 Welcome to the Think Wider Webinar Series, News Perspectives on Domestic Revenue Mobilization. I'm Kunal Sender, Director of Year New Wider. This is the fifth edition of the Think Wider Webinar Series, New Perspectives in Domestic Revenue Mobilization, and the title of today's webinar is, Potential Domestic Savings in the Global South. Now we know that domestic financing plays a crucial role in the growth prospects of developing countries. One of the very important factors we have on economic growth is a country with higher domestic savings tend to experience higher economic growth than others. However, we see a large variation in savings rates across the world. For example, Sub-Saharan Africa's average savings rate in 2022 is 22% as compared to 30% in South Asia and 36% in East Asia. Clearly, this may have implications for economic growth in these regions. So how can we increase savings rates in developing countries, especially in Sub-Saharan Africa? What are the drivers of savings rates? And what are the instruments that evolve to policy makers to increase savings? What is the role of macroeconomic policy and financial reforms? How can we think of new sources of long-term capital for developing countries, especially in Sub-Saharan Africa? So we can try and address several of these questions in the next one hour, and we're going to bring together academia and policy makers, policy analysts in this discussion, and try to get a sense of the real challenges facing developing countries, increasing savings, and what we can do about it. So let's get started. And I'm going to introduce now the panelists in turn as we speak, and then I'm going to ask them to speak for about seven to eight minutes on a specific question and ask them, and then we're going to have time for about 30 minutes for question and answers. So let me introduce the panelists. So first we have Rose Ungugge, who is the Executive Director of the Kenya Institute for Public Policy Research and Analysis, Kipra in short, Kenya's leading think tank. She's involved in providing technical guidance, capacity building on policy and strategy formulation, the government of Kenya. Prior to joining Kipra, Rose was a senior advisor in the IMF. She's been a member of the Central Bank of Kenya, the Monetary Policy Committee, and she has vast teaching experience in the University of Nairobi School of Economics. Welcome, Rose, to the webinar. We also have Tobias Rasmussen, who's at the IMF and as a resident representative in Kenya, and where he's also been working also in many other countries in Africa and elsewhere. So he was a Mission Chief for Guinea-Bissau, and he's also worked in Ghana and Zambia. Tobias also worked in countries in the IMF's Asian, Middle Eastern, and Western Hemisphere European Departments. Welcome Tobias also to the webinar. And then third, we have Amir Labdoi, who's a Development Economist and Lecturer at the Product Economy of Development at SOAS, the University of London. Amir has worked before at the LSE as a Channing House Research Fellow. Thanks, Amir, for joining us in this webinar. We're expecting a fourth panelist, Juguna Undugu, who's a Cabinet Secretary of the National Treasury, the Economic Planning of Kenya. Dr. Undugu is before that, before he joined as Cabinet Secretary very recently in the National Treasury, he was the Executive Director of the African Economic Research Consortium based in Nairobi, and also held the position of the Government of Kenya Central Bank Governor from 2007 until March 2015. So I'm gonna ask now each of the panelists one question just to get started, and then we're gonna try and have further questions as we have in the Q&A. So my first question is to Rose. Rose, the question I have for you, and this is to link to the overall question with an answer in this webinar, is what are the drivers of savings in the developing world? What are the policies challenges in increasing savings, especially based on the Kenya experience? And what do you think are the instruments that policymakers can use to increase savings in the short to medium term? Over to you. So Rose, you can go ahead. Just a moment, we will, yeah. I think I'm okay now. Yes. Yeah, thank you. Thank you very much, Professor Kunal. I think the topic we are looking at today is very critical given that for any country to actually see economic growth, need to invest, and for them to invest, they need to mobilize resources. So I'll go quickly through some slides, try and bring out the key issues that I find in Kenya, and that they'll be responding to the questions that you have asked. So, okay. So the first thing that is motivating this one is to say that, as you have observed, the savings levels are very low. And if you try to compare where Kenya was in the 70s and where it is since mid 1990s, you'll notice that we are yet to get back to the levels of savings that we had before even we liberalized the market in 1991-92 period. So this has seen the savings gap actually increase. But over time, we have seen the government put up the various initiative to enhance savings. For example, in various development plans since the independence, the government has emphasized on saving culture. And in the recent long-term development agenda, that is the vision 2030, the expectation is that we'll grow our savings from about 15.6% of GDP. That is just before the vision 2030 implementation started to about, you can hear me? Oh, yes. Yeah, all right. Sorry, I seem like there's a fluctuation. Yeah, to about 26% in 2012-2013 and all that with a vision to reach at 29% by 2030. At the moment, we are very far behind even the 2006-03 levels of 15.6%. In addition, the government has really put a lot of effort in establishing channels to facilitate the savings, including the establishment of the NSSF for long-term savings. Commercial banks, including the National Bank and Cooperative Bank and others, a lot of reforms have also gone into the capital markets and other platforms have also been established. In addition, Kenya actually has gone through the liberalization process for the financial sector, but our interest rate policy has seen a reverse of, we saw one unattended in early 2000s and recently, of course, we had the interest rate