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When it comes to growing a healthy economy, there are two things that really matter: financial inclusion and sustainability. Financial inclusion means making sure that everyone, from individuals to businesses, has access to important financial services such as credit, insurance and savings. Sustainability, on the other hand, means finding ways to grow and develop the economy without harming the planet and its resources for future generations.

Innovative technologies in the finance sector have the power to drive inclusive and sustainable development, according to recent studies. By creating new financial products and services that are tailored to the needs of underserved populations, financial institutions can help to promote economic growth and social inclusion, while also addressing environmental challenges.

Impact investing

One example of financial innovation is the rise of impact investing, which involves investing in companies and organisations that have a positive social or environmental impact. Impact investing has grown significantly in recent years, with assets under management reaching roughly $715bn in 2020, according to the Global Impact Investing Network. Impact investing can help to address a range of social and environmental challenges, from climate change and poverty to healthcare and education.

Mobile banking and digital wallets

In addition to impact investing, there are a number of other financial innovations that can promote inclusive and sustainable development. For example, digital financial services, such as mobile banking and digital wallets, can help to increase financial inclusion by providing access to financial services to those who are unbanked or underbanked. According to a report by the McKinsey Global Institute, digital financial services have the potential to add $3.7trn to the gross domestic product of emerging economies, while also creating 95 million jobs across all sectors.

Green finance

Another example of financial innovation is green finance, which involves investing in environmentally sustainable projects and businesses. Green finance has grown rapidly in recent years, with global green bond issuance reaching a record $269.5bn in 2020, according to the Climate Bonds Initiative. Green finance can help to address climate change and other environmental challenges, while also promoting economic growth and job creation.

Credit rating agencies

Credit rating agencies can also help in the advancement of financial inclusion and sustainability by ensuring that underserved communities have access to the financial products and services they need to thrive, and at the same time by promoting transparency, accountability and market efficiency. Investors are thus able to make informed decisions about where to allocate their capital.

In the Arab region, the establishment of a rating agency represents an important step towards economic growth and progress. This agency would be specifically designed to take into account the unique characteristics of the region, including cultural, political and economic factors. Having a rating agency that is tailored to the Arab region would help to ensure that the rating process is more culturally sensitive and attuned to the specific needs and concerns of the region, which could help to promote greater trust and confidence among investors.

Opportunities for further growth

Despite the potential of financial innovation to promote inclusive and sustainable development, there are still challenges that need to be addressed. For example, there is a need to ensure that financial innovations are accessible to all, including low-income and marginalised communities. In addition, there is a need to ensure that financial innovations are sustainable over the long term, and do not have negative social or environmental impacts.

Overall, financial innovation has the potential to play a key role in promoting inclusive and sustainable development. As the world faces a range of economic, social and environmental challenges, financial innovation will be increasingly important in driving positive change for all.

The 12th Annual Investment Meeting has partnered with the Union of Arab Banks to host the first edition of the “Future Finance Forum,” slated on 10 May 2023 in Abu Dhabi, United Arab Emirates under the theme “Leveraging Innovative Technologies for Financial Inclusion and Sustainability.” With 11 engaging topics lined up on its agenda, the Future Finance Forum will provide a platform for stakeholders from government, industry, civil society, and academia to engage in a comprehensive examination of the trends and challenges shaping the future of finance.

Register at the Annual Investment Meeting here using the discount code AIMGLOBALDATA20.