The COVID-19 pandemic is not only a global health crisis, it is also an economic crisis – and has increased poverty and inequality across the globe. Over the past few months, we have seen income and job loss, particularly in the informal sector; a decline in global trade and tourism; and an increase in food insecurity.
Because lockdowns have restricted movement everywhere, digital services are more important than ever. The expansion of digital financial services during COVID-19 has not only eased the ability for individuals and companies to perform financial transactions from the comfort (and safety) of their own home, but also many more low-wage earners and SMEs who now have access to these types of services. Digital finance has also provided social safety nets, which has proven to be an incredibly crucial service with so many out of work and unable to keep up with their daily basis expenses.
As part of the UN’s COVID-19 Response, the United Nations Development Programme (UNDP) is leading on socio-economic response and recovery, and this takes an integrated look at the effects and longer-term threats of COVID-19, going beyond health response and humanitarian action. The UN’s Task Force on Digital Financing has highlighted many promising digital initiatives around the world – like in the Gambia where, together with local actors, they are advancing financial inclusion through building a more supportive policy environment and promoting private sector investment in citizen-centric fintech products and services.
In the SME space, Ant Group in China, in collaboration with 100+ banks across the country, has used blockchain technology to create the Contactless Loans initiative which support SMEs to more easily apply for loans to recover from Covid-19. Meanwhile, In Sierra Leone, the Ministry of Health has quickly launched a digital payment solution to pay essential health workers during the early days of the crisis. Many of these ‘emergency use’ solutions are already becoming the ‘new normal’.
As noted in the Task Force’s recently launched report “People’s Money: Harnessing Digitalization to Finance a Sustainable Future”, having access to a phone, bank account and digital ID is becoming ever more central to economic health – and for some, can be a matter life or death. This makes it critical to tackle challenges around inclusion and access at the start to ensure fintech solutions reduce rather than increase the digital divide. Also, cybersecurity and personal data protection and privacy are key as more people access financial services – and it is the poorest people who are most vulnerable.
We also need more international cooperation around governance, data flows and standards for digital finance, to ensure as many as possible can reap the benefits of digital finance. Here, the UN is supporting the Central Bank of Kenya to grow a regional digital financing ecosystem. And the UNDP Global Centre in Singapore is creating a programme with the Monetary Authority of Singapore to help expand the foundations for digital finance for good in several countries in Africa.
There is a great opportunity for us to make full use of digital finance tools and solutions as we tackle and recover from the effects of the pandemic. One way is through the Global Impact Partnership programme, together with partners at Copenhagen Fintech, Citi, and DBS Bank. Through this programme, we hope to bring Nordic fintech startups to Southeast Asia and help them scale, with the intent of boosting digital financial services and capabilities in countries in this region.
If you would like to work with us on our sustainable finance initiatives, drop us a line.
Director, UNDP Global Centre for Technology, Innovation and Sustainable Development