APEC and financial exclusion: missed opportunities for collective action?

The Asia-Pacific Economic Cooperation (APEC) has recently recognized the phenomenon of “financial exclusion” in its member economies, in consequence of a realization of the need to deal with the “losers” in the globalization process. With leadership from Mexico in 2002, APEC considered the merits of “microbanking” as a remedy for financial exclusion. With a number of member economies preferring to deal with financial exclusion as a “development” issue, rather than as a general condition in all APEC economies, APEC appears to have settled upon “microfinance”, rather than microbanking, as the solution to financial exclusion. This paper examines financial exclusion as a generalized problem applicable to all APEC economies. It notes that, in all APEC economies, significant population subgroups are excluded from access to the services of formal financial institutions. It argues that providing such access would bring economic benefits, both in terms of aggregate economic efficiency and of interpersonal equity and equity between households. The paper examines the distinction between microbanking and microfinance, concluding that the latter is a subset of the former and primarily applicable to the developing economies, rather than representing a solution to the generalized problem of financial exclusion. The paper provides an overview of the different forms that microfinance has taken in APEC economies, including Australia. It also reviews the adequacy of the APEC process to discuss financial exclusion effectively.