stopping, which again has been reversed. Further is the commitment for the government to fiscal sustainability in the aim of mobilizing public savings. If we look at what has been happening in the space of savings channel, you'll notice that since 2006 to the current period, using the data that is collected from FinAXS, you'll notice that there has been a shift across the various sources. Say, for example, the post bank is going down, but there is a heavy increase in mobile money channel that is now being used. A lot of activity also for group and cameras is just social groups that are being used by various members of the society. But in addition, if the motivation to save is very diverse, there are those who are saving targeting to either buy a house, targeting to do ordinary things in the household, targeting to finance education, but there are also others that are saving actually to invest. For example, in the aperture input, as well as in other elements. Significant shock have hit the market. For example, if you look at the inflation element, you'll notice that in 1992 period, when we had a very sharp increase in inflation and also in 2007, these are critical points that you can see also the savings level responding to. And when you look at the deposit rate and the savings level, I tried to get colors, but they couldn't get, but this element here, I have the deposit rates. The deposit rates fell so sharply in 2002 with a new government coming in and the economic recovery strategy being implemented. It fell very sharply and at the same time, you can see also a decline in the savings rate, which has not been recovered since that time. Other developments that are important to note is the demographic dynamics. If you look at the population for Kenya, we have a very big population of zero to 17, over 50%, but over time, you'll notice that the youth entering the 18 to 34 blockage are actually increasing, which means that for us to move forward with enhancing the domestic savings, then we have to cater for that youth that is entering the work level. In terms of the deficit, as I've indicated, there's been an attempt to really tame the increase in the fiscal deficit, but of course, over time, we've seen that there are various demands that have come, especially with the new government structure, the devolution process, and other shocks that have hit the country since 2010. So in the analysis that we have done, looking at the private savings function and using the life cycle model, we tried to analyze the factors that are influencing savings behavior in the country. And what you see in red are those factors that are not significant, either in the short run or in the long term. And for this private savings framework, what you notice is that public or fiscal policy plays a key role in enhancing your private savings. Sharks, even from external sources, measured by the terms of trade, also have an implication as far as the savings are concerned in the long term. Although wealth is having a negative effect in the short term, that effect is not significant in the long run. Inflation is significant both in the short term and in the long term, but in the short run, there seem to be a lag of one with a positive and significant implication on savings. Per capita income, as usual, is a key factor in terms of enhancing a savings. And it's one of the areas that the government, even in the development plan, was trying to focus on seeing that the low income earners were not actually saving a lot. Deposit rates, this is giving us a negative effect in the short run, but in the long run, it's negative but not a significant aspect of how the income effects and the abstention effects playing a part is what is determining the sign for the deposit rates. Further is the age dependency ratio has a positive effect. And as you can see from the demographic dynamics that are in Kenya, you can actually tell where this is coming from. When we looked at the national savings framework, we had a very few factors that were influencing your savings. And of course, the national savings have other aspects in addition to the private savings, we have also the government savings. And the only factors that tended to be significant were the terms of trade, and of course inflation. And the financial development was giving us a negative sign. And age dependency was not significant. From this, the policy implications that you are drawing from it is one fiscal sustainability, given the implication that it has on the private savings. External shocks are very critical and seeing the implication that it has on the exchange rate as the path to savings through interest rates. Price stability to enhance enhancing price stability. And of course, for example, in Kenya, price stability is really determined by food inflation. And that would be the very core area that we need to work on to ensure that price stability is maintained. Quality and inclusive economic growth. It's not just having economic growth. What we found very significant is the per capita income. So enhancing per capita income means that we must have quality, inclusive economic growth. For the interest rate policy, this is crucial. And the reverse in the policy can themselves create uncertainty in the market. So trying to ensure that we sustain the interest rate policy gives certainty to the savers. Job creation to absorb the increasing youth category, as I've indicated, they are all shifting towards entering the labor market. And what we need is actually to sustain them with decent jobs so that they are able to enhance the savings. And of course, finally is looking at beyond the financial savings, the non-cash savings, given that sometimes the targeted savers, they don't, after they have put their savings and they have gotten their assets, they again start again with the targeting for savings. Because given seven million, thanks very much. Thank you, Rose. Actually, I mean, one of the important things you mentioned was on macrocomic stability and price stability. There's an open question that given the high inflation rates you're seeing in Africa and also obviously in other developing countries and also in developed countries, what does it mean for savings going