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18 July, 2016

Financial inclusion: a right, or a privilege?

Jaime González Aguadé, President of the National Banking and Securities Commission, and Enno Schmidt, MD of the Enterprise Economy & Art presented their methods of using finance as a tool for empowerment. They were addressing the CAUX TIGE 2016 Conference on the 8 July 2016.

Both speakers argued that an inclusive financial system was necessary to ensure an economy which respected human dignity and the right to determine one’s life path. However, their proposals for what this would look like were radically different. Aguadé presented a cash transfer system backed up by financial education and infrastructure, while Schmidt called for a universal basic income.

Jaime González AguadéAguadé’s (above) presentation was grounded in his experience working with conditional cash transfers in Mexico, a country with impressive economic growth but persistently high levels of corruption and inequality. According to Aguadé, the ‘one size fits all’ regulatory environment created by advanced economies has had negative effects on emerging markets and developing countries, whose financial systems differ from those in the developed world.

Under his stewardship, Mexico implemented a cash transfer programme by which seven million Mexicans who met certain conditions have been integrated into the financial system through a debit card and financial education. The aim is for recipients to build up a credit history and financial record with the tools needed for responsible financial independence.

A video interviewing beneficiaries portrayed the scheme as being highly efficient – ‘It never takes more than a few minutes to get my subsidy,’ says one interviewee. A fingerprinting system ensures that the right person receives their subsidy, and the attendant monitoring the process is a member of the community.

Still, there is work to be done before the scheme achieves its full potential, says Aguadé. Financial education and infrastructure is still lacking. The Banking and Securities Commission must strengthen regulation, collect data, and form a Secretariat of the National Council for Financial Inclusion to ensure the programme is effective.

Enno SchmidtEnno Schmidt’s (above) proposal is different. For him, the right to income should not be conditional on work or certain behaviours. ‘Basic income represents a step in history that is a new understanding of an income,’ he says. ‘You don’t have to deliver a performance to get the right to live – first you have to live, and then you decide what you want to do.’

For the founder of an initiative for financial inclusion, Schmidt has an unusual background: a professional artist, he steered clear of economics and politics until he discovered money creation and basic income, and started a People’s Initiative for a vote on the idea in his home country of Switzerland. ‘Anyone can do it here,’ he says, ‘that’s direct democracy!’ and do it he did: in 2016, he and a partner gathered 100,000 signatures necessary to bring the concept to a national referendum. It did not pass, but nevertheless garnered nearly 600,000 votes, placing a concept as yet unheard of in Swiss politics on the agenda.

Still, opposition to the idea is strong. Schmidt cited polls which stated that although the majority of people are certain they would continue to work when receiving a basic income, the same proportion believe that others would not. He calls this a ‘cultural problem’: a lack of awareness of the needs, habits, and ambitions of others.

However, their scepticism may be proven wrong: basic income projects have been piloted in the US, India, Namibia and others; the movement continues to grow.

By Victoria Waldersee

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