Toespraak van minister Ploumen bij de FMO Exchange on the Future of Banking

Toespraak | 29-09-2014

Ladies and gentlemen,

When we think of a better world, we often envisage a world without war. A world without hunger. A world without poverty. But I also see a world without unequal access to financial services. Bankers have come under heavy fire in recent years. And rightly so. But let’s face it: the world needs financial institutions. It’s only fair to say we wouldn’t get much done without you and your services.

Unfortunately, not everyone in the world has access to financial services. In fact, this is one of the main causes of inequality around the globe. Only last year, 1,500 experts from the World Economic Forum identified inequality and structural unemployment as one of the three main worries for world leaders. Inequality has become a pervasive global problem – evident in developing and developed economies. There are more and more poor people in middle-income countries. Yet despite robust macroeconomic growth, large segments of these countries’ populations are being left behind. Squeezed out of the middle classes into the clutches of poverty. Poor access to financial services plays a key role here. It’s not fair and it doesn’t make sense. Let me explain.

The vast majority of companies around the world are micro, small or medium-sized enterprises (SMEs). In fact, more than 95 per cent of all businesses fall into this category. Yet SMEs can often find it hard to get financing. Even here in the Netherlands. For some time, stricter credit rules have made it difficult for them to secure loans – especially small loans. In developing countries the situation is much worse. First, there’s less capital to share. And second, it’s more difficult to predict and monitor the risks. A company applying for a loan has to provide guarantees. But often there’s no collateral. And even if there is, the property rights are not properly defined. So the company is given a negative credit rating. What’s more, many SMEs in these countries are informal or unregistered. So there’s no basis for formal sources of financing and risk management.

That’s why it’s so important for development banks to be able to step in. Our host today, FMO, has been doing fantastic work for forty years now. Ten years ago it launched the MASSIF fund, which strengthens the capital position of local banks focusing on SMEs. Policymakers, central banks and governments worldwide have been paying close attention to these innovative developments. But there’s still a lot to be done. There are still 2.5 billion people without access to formal financial services. And there is still no proper financing solution for SMEs. The World Bank estimates that there are around 40 million small businesses in low- and middle-income countries with unmet financial needs of over 800 billion dollars. 

That doesn’t make sense. Because SMEs are the driving force behind a country’s economy. Being able to save and pay, and having access to insurance and credit makes low-income groups and small businesses more economically active and more self-reliant. Having a job is people’s chief means of escaping poverty. In most high-income countries, SMEs are the engine of employment, providing more than two-thirds of all jobs.

Looking at this audience I see financial leaders from around the world. Your institutions are pivotal to economic growth. They are the key link between savings and investment. I realise that eradicating world poverty is not your number-one priority. But I would encourage you to view SME financing from a different perspective. I believe that SMEs − often run by ambitious young men and women − offer very attractive investment opportunities. After all, they are innovative, their profits grow rapidly and they create jobs. It’s true that many of them don’t have collateral or a robust track record, and this makes them higher-risk. But risks can be mitigated if banks and government act together.

Last July I launched the Dutch Good Growth Fund, which stimulates investment in development-relevant local projects and exports. These are projects of both Dutch and local SMEs in emerging markets and developing countries. The Fund provides guarantees to banks and financing to SMEs that have no access to it. I want these risk-mitigating instruments to encourage you, as financial leaders, to give SMEs credit. The Dutch Good Growth Fund also creates partnerships between commercial banks, NGOs and government. These partnerships encourage the creation of alternative and innovative lending services – yet another way of giving SMEs easier access to credit. Programmes like the Dutch Good Growth Fund enable SMEs to undertake innovative and successful projects, and give commercial banks the opportunity to be part of, and even take over, profitable ventures.

For me, the future of banking involves exploring new activities, new ideas and new markets. Exploring alternative and innovative forms of finance, including new players and new products. I know innovation doesn’t happen by itself. So I’m pleased that the SME Innovation Award will be presented later today. One of the nominees is the Medical Credit Fund, which facilitates affordable quality healthcare services in Sub-Saharan Africa. The MCF reduces the unknown risks for local banks of investing in primary health care. In this way, the fund’s investments catalyse private sector investment. Initiatives like these are the future.

Let me conclude. I think that what some of you may see as risks are actually opportunities. Opportunities for SMEs and opportunities for you, the financial sector. Don’t lag behind but get ahead. Be pioneers. In the end we all benefit. Because inequality is in no one’s interests.

Thank you.