forward? Given we know that inflation can be quite detrimental, high inflation can be quite detrimental to savings. I should also mention, I should have mentioned that earlier that the paper that you drew from in your presentation is on the UNU wider website. It's part of the project on the basic savings shortfall in developing countries, what can be done about it. It's already a wider working paper and we already have a link to the working paper in the chat. So you can, so others can take a look at the paper. It's a very important paper and it's very, very rich. Embrick analysis, definitely worth reading for those who are interested in this area. So I wanna move on to now, I think I've actually now seen Dr. Undugo online. And so actually, I have already introduced you Dr. Undugo because I thought I knew that you might be joining with late. So maybe I think it's important that we move on to you because the some of the implications that came from Rosengu's presentation, mobile money and so on is important for to understand that how important is that for overall savings, not only in Kenya but also of course in the African continent. So the question I had for you, if I can just jump into the question then is what is the role of FinTech in increasing savings in Kenya but also in Africa in Africa? What can Kenya's experience suggest the rest of Africa and what are the challenges on trying to use FinTech for mobilizing savings? Over to you Dr. Undugo. Thank you so much for joining us. Thank you so much. And let me say that I'm very happy to be this part of the program. And I'm sorry because I think my life has become difficult to plan. I kept on trying to defend this time but somewhat I was almost getting I had to chase people away from my office. I think Tobias is not in the same kind of problem or rules like I am in. Let me say this is a subject matter I really quite appreciate and like because I've come a long way with it since 2007. But in actual fact, what we introduced in 2007 has become very, very important. In fact, what we introduced although it is an embodiment of mobile phone financial services platform, it was actually a retail electronic payments platform. And which by the mere fact that is a retail electronic payments platform it talks to itself in a number of ways. Of course the first general conclusion everybody makes is that once you have a retail electronic payments system that is efficient and transparent and effective and also safe, it means that it opens it is going to be a game changer. And for me that is a very, very important concept especially in a world where you have segmented markets. If you have a product like that that can navigate across segments of the market that is actually a very, very important contribution to the whole ecosystem. But then moving further it's actually it creates what we call accessibility but most people don't realize how that solves many of the constraints when it increases accessibility. In Kenya of course the initial should I say achievement as Rosa just said is actually financial inclusion. But financial inclusion itself it was on the services bait. But within no time banks realize that oh here we have a technological platform that can actually help us manage micro accounts whether it's micro savers or micro depositors or even micro rendering. All those things went hand in hand and the developments are quite pervasive. And I'm very happy that I managed after a long struggle in my work to actually come up with a case study of M-Pesa. And I think I've shared it across and it's also in the ARC website which I think I liked a lot. And I made sure that I finalized it even after many years. But within it I've done, I've covered so many papers. But the most important thing is that the constraint, of course, one of those successes one success led to another. Let me give you a chronology of events. The payment system is working. It encourages banks to use that payments platform to actually introduce virtual savings account and virtual reading accounts. It allows us, it allows the banks also to correct credit score so that they can actually change the collateral technology. And finally, you find that then there is space for everyone to participate and even to use that system. Those benefits are quite clear. And for purposes of even that space it also brought in so many other actors in the service that you did not even need to go to look for those services. For example, e-government services work. In 2017, IMF came up with a volume that the title was digitization and the design of public finance. And one of the arguments was that one of the strong conclusions was that the digitization can actually lead to a new design of public finance. One, because even tax payments platforms can be developed but more importantly revenue administration would be very effective and minimize leakage. And for us that's a very important conclusion coming up. So essentially we've gone through that but because I also want to make sure that I save on time and maybe other issues. Let me say that banks developed that very fast but there were emerging issues. In one of my papers and even the case study I actually argue that we need to push this frontier forward. So let me present four points that would push the market. Which also if you flip the other side it would show that there were disadvantages or there are constraints in the market. The first thing is that if this is the game changer if the richer or turning payments is the game changer then it means that we have to widen the physical infrastructure of the fiber optics so that the telecoms can actually ride on that physical infrastructure and create the core infrastructure which is now M-Pesa which is riding on the physical infrastructure. Because no one should be left behind if this is the game changer then it means that we have to make sure that we have widespread connectivity. So connectivity becomes a solution for the future but it's also for countries or even in the same country where regions are not covered it becomes a major problem. So make sure that no one is left behind. The second thing is that I am one strong believer of development of markets but for us to develop the markets we also need to