In 2010, based on a proposal from the G20, the International Association of Deposit Insurers (IADI) engaged in activities to strengthen the financial inclusion of the G20 as an international standards-setting body. IADI has established the Sub-Committee on Financial Inclusion and Innovation (FIIS) under the Research and Guidance Committee, which acts as a forum for deposit insurers around the world to promote the role of deposit insurance policy in the world. Global financial inclusion campaigns.
Financial inclusion means that all people and businesses can access and use financial products and services conveniently, in accordance with their needs and at reasonable costs, provided by financial institutions in a manner that is convenient and affordable and sustainable. In particular, it focuses on the poor, low-income people, small and medium enterprises, micro enterprises.
In Vietnam, in January 2020, the Government promulgated the "National Financial Inclusion Strategy to 2025, Orientation to 2030" which affirms: "Financial inclusion is that people and businesses have access to and use financial products and services conveniently, in accordance with their needs, at a reasonable cost, provided in a responsible and sustainable manner, with an emphasis on to the poor, low-income people, the disadvantaged, small and medium-sized enterprises, and micro enterprises”.
The overall objective of the Strategy is “all people and businesses can safely and conveniently access and use financial products and services that are suitable for their needs, at a reasonable cost, provided by financial institutions licensed to supply responsibly and sustainably”.
Among the 6 specific objectives of the Strategy, financial education is emphasized as playing a very important role: “Improving financial literacy for people and businesses, ensuring that all people and businesses have good financial knowledge, skills, attitudes and appropriate behavior in choosing and using financial products and services. Develop a financial consumer protection mechanism to ensure that consumers are fully informed and treated fairly. At the same time, the Government affirmed to "encourage microfinance organizations, programs and projects to participate in promoting financial education". Accordingly, the tasks and solutions for implementing the National Strategy on Financial Inclusion have specific content on financial education, improving financial knowledge and capacity, protecting financial consumers with specific actions to promote communication and education programs, disseminating financial knowledge for all people and businesses. Especially, for the group of pupils and students, the Government advocates "Integrating financial education content into the national general education curriculum".
The role of deposit insurance policy in financial inclusion
Assessing the relationship between deposit insurance policy and financial inclusion, on the basis of the Core Principles for the development of an effective deposit insurance system, FIIS stated that the role of IADI as well as other deposit insurers in the world includes tasks such as: public policy objectives on stabilizing the banking and financial system and protecting retail depositors; advancement, membership, coverage limit, funding, depositor awareness and processing. FIIS conducted a survey of deposit insurers and published the results in 2013, which outlined the actual implementation of deposit insurance operations related to financial inclusion of IADI member institutions.
First, the public policy goals of deposit insurers need to go hand in hand with promoting financial inclusion. It is about stabilizing the banking and financial system while developing initiatives for financial inclusion that strike the right balance between controlling risk and expanding financial services. The role of the deposit insurer will be most effective when it is specified in legal documents on banking safety, supervision and deposit insurance. Furthermore, there should be coordination between members of the Financial Safety Net and supervisory authorities. In fact, up to 60% of the 58 deposit insurers who responded to the FIIS survey said that the role of deposit insurers in financial inclusion programs is very limited, if any, it has not been formally prescribed in the Law and the documents under the Law. However, the contribution of the deposit insurance system to financial inclusion is still implicitly acknowledged through its small depositor protection function, given its limited deposit size.
In addition, it is necessary to strengthen the role of deposit insurers to protect small depositors. This is a task that should be seen as a public policy objective of the deposit insurer. Small depositors are often considered to be more restricted in terms of information than large and complex depositors, especially depositors at non-banking credit institutions and microfinance institutions. However, in some countries, such types of small-scale credit institutions have not yet participated in the deposit insurance, but most are microfinance institutions belonging to banks or bank credit unions. There are 18 countries accepting members as banking microfinance institutions, 24 accepting credit unions, 4 accepting non-banking microfinance institutions, 3 accepting credit unions that are non-bank, and 5 countries accept postal savings banks.
Some countries such as Mexico and Albania also said they are considering adding deposit insurance status for non-banking microfinance institutions, and considering setting limits and separate contributions for this type when participating in deposit insurance. Particularly in Turkey and Serbia, no form of deposit-receiving credit institution other than commercial banks is recognized.
