2024 APEC Economic Policy Report

Structural Reform andFinancial Inclusion APEC ECONOMIC POLICYREPORT 2024 Structural Reform andFinancial Inclusion APEC Economic Committee November 2024 Prepared or printed byAsia-Pacific Economic Cooperation Secretariat35 Heng Mui Keng Terrace, Singapore 119616Tel:(65) 6891 9600|Fax: (65) 6891 9690Email: info@apec.org|Website: www.apec.org © 2024APEC Secretariat APEC#224-EC-01.3 ISSN: 0218-9763 The views expressed in this paper are those of the authors and do not necessarilyrepresent those of APEC member economies. The terms ‘national’, ‘nation’ or ‘state’used in the text are for the purposes of this report and do not imply the political statusof any APEC member economy. Cover photo:Artisan woman who boosts the economy by Jose Alberto Sotomayor Jimenez/APEC Photo Contest 2024 PREFACE Financial inclusionisessential tosustainedeconomic growth.Itprovides access to financialservices such as savings, insurance andcredit services, whichhelp households grow wealthandsmooth consumption,while access to credit enables entrepreneurial activity andinvestment.Increasingaccess to financial servicesalone, however,is notsufficient; the fullbenefits offinancial inclusionare realised when these services are equitablymade available todifferent income groups. This year’s APEC Economic Policy Report(AEPR)discusses thecrucialtopic ofStructuralReform andFinancial Inclusion,addressing bothdemand-sideand supply-sideissuesthroughstructural reformstofacilitateall people to access and utilise financial services. The report highlightsthatfinancial inclusion should be a deliberate and deliberative process.Inclusion does not spontaneously happen; it needs to be built in from the start and activelyimplemented.Even as APECeconomieshaveexpanded access to financial services—forexample,morethan 8 in 10 people in the regionhavea financial or mobilemoney account—more can be done to ensure that these services are accessible to all people.Fromincentivisingfinancial sectorcompetitionand innovationtopromotingfinancial literacy andreasonableaccommodation practices,structural reform can play animportant role inexpanding equitableaccess to quality financial services for all people. This report was made possible through generous funding provided by Australiaand NewZealand. I would like to express mygratitudeto theAEPR 2024Core Teamco-lead byPeruand the United States, and supported byAustralia;Canada;Indonesia;Korea;New Zealand;Russia;Chinese Taipei; andThailand.I ampleasedto note that19APECEconomic Committee(EC)membereconomiesprovidedIndividual Economy Reports (IERs)forthis AEPR.Eleveneconomiesalsoprovidedcase studieson their financial inclusioninitiatives,all of whichgreatlycontributed to the AEPR.I would like to thank the APEC Secretariat’s ProgramDirectorfortheEC,AliceMcKenzie,forhervaluable advicethroughout the process and theAPEC Policy Support Unit (PSU) for managing the production of themain report.The AEPR2024was drafted by a team comprised ofEmmanuel A. San Andres,Glacer Niño A. Vasquez,Tess Perselayandateam atSvaraInstitutecomprisingMade Suardhini,Erica Pramesty andWiddi Mugijayani.This report has also benefited from the peer-review andinputs of themembers of the ECand the Asian Development Bank. ThisAEPR on Structural Reform andFinancial Inclusioncontributes to therealisationoftheEnhanced APEC Agenda on Structural Reform(EAASR)and the Putrajaya Vision 2040.Asthe EC’s flagship publication for 2024,this Report will serve as avaluabletoolkit foreconomies in promoting economic inclusion andI look forward tomembers’ initiatives toimplementtheReport’s recommendations. James DingChairAPEC Economic Committee TABLE OFCONTENTS PrefaceiList of figuresiiiList of tablesiiiList of boxesiiiKey abbreviationsivKey messagesv 1.The challenge of promoting financial inclusion in the APEC region...........................1 Structural reform and financial inclusion...............................................................................................................2Linking structural reform, financial inclusion and inclusive growth priorities.......................................................5APEC’s structural reform and financial inclusion efforts.......................................................................................7 2.Understanding the macroeconomic impact of financial inclusion...............................8 Financial inclusion and the economy......................................................................................................................8Financial inclusion in APEC: Data and empirical findings..................................................................................16 3.Leveraging financial inclusion to realise economic potential.....................................38 Challenges faced by groups with untapped economic potential...........................................................................38Empowering groups with untapped economic potential through financial inclusio