nudge the markets into the optimal path. We have to regulate that market and more importantly we have to protect that market. Most of the time markets fail to achieve the desired goals and especially when we come to savings for example we come to digital adding virtual savings in Kenya and because somehow somewhere we drop the ball. I'll give you an example. One of the things that we did was we were, I praised the whole idea of coming up with credits course generating credits course which could change the collateral technology. But all of a sudden another regulator who regulates betting digital, digital rending and digital betting cannot be good. There could be a strange bet for us was that most people could borrow they could borrow a virtually and go into digital betting. In the end they don't win the bets so essentially they accumulate debts and then the credits course instead of worsening they get into CRBS and they are blacklisted. So you can see that instead of using the credits course positively the CRB uses it as a binary tool. So in a sense it becomes quite problematic. That is something that is an institution of area problem. Let me move to the second problem. Now the second advantage. One of them is that most countries especially in Kenya we succeeded because we had an identity card or an identity number system. But we need to move on to an electronic ID system. An electronic ID identifier is going to secure the market. It's going to be a security to the market. That is something that is quite important. The third one which is an institution of area problem or it can be an institution of area problem it can be a constraint. It's actually thinking about the whole idea of how different payments because this is where most the Reddit telcos developed the idea. The first move advantage can be actually very good but success has its own pitfalls. So you found that especially in Kenya everybody gives the Kenyan example. There is a monopoly but it is a first move advantage. Why I say it's a pitfalls for success has its own pitfalls is that because of that success everybody wanted and PESA we pushed the dominant the first move into providing networks and solutions. In the end that physical infrastructure cannot be replicated by those that come later. It's so expensive to replicate. So in a sense you have to look at it in terms of an interoperability in a different sense. For me the advantage of interoperability across payment system is that it emerges the market and lowers the unit cost and then it means that it becomes sustainable. But for Kenya for example in one of the contributions that I've made recently is to say we need some recent arrangements of the physical infrastructure that can make it very, very efficient. That and maybe more importantly we have to defend ourselves against institutional failure problems in regulatory capacity. Regulatory capacity is very, very important. We want a regulator to know exactly where the constraints are and how to move the market to the next level. If we don't do that then obviously we get to a point where we fail. And when we fail it means that a crack of section of the market may not succeed. I think the issue and the comments worldwide is that we succeeded in Kenya especially coming up with a return on payments platform because the central bank is a regulator of banks and communication authority is a regulator of telcos came together and agreed and understood each other. But there will be an intertwine of other regulators who may not understand that space. And that is where problems can emerge. I've given you examples of digital ending and all that. So these are the issues. But then we come to the main subject matter. Having, if I say those are the issues then it means that we have to go back and say what about the savings themselves that FinTechs have really carried us they have carried us this far. It means also those savings must be dependent very much on how do we regulate institutions or how do we sustain those institutions that are carrying our savings. And the second things are those savings are supposed to also generate investments. And then we have to see the path from generating savings to investments and return on those investments are going to be commensurate. So I'm happy about where we have come from it's a good showcase but we have to watch in terms of an institutional failure problem that can actually constrain the achievement in this process. Those are the points I wanted to share which I believe that I've summarized them in a way that is coming up. But then also before I leave that, let me say finally I always support that the government should tax a booming sector because essentially that is how the government can generate the resources. But we have to be careful so that you don't kill the goose that drag the golden egg. When I wrote, there's a paper I developed and was published in Brookings and I argued that when you tax return electronic transactions or mobile financial services you have to be careful that you don't create a reaction that there is a thin line between the sensitivity of those small savers or small transactors when the tax itself creates a wedge. We have seen in Kenya for example in the recent months and the recent years maybe two, three years ago you find that there's more cash now than it was because essentially people are sensitive to the cost of transactions. So that is something that we should watch on and it's a pitfall that I'm seeing coming up. I do hope now that I'm here in this position we can reverse this so that I don't call it a disadvantage but I'm warning in fact the title of the Brookings paper was taxation of mobile phone based transactions and what should African countries run from the Kenyan case? When I wrote that paper the tax, the tax rate, the excise tax rate VAT on the transactions was 10%. It is now almost 20%. You can imagine the pitfalls. So that is some of the things that we should watch and it can actually produce some failure. So thank you very much and sorry for taking more time than was allocated to me and thank you very much for seeing everyone. Kunal, thank you very much. Thank you Dr. Umber actually it was very insightful and I think what you obviously