Secondly, strengthen the promotion of financial inclusion initiatives and innovations for both traditional and modern banking, and the policy implications for the deposit insurer in that context. Most deposit insurers said that the process of modernizing the banking and finance industry is taking place strongly in banking and non-banking credit institutions, leading to an increase in electronic deposits on mobile, digital banking services, but depositors do not have much knowledge about these types. Many are concerned about the increased risk to deposit insurers brought about by these modern financial services and the need for specific regulations for such online and electronic deposits. According to the FIIS survey results, most deposit insurers already have complete and clear regulations on the type of insured deposits and some countries are considering revising the official regulations to accommodate changes in the deposit insurance and financial inclusion, especially in the European region. The US Federal Deposit Insurance Corporation (FDIC) applied a safe deposit account pilot program in 2011 for electronic transactions for debit cards, in partnership with partners such as Cities Group, Alliance Economic Inclusion (AEI) and Financial Opportunity Center (LISC) to connect services for depositors in non-banking institutions. Insurance for deposits through intermediaries is rare, and if so, is not formalized in Laws and Regulations.
Thirdly, it is necessary to raise awareness of depositors, especially depositors in rural and remote areas with underdeveloped conditions through communication activities on deposit insurance. This is an important category in the overall financial inclusion program. For example, the deposit insurer may conduct communication activities to educate depositors about insured deposit information, legal savings deposit transaction process, etc. The Armenian Deposit Insurance affirmed that the country's law provides for the comprehensive financial participation of the deposit insurer through the communication service - a mandatory task of the Armenian deposit insurer - in order to ensure that small-scale depositors have access to full understanding of safe deposit.
Up to 70% of deposit insurers implement public awareness programs with the main target audience being small depositors and households about the benefits of deposit insurance policies, including deposits in non-banking financial institutions. Communication programs are carried out through many media such as newspapers, online newspapers, public places, etc. and has proven effective in raising depositors' awareness of deposit insurance as well as safe and sound financial-banking activities in general. For example, the Philippine Deposit Insurance Corporation (PDIC) has coordinated with the Ministry of Education to implement a financial education project for high school students; coordinate with the Central Bank and a group of large commercial banks to organize the movement "Wise savers" for students and office workers. The Deposit Insurance Corporation of Japan (DICJ) in collaboration with the members of the Financial Safety Net organizes more than 20 training courses per year for the target public. Meanwhile, the Deposit Insurance of El Salvador has organized many free workshops for households; Deposit insurance of Zimbabwe promotes deposit insurance at trade and business fairs and Uruguay considers it part of the National Economic and Financial Education Campaign.
Fourthly, in terms of funding, the deposit insurer needs to have an adequate funding mechanism to ensure timely payment to depositors, including contingency funding mechanisms. In fact, the source of funding and the method of fee calculation vary depending on the characteristics of the country, the type of organization participating in the deposit insurance, especially the non-banking organization. Notably, the source of capital to pay for innovative forms of savings such as e-deposits (if any) does not exist or does not have a mechanism different from that of traditional savings deposits.
Lessons for Vietnam
Based on the recommendations of FIIS-IADI and the valuable experiences of international deposit insurers, some recommendations for the deposit insurer can be drawn as follows:
Financial inclusion performance should be evaluated on the basis of the accompanying Core Principles. From there, it is possible to identify and harmonize the contents related to financial inclusion such as innovative financial products and deposits, transaction methods or non-banking financial services for the poor, and regulations about deposit insurance.
DIV needs to continue the research and implement insurance for innovative financial products and services such as online deposits within the scope of the Law on Deposit Insurance in order to meet the deepening innovation of its operations in modern banking and finance, especially deposits of small and individual depositors. Research on amending and supplementing in detail regulations for online deposit, mobile phone deposit, etc. such as regulations on dossiers and procedures for paying insured deposits.
Focus on enhancing the role of deposit insurance policy communication with regard to the objective of financial inclusion. In the coming time, the DIV needs to actively coordinate with PCFs and microfinance institutions to organize more communication and policy dissemination programs to local people, especially in remote and isolated areas. Coordinating with the Ministry of Education and Training in implementing financial education in schools for pupils and students who are considered as future owners and potential depositors.
Review and evaluate the effectiveness of communication activities periodically through surveys on public awareness towards deposit insurance policies, thereby developing an appropriate communication strategy.
Share and learn from international experiences and best practices to develop and implement comprehensive financial and deposit insurance strategies of deposit insurers around the world, from mitigating risks due to various factors as a modern financial product and requires an increased insurance limit compared to traditional deposit forms.