to further integrate it into the network. The AFI green financial inclusion workstream is also part of the In­ternational Climate Initiative (IKI), supported by the German Federal Ministry for Environment, Nature Conservation and Nuclear Safety (BMU), based on the decision of the German Bundestag.

During the conference, the pan­elists are showcasing how financial inclusion policies can build resil­ience of the vulnerable populations and mitigate climate change threats.

The two-day event is also an im­portant milestone for us, following the Sharm El Sheikh Accord on Fi­nancial Inclusion, Climate Change and Green Finance adopted by the Alliance during the 2017 Global Policy Forum (GPF) in Egypt. AFI members that have been pioneers in implementing the Sharm El Sheikh Accord, such as the Reserve Bank of Fiji and the Bangladesh Bank, are featuring their work and practices at the conference.

With Fiji currently presiding over COP23 and leading advocacy in the region and globally, the conference is also focusing on the role of green fi­nancial inclusion in the wider global context of climate action.

What is the goal of the confer­ence?

The conference is featuring pre­liminary findings of AFI’s research in financial inclusion and climate change, and taking stock of good policy examples within and beyond our Alliance.

We are launching AFI’s green fi­nancial inclusion workstream, along with recommendations on how to further integrate it into the network.

The AFI green financial inclusion workstream is also part of the In­ternational Climate Initiative (IKI), supported by the German Federal Ministry for Environment, Nature Conservation and Nuclear Safety (BMU), based on the decision of the German Bundestag.

During the conference, the pan­elists are showcasing how financial inclusion policies can build resil­ience of the vulnerable populations and mitigate climate change threats.

The two-day event is also an im­portant milestone for us, following the Sharm El Sheikh Accord on Fi­nancial Inclusion, Climate Change and Green Finance adopted by the Alliance during the 2017 Global Policy Forum (GPF) in Egypt. AFI members that have been pioneers in implementing the Sharm El Sheikh Accord, such as the Reserve Bank of Fiji and the Bangladesh Bank, are featuring their work and practices at the conference.

With Fiji currently presiding over COP23 and leading advocacy in the region and globally, the conference is also focusing on the role of green fi­nancial inclusion in the wider global context of climate action.

Who is attending the conference?

The international two-day confer­ence is set to convene more than 70 participants from AFI member in­stitutions including central banks, and other financial sector regulators from emerging and developing coun­tries.

Participants also include distin­guished experts from relevant gov­ernment authorities, private sector participants, academia, and inter­national organizations such as In­novations for Poverty Action and Microinsurance Catastrophe Risk Organization (MiCRO).

Why should central banks care about green financial inclusion?

Climate change poses a risk to fi­nancial sector stability. Addressing climate change is is also about safe­guarding inclusive financial sector development. Both, financial sector stability and inclusive financial sec­tor development are at the core of central banks’ mandate.

So, how do we do that? There are two broad ways:

There is solid, scientific evidence that financial inclusion increases resilience of people to economic shocks. Climate change poses eco­nomic shocks, especially for the poor and vulnerable. By having them fi­nancially included they are much better equipped to deal with these shocks. There are many examples worldwide, where central banks have facilitated financial inclusion and the poor were much better able to deal with crisis triggered by cli­mate change. Thus, Central Banks can facilitate adaptation by increas­ing resilience.

Central Banks could use financial services as means to transition their countries to a green economy, mean­ing low carbon economy. They can make sure financial sector provides finances for low carbon alternatives and technologies and in that way lay foundations for green growth.

Poor countries have a choice. They can either opt for high carbon growth which will soon cause mas­sive problems for them, their regions and globally; or they can choose low carbon technologies and lay founda­tion for green growth, which is their interest and Central Banks can en­able that.

Central Banks have facilitated green growth by making finances available through various ways. In some countries, we have seen that Central Banks are requiring finan­cial institutions to incorporate en­vironmental considerations in their risk management. There are vari­ety of ways that Central Banks can encourage green growth, some are more interventionist, and some are more promotional.

What can policy makers specifi­cally do to help respond to and tackle climate change and lessen its impact?

We are currently conducting re­search across the AFI network. We are observing four broad types of measures that policy makers can take:

1 – Provision

2 – Promotion

3 – Protection

4 – Environmental Risk Manage­ment

Under Provision, some Central Banks make financing directly avail­able for renewable energy projects by providing refinancing facilities, mostly with subsidized interest rates that can be used by Banks to lend to renewable energy projects.

We also see that those refinancing facilities are used for reconstruction after climate change impact. Subsi­dized interest rates in lending facili­ties are offered to people affected by hurricanes or flooding to help the reconstruction efforts.

In some countries, we have seen that Central Banks require their fi­nancial institutions to provide cer­tain percentage of their loan port­folio to renewable energy projects, which is mandated lending, it is con­troversial, but it is done.

This is representing more of an in­terventionist policy.

With regards to Promotion, some of AFI members have chosen softer approach.

They try to encourage their finan­cial sector to provide these services.

Through moral suasion, they are sending a signal to the financial sec­tor that these services are a public good and encourage them to provide it. Few know how to do it, so the Central Banks also provide capac­ity building to the financial sector to enable them to provide green loans that can facilitate transition to green economy. We also see this in adapta­tion front.

For example, in Vanuatu, after the cyclone, the Central Bank lowered the reserve requirements for the financial sector to encourage lend­ing for reconstruction. They also reduced the base interest rate to en­courage banks to lend more because the assumption was that the lending would go to reconstruction efforts.

Therefore, the moral suasion, ca­pacity building, lowering reserve requirements and base interest rate fall into the promotion policy seg­ment.

We also see that Central Banks collect data on green lending and mirror it back to financial sector to provide transparent perspective, see how the sector is doing and encour­age more of it.

This is a supportive role central bank can play to encourage more fi­nance to green project

As part of Protection, we can see that governments world-wide are getting into the topic of climate im­pact insurance, with many countries trying to solve this issue.

It is a complex issue as generally national insurance companies do not want to take over the risk im­posed by climate change impact.

Various innovative ways are needed to make this work. Many are build­ing ways to make climate impact in­surance possible in their countries.

We also see that mobile money has enabled post disaster payments.

For example, after tropical cyclone Winston in Fiji, G2P payments were distributed through mobile money.

This ensured that people could get the payments fast and that distribu­tion process is more efficient.

We now see, that countries with mobile money and digital financial services are better prepared for fi­nancial post disaster response, com­pared to countries that do not have it.

Immediate financial aid can reach the population quicker and is made available faster.

When it comes to environmen­tal risk management, a few AFI member institutions have done it by incorporated environmental consid­eration in their credit risk assess­ment.

Usually credit risk assessment does not incorporate environmental risk and environmental risk is not priced into financial products.

This is a way to price environmen­tal considerations into the credit provided by financial sector, which should lead to more finance flows to green activities.

Feedback: maraia.vula@fijisun.com.fj

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