make it's so important for policymakers that to bring about what we've seen in the Kenyan success story with our base and mobile phone transactions there are many other things you got to do including physical structure like fiber optics and so on and the regulatory environment has to be supportive of this. And I think that's something that I think could be something that is useful for other policy makers elsewhere in Africa and on tax session two I think it's a really important message that we're getting the taxation right of this particular sector. So we can come back to that in the Q&A but thank you so much again I should mention that your paper is online on our website and the UNU wider website. It's perhaps the most comprehensive review one has seen of FinTech in Africa. So absolutely essential reading for everyone and the link is then on the chat. So let's move on now to Tobias Rasmussen. Tobias I think follows very nicely from what you've heard from Rose and Guggy and Dr. Ndugo about issues around FinTech around reforms around macroeconomic policies. So I would like to ask you to speak on the role of macroeconomic policy probably defined in augmenting domestic savings in Africa and can financial reforms help in increasing savings rates? And it's so which type of reforms is the most effective because there's been quite a bit of debate about financial liberalization and having not necessarily a positive effect on savings in Africa. So I wanted to you to also reflect a little bit on this discussion of financial reforms and also macroeconomic policy over to you. Thank you, Konal and indeed honor and a pleasure to be here. I have a few slides. So let me try sharing my screen here. Okay, is that coming through? Yes. No? No, not yet. I think Anna might have your slides, right? In case you can't share it, Anna can possibly. So let me just try again. Sorry about this. Yeah, perfect. Thank you. Oh yeah. Yeah, so much of this actually follows up on what we already have heard from both Rose and from the CS. So here's a slide similar to what Rose was showing from the financial access survey in Kenya but more recent data showing the motivations. And I don't think this has changed so much over time but I think our important thing I would take from this is that there was a very large precautionary motive in savings in Kenya and I think in the region generally. So when we think about why households save important to keep in mind that it's not just for wealth accumulation, long-term savings it has a very significant element of precautionary savings, liquidity management, having some funds for an emergency, a medical emergency or simply just expenses that's perhaps lumped up. So I think that's an important thing to keep in mind when we're talking about savings. Then at the broader macro level, you spoke about this, Kumaran. I think where savings really are important is that link with investments. So this is really the old famous Feldstein-Horioca result that there is a correlation between savings and investment. If capital was entirely mobile, one might think that there would be no correlation, savings not necessarily influencing investment but in fact, we do see a significant correlation and that correlation is especially strong in low-income countries. So this is then linked to why we think that savings is important for investment and ultimately growth. The chart on the right shows savings rates across countries. We see that in Sub-Saharan Africa, actually overall savings rates not that different from high-income countries, but lower than middle-income countries. And I think some of those countries in Asia that you were also referring to, Kumar. But as Rose also had in one of her slides, we see that the savings rate in Kenya had fallen down below that regional average, recovered a little bit in the past few years, but it's still relatively low. So I think there is a lot to be said here for policies to boost savings generally, but perhaps particularly in Kenya. Although I would also just put in the caveat of what we think about in terms of savings, how we measure it matters. So in the concept of savings, you would not count, for example, spending that households use to educate their children. But in reality that is investment for the future. So in Kenya, it is certainly the case that many families use a very large share of their income on educating their children. So perhaps that Kenyan savings rate is not as low as it might appear. So some caveats to keep in mind there, I think. But on the question of policies to promote savings, so I would distinguish between policies at the macro level, which is very much about ensuring a stable favorable economic environment, I think consistent with the findings in Rosa's paper, things like low inflation, reducing the fiscal deficit. And I would put perhaps also the external, the current account deficit in the same category, policies to promote growth. But then also that link to the precautionary element of savings, social protection is really important. Here, I think there is an interesting example or policy innovation development in Kenya. New government is moving to significantly scale up the contribution rates to the national social security system. So that has the potential, I think to work on two levels that are important in relation to savings. One, increase overall savings in the economy and provide funds for investment that way. But also in as far as that social security system is also providing social protection, you're addressing some of those needs that people have that have caused them to engage in precautionary savings. But how that system is managed is of course also very important. Then the other category, financial reforms here, I think important to look for making an efficient and inclusive financial sector, many of the agenda items there that the CS spoke about, healthy competition, new products and in particular also the scope for expanding the reach of products, financial inclusion through microfinance, mobile banking services and all that. And then the regulatory environment, consumer protection all important to ensure that there is trust in the financial system. Now, as an example of the importance of some of these innovations