Speech
Reshaping financial markets to make them more relevant to the poorest of the poor, Stockholm 20 August 2010
Mats Odell, Minister for Local Government and Financial Markets

Reshaping financial markets to make them more relevant to the poorest of the poor

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It is a true privilege for me to be here today and welcome all of you to this seminar: Reshaping financial markets to make them more relevant to the poorest of the poor.

This is a day when we, apart from gaining insights in access to finance, will discuss fundamental issues such as human rights, creativity and democracy. But, just as important, we will meet colleagues and friends from positions and countries that we may never have met before. Present here today are participants from very different parts of societies.

Innovative slum dwellers, experienced policy makers and financial investors often co exist, but in different circles. I believe that what we will discover here today is that we do share common values and interests. I would like to share with you my view of these shared interests, and how I believe that financial investors, policy makers and slum dwellers may create a better future by increased interaction.

Financial markets and transparent access to finance are important drivers of development. Well functioning financial markets are essential to business, trade and production. With increased access to finance, ideas can turn into products, services and homes.

Unfortunately, in most developing countries, finance is unaccesible to the greater part of entrepreneurs and households. Low and middle income earners have to rely on meager savings, their families, remittances or informal loans when creating a business our building a home. To borrow money formally in a developing country is cumbersome, expensive and it takes long time. This is mainly due to lack of financial infrastructures, high transaction costs, and the fact that formal institutions have no experiences in working with those who do not belong to the most fortunate of the society.

I believe that one of the most efficient ways to boost development and growth is to release creativity and entrepreneurship by increasing access to finance to low and middle income people. This can be done domestically by developing and supporting better financial infrastructure and good governance. Policy makers in a well functioning state can give incentives to the creation of transparent financial markets and institutions, promote rules, regulations and better infrastructure.

Unfortunately, the state is often not functioning well in developing countries. Therefore, international investors based on sound and transparent structures, may play an important role simply by investing. This will help developing countries to build financial markets, industries and to increase trade. It will also open up new markets and create new business opportunities. And it will create meaningful and globally sustainable investments.

In the aftermath of the financial crises it has become clear to most of us that creating a world based on greed and short term gains does not lead to sustainable development. We need to construct our future on less fragile building blocks. Financial markets and policy makers in richer countries who abandon their introvert perspective and passive relation with the rest of the world will also increase their own opportunities. No company, no dynasty, no country are able to create eternal success and wealth. To invest in developing countries and in people who at present have no access to finance will lead to the establishment of new markets. By opening up financial markets to middle and low income people in developing countries, better options will be created. Hence, there are economical opportunities waiting to be created.

But, there are not only economical opportunities waiting to be created. There are also values! There are words waiting to be filled with substance: Respect for human rights, dignity and democracy. In order to prove that we actually mean something when repeating these words (to prove that they are not only mentioned at conferences or domestically in richer countries) we need to cross boarders and support implementation of them practically and globally.

One way of filling the words with substance is to support initiatives taken locally around the globe. There are people who fight for their families, for their ideas and who create new projects and collaborations, but in a soil so meager that nothing grows. By simply facilitating financial expansion and investments in deprived areas the resourcefulness of the unbanked will open up new chances and virtuous circles. Most of us are capable of taking our own decisions, planning our own futures and grabbing our own opportunities, but there has to be an opportunity to grab. If politics, industry and investors trust the potential of people in poorer communities, then decisions will be taken and new prospects will open up. And these prospects will be based on the ideas and initiatives of local individuals and communities. To listen to and support people is a fine way of showing respect and it is one of the most important bases of democracy.

Finally, I want to emphasize that slum dwellers and poor communities around the world are able to give something back. Poor people invest, poor people pay back their loans and above all poor people need to be immensely creative and use all their skills to reinvent opportunities almost on a daily bases. This is an ability that is often lost in more prosperous areas and certainly in developed countries. I believe that policy makers and investors, some of us present here today, not only can seize the hand of a slum dweller and meet a potential business partner, but also someone who may inspire us and remind us about our creativity lost.

Investors and policymakers may provide increased access to finance and a broader respect for democracy and human rights. But in order to create dynamic societies we need vibrant entrepreneurs and creative inventers. These are qualities that slum dwellers can give back to the investors and to their societies.

To bank the unbanked is a way for investors to act in their self interest and enter into a new market, but it is also a way to let go of greed, to take responsibility and give words like globalization and democracy a true meaning. Not to use these opportunities would be an immense waste of future capacity and wealth - for all of us. Therefore, I urge you all to listen to each other.

Thank you for taking your time and for listening so attentively.