Unleashing the potential of digital finance could have transformational impact on sustainable development, according to a report from a taskforce convened by the United Nations’ secretary-general.
‘People’s Money: Harnessing Digitalisation to Finance a Sustainable Future’ sets out what its authors refer to as an ‘action agenda’ for policymakers aligned with the UN’s Sustainable Development Goals (SDGs). It says that COVID-19 presents a historic opportunity to harness accelerating digitalisation and ‘put citizens in control of finance’.
The report, published by the secretary-general’s taskforce on digital financing of the SDGs, cites the positive aspects of technological developments such as mobile payments that have ‘transformed mobile phones into financial tools for more than a billion people’. But it warns that harnessing digitalisation ‘for the good’ is a choice, not an inevitability driven by technology. Indeed it says that digital risks, if unmitigated, could ‘deepen exclusion, discrimination and inequalities’.
The report makes five proposals that align with the SDGs – the 17 goals, including ‘no poverty’, ‘zero hunger’ and gender equality, that were agreed in 2015 by the UN General Assembly, with the aim of achieving them by 2030.
Proposals in the 118-page report are for policymakers, organisations that govern finance and the private sector to: ‘align the vast pools flowing through global capital markets with the SDGs’; increase the ‘effectiveness and accountability’ of public finance; ‘channel digitally-aggregated domestic savings into long-term development finance’; inform citizens how to link their consumer spending with the SDGs; and ‘accelerate the lifeblood financing for small- and medium-sized businesses.’
Digital finance’s potential highlighted during COVID-19
The taskforce, which comprises 17 leaders from policy, regulation, finance, technology and international development, was set up almost two years ago by UN secretary-general António Guterres to ‘recommend and catalyse ways to harness digitalisation in accelerating financing of the SDGs’. Its work has been funded by the governments of Germany, Italy and Switzerland.
The report was launched by Guterres and the taskforce’s co-chairs, Achim Steiner and Mario Ramos.
“Digital finance’s dramatic potential for transformative impact is being revealed by the COVID-19 pandemic,” said Steiner. “Digital transfers enable governments to get support to people in need, crowdfunding platforms have mobilised funds for medical supplies and emergency relief, and algorithmic lending means small businesses have quicker access to funds.
“The speed of the recent spread of these technologies is astonishing, but progress is not automatic. For digitalisation to be a true force for delivering on the SDGs, technological advances must combine with sound policy that empowers citizens and enables our financial system to meet the urgent investment challenges that must be overcome to build forward better.”
Bangladesh, Africa and the Pacific provide examples
The report outlines a number of schemes that have been initiated in association with the taskforce that, it says, ‘exemplify ambitious action’.
These include Bangladesh exploring how to capitalise on digitalisation to channel domestic micro-savings into investments in sustainable infrastructure, and then use blockchain to improve the effectiveness and accountability in use of funds.
The report also cites M-Pesa, the mobile-phone-based money transfer service that has expanded from Kenya into other African nations and beyond, as a digital finance success story that has triggered innovation in its wake.
‘Launched into largely unprepared financial markets, governance arrangements and technological infrastructure, [M-Pesa’s] rapid success in itself catalysed the development of many new financial services and enabling rules and governance arrangements. Digital foundations, such as digital ID and even basic infrastructure, are not therefore always well developed in advance of such opportunities but are catalysed by their very presence. Developing countries, often unencumbered by legacy systems, can be agile at developing and encouraging innovation,’ the taskforce says.
On the same theme, the report says that regulatory sandboxes and innovation hubs should place more emphasis on the SDGs, citing the example of the Pacific Islands Sandbox.
The report is published alongside a four-page briefing for policymakers and regulators summarising what the taskforce sees as their role. These include taking actions to accelerate government digitalisation, in particular digitalisation of payments between citizens and government and vice versa, and driving more transparency, efficiency and accountability in public finance.