in the area, I think also instructive to look at a slide that Rose also had, but without 2021, the use of savings by instrument in Kenya. And one thing that is really striking in this data is the columns at the bottom where you see bank financing shooting up from about 10% of savers using banks to save back a decade ago to 58% in 2021. And the growth there is really via these mobile platforms. It's what the CS was talking about the apps that people are able to use linked to bank accounts that are able to save easily. And policy also playing an important role there in 2021 following COVID, we saw the removal of some of the fees that applied for moving money between mobile money accounts and bank accounts. So reduced transaction costs and this presumably has contributed importantly to that surge we saw in the use of bank savings. You also see in this chart savings on mobile money platforms themselves. These are the digital wallets. So that is an important part of savings, not growing as much, but it's been there for a decade or so. These savings are not earning interest. So they're very convenient to use, but they don't have the capacity to renumerate savings in the same way as the bank products do. So overall, I think a lot of role for policies to stimulate innovation, encourage use of savings through these new technologies. And we've seen in Kenya how this really can change the landscape overall savings, the percentage of people that are saving has really increased over time. And I think mobile technologies and the regulatory environment surrounding that has really been important. So let me end there and thank you. Thank you, Tobias. I think one important issue that came up in your presentation, especially your final graph, was increasing use of banks for savings, which is really important I think because banks are a source of loanable funds for investment and that's what they're there for. And I think that's really interesting that we can see the shift over time, quite dramatically actually in Kenya, especially in the last couple of years. So let me move on now to Amir left doing and I'm going to ask Amir to speak about a particular question and issue that I think needs also a lot of attention, which is that in Africa we seem to have not too much availability of long-term capital. And if you look at capital markets, stock markets, they are underdeveloped and yet Africa needs long-term capital. And one of the ways it can do that is through sovereign wealth funds because Africa does have several sovereign wealth funds. And Amir, of course, has written a very nice paper with Presidonia Addison, which is now also on our website, which one again, one should take a look at. So Amir, I wanted to ask you therefore, the question that just, what I want to be opposed to you is can sovereign wealth funds be a source or long-term capital for development in Africa? And then related to that, what do African policymakers need to do to maximize the development potential of sovereign wealth funds? I mean, over to you, seven minutes if that's okay. We need some time for discussion. Thank you, Ganal and thanks for the invitation. It's very interesting to hear those different perspectives shared earlier in the hour. So to answer your question, obviously sovereign wealth funds have become a symbol of national success, but do they really contribute to national development goals, especially in Africa? And I guess the answer is yes, but they can, but their impact depends on a variety of factors and the devil is in the details. So to answer first regarding, their potential contribution to future development, we need to first look at the past, right? And what has been done to date was the track record. And this is exactly what we've done, as you mentioned with Tony Addison in our recent study for Unwider, looking at kind of assessing the impact of sovereign wealth funds and thinking about their future. And several insights or findings emerge. The first one is over the past 20 years, the track record of sovereign wealth funds in Africa is quite bleak, right? The capitalization of sovereign wealth funds in Africa has shrunk by two thirds since 2013, right? So now it's a total capitalization of about $50 billion compared to $170 billion in 2013. And that's the result of the end of the 2010 commodity supercycle and subsequent shock like the COVID-19 crisis where governments had for good reasons to draw savings from there, which led to dissavings. Most of the capital base of sovereign wealth funds in Africa come from commodities, mostly oil and gas, but also mining to a less extent. And that also brings the context of the climate crisis, right? And that's why it's particularly relevant to wonder about the role of sovereign wealth funds as we go into an ecological crisis because this impacts considerably the optimal ways to manage savings on the African continent. And that's because Africa depends to a large extent on agricultural exports, right? Which are particularly sensitive to fluctuations in temperature, in precipitation, which also, and same with fossil fuels, right? These are, they're highly at risk of the global transition where there would be considerable losses of income for fossil fuel exporters. Countries like Algeria, Angola, and Nigeria, which are highly dependent on them. So this really needs to, we really need to rethink, right? The optimal public savings of those commodities and how to use them to faster development. Now, the second part of the answer is that the impact of sovereign wealth funds for development, at least when we think about their future impact. And by the way, one reason why they remain relevant even if they've been historically funded, right? Financed by fossil fuels, right? Even in the context of a decriminalized world, it's expected that mining commodities, the prices will go up and several African countries are key producers of critical minerals. So it really brings back the relevance of sovereign wealth funds for those countries specifically. Then obviously the impact that they have on development depends on the type of sovereign wealth funds that we are talking about. There are different types of sovereign wealth funds and the three that are worth talking