Financial Inclusion and Innovation in Africa: An Overview

Financial inclusion is gaining attention in African policy circles in view of the recent African growth renaissance, but which has been characterised as non-inclusive. While not conclusively documented in the literature, financial inclusion is viewed among the drivers of inclusive growth. This special issue takes a stock of the extent of, and the factors affecting financial inclusion; the role of cross-border banking in financial deepening and access across Africa and the impacts of financial innovation on access as well as monetary policy. While Africa's banking systems are still shallow relative to peers, substantial progress has been made over the past two decades both in terms of financial inclusion and financial innovation, as well as cross-border banking. While access to finance has improved, the evidence based on the Global Findex database points to substantial heterogeneity within sub-regions of Africa and demographic characteristics. The evidence also suggests that foreign banks from emerging markets, including Africa, have contributed to financial access, but the opposite is the case for foreign banks from Europe and USA. However, challenges remain, including the gap between financial deepening and financial inclusion

The Controversy over Proxy Voting: The Role of Asset Managers and Proxy Advisors

In this statement, we assess the role and power of proxy advisors and asset managers in corporate governance, an industry that is characterized by a limited number of voting advisory firms (ISS and Glass-Lewis), accompanied by the growing dominance of index investing in an industry with a few large asset managers, such as BlackRock, Vanguard, and State Street. We discuss the business model of proxy advisory firms and contrast its objectives with those of asset managers in the context of the informational screening/filtering role and voting analysis. This discussion concludes with a set of policy recommendations, such as: (a) requiring disclosure of advisory firms’ other businesses, (b) increasing the transparency of the business model of proxy advisory firms, particularly around the rationale for their general guidelines for voting recommendations, (c) ensuring that the regulatory burden on proxy advisory firms does not discourage entry, and (d) increasing the regulatory oversight of the voting process with a view to incorporating investor preferences in proxy voting

Improving access to banking: evidence from Kenya

We explore the relationship between bank branch expansion, financial inclusion and profitability for Equity Bank. Unlike traditional banks, including foreign and government owned banks in Kenya, Equity Bank targets less developed territories and less privileged households. Its presence increased financial inclusion by 31 percent of the adult population between 2006 and 2015, especially for Kenyans who were less educated, did not own their own home, and lived in lessdeveloped areas. The bank’s business model proves to be highly effective, with branch-level profits rising in areas with a smaller number of operating banks. Overall, the growth of Equity Bank demonstrates that financial inclusion can be achieved and sustained through profitable branching and service strategies that also serve the needs of underserved regions and populations. Thus, financial inclusion need not come at the sacrifice of bank profitability