about today. The first ones are fiscal stabilization funds are to smoothen government spending. The second type are intergenerational funds and the third types are development funds. And the argument that we make with Tony is that even though fiscal stabilization funds are the most popular at the moment, especially in the African continent, fiscal stabilization and intergenerational funds, they're not very well suited to national development needs and they have high opportunity costs, which is why in the context of long-term structural transformation, it might be worth prioritizing development funds, including national development banks, even though they require strong governance mechanisms. Now I'll briefly mention perhaps the why we think that. Fiscal stabilization funds are basically they aim to provide a fiscal buffer in case of a shock, right? There, for example, that includes Algeria's ponder regulation under a set or Botswana's Pula fund. The issue is that for them to be able to cushion an external shock that needs to be large enough. And what we've seen across the African continent is that it's very unlikely that a fund can be a stabilization fund can be capitalized to the extent that will be effective in case of a massive external shock. And we've seen it with the COVID crisis where countries like where in Nigeria, the sovereign fund was just not equipped to deal with the shock of this magnitude. The other issue is that these have very high opportunity costs. That means that the funding they basically, they involve mostly the acquisition of financial assets like sovereign bonds, right? Which are highly liquid. And that means that less funds are freed up for domestic development projects. And the issue also is that the returns on those investments in liquid assets that are low yielding are typically three, four percent, right? The top of the class in Norwegian fund is about four to five. And that raises another question they have in context because of debt servicing, right? Many African countries face disfavorable terms when it comes to borrowing. And that means that, you know, many of them, the interest rates on debt is about, is higher than six percent, right? Some even pay interest rates that are higher than 10%. And that means that, you know, investing in those financial assets in the sovereign bonds bring back less money than the interest rate they have on debt servicing. So in some of those contexts, this is a very fiscally conservative argument that actually makes more sense to pay down national debts as opposed to invest in fiscal stabilization where you receive less returns. The second point on intergenerational funds is that, you know, the idea is that non-renewable resources don't belong only to the current generation but also to the future generations, right? So you save up for the future. However, there are several issues. The returns can be quite low on financial assets compared to the development projects. Development projects which can benefit current generation as well as future generations. And even if you look at things like education spending and healthcare spending, right? Given high levels of mortality, infant mortality rate in the African continent, you actually benefit future generations more if you invest in maternal care, right? Which ensures that more people actually have a healthy life as opposed to keeping the money in financial assets and paying down future generations in the future. And the other issue is in terms of climate risks, right? Financial assets are particularly vulnerable to climatic and transition risks, which means that spending on development projects offers more resilience as a savings mechanism. That leaves us to development funds. And here the idea is those funds encourage national development by investing a portion of their portfolio in the equity or debt of local companies with a potential for growth as well as domestic infrastructure. And their role is really to address market failures and capital constraints which prevent, you know, industrial development and diversification in African countries. So their aim is really to crowd in private capital. And here are a few things can be said. Some exist on the African continent. I think a few that need to be named are at least the Gabon's Strategic Investment Fund, Senegal's Francis, or the Ghanaian Infrastructure Investment Fund. By the way, Ghana and Nigeria are the only two African countries that have all three types of funds at once, right? And so this helps address also existing challenges of combat dependence, trade dependence, technological dependence. However, something that needs to be stressed is that the success of these types of funds are highly dependent on strong governance mechanisms, right? To ensure the effectiveness, proper public disclosure mechanisms, parliamentary oversight to show transparency in terms of how decisions on investments are made as well as proper evaluation and monitoring and evaluation mechanisms. It's also better to have one fund than two. And yeah, and basically just to conclude, it's hard, right? For governments to pursue a consistent strategy when it comes to public savings, political expediency can often win out, especially around election time. But it's important to remember that given the patterns of combat dependence across the African continent, it's extremely important to think about linking public savings with a structural transformation agenda, which is why it's as clear as ever that African governments and their international partners need to take both steps towards prioritizing the right type of development finance to ensure future prosperity. Thank you. Thanks, Amin. Actually, there's a question for you already in the chat, but I'll get to that question in a minute. That's a really good question, actually. But I think before, I wanna know because we don't have much time for Q&A, I wanted to pose a question I've seen in the chat, which is kind of interlinked question that's coming up about Kenya, which is that the question is that we see this decline in mobile money in 2021, quite a sharp decline, which I think Tobi has showed us in the graph. And there's also this question that we have a lot of increase in MFI, it's Microfinance Institutions in Kenya, but also we see in other African countries. So there's two questions, interlinked questions here. One is that why are we seeing this decrease in mobile money if it's true in Kenya? And also linked to that, Microfinance Institutions, how important are they? I mean, if that's, we see this growth in their number and the scale, does it, what implication does it have for savings? So can there be a vehicle for savings or not? Or are they too small and too fragmented to do that? I'm going to now go in order of the panelists. So Rose, did you want to say a little bit about what we see with mobile money in Kenya? If this decline that we see for only one year, is this going to be a trend or not? And also Microfinance Institutions, and I'm going to ask you to speak to the same question and then Tobi is too. So Rose, go ahead, thanks. Yeah, thanks very much for that. I'm assuming that is data that is coming from in access, because if you look at data that is published by the Central Bank of Kenya, that decline is not feasible. So, of course, during the corona pandemic period, we saw quite a significant increase in 2020 and probably it's the perception element that is being reflected in the fin access element. When it comes to the MFI, one of the things that we have in Kenya is two classes of MFI, those which are deposit taking and they are under the Central Bank surveillance, of course, the ones that are taking deposits. And there's been growing activity as far as MFI's are concerned, but at the same time, there are those which have faced some challenges and there is an element of patches of some of these MFI's by banking institutions here. Thank you, Rose. So, Dr. Ndube, the same question to you. I mean, do you see a kind of secular decline in mobile money happening in Kenya as people now shift to banks as we saw from what Tobi has showed us or not? And the other question is microfinance institutions. How important do you think they could be for mobilizing savings? I think for me, thank you very much. And I did raise an issue about taxation of mobile phone-based transactions. And of course, that is in itself because essentially, let's face it, essentially it was for those people who found that going to the banks and even compliance cost was very, very expensive. And once we create a wedge between them and the cost of transactions, you may find that there is a storing behavior. That's one aspect. The other aspect is that, and this is something that we have all had. By the time this current government came, this current administration came in, there were quite a sizable number of people who were blacklisted by the Sierra B's so that they could not participate in that particular market we're just salvaging them. So in a sense, what has thrown is actually an institutional failure problem, as we can see, because the blacklisted, some of them with as little, because there are other products. Let me explain, maybe I need it to go back. And I think, I don't know what the rules touched on it. And I don't know what to buy as touched on it. One of the things has been, there has been other products that have come in. And one of the most maybe corporate in terms of new products was actually a form of overdraft facility. And that overdraft facility became very popular. But of course, when it is popular and easy to get, it can be abused. And at one time, they were close to 13 million customers blacklisted because they were not paying the overdraft facility. So in a sense, what you're really saying is that it is important to bring in also many of these products. But if you don't have a filtering mechanism to see that they are not abused, it can work out negatively. So there's a combination of various factors. For me, I consider them as an institutional failure problem because you need to nudge the market to the optimal path. But if you create compliance costs that are so expensive, the markets, most of the customers leave the market. And that is something that becomes quite critical. And I like to even Tobias the way he rated in terms of why most people save. Most of the time, it is actually to safeguard themselves in terms of future shortfalls. But at the same time, you have to be careful about where savings are. For example, if you look at Tobias, if you look at the time series data, you would see that when there's a bank failure, there's a major problem that takes place, especially the savings or even exodus of savings from banks deep because of the fear. But I don't know whether the data have refilled that, but it's one of the areas. But I wanted to emphasize those two points, one in terms of cost of transactions. And the second one, in terms of an institutional failure problem to recognize, actually, if you create a binary tool, it becomes problematic. We need to get a better mechanism of how you filter the digital-ending platforms because essentially people can vote. Thank you. Thank you, Dr. Ndukha, it was very, very helpful. Tobias, I was wondering with you to reflect a little bit on this question very quickly. You don't have the audio a bit over time. Yes. The other thing that's come up is the inflation question. We have seen this high inflation happening mostly because of food prices. Do you think that is coming from your perspective, are you worried about what that might mean for domestic savings going forward? So very quick responses if you can, please. Yeah, sure. Maybe just on the first point with what we've been seeing from the fine fin access survey on savings and the use of mobile money. I think important to make clear that the question is there, are you using your balances on mobile money as a savings vehicle? This is distinct from use of mobile money in general, which definitely has been growing and growing sharply in terms of transaction volumes and numbers during the pandemic. But what we've been seeing in the 2001, 2021 data is that people are perhaps not using those balances as much as mobile bank connected savings applications. And I think that ties in with some of the points. The CS was making. People are looking for convenience. They're looking for reducing transaction costs. And when those fees for transferring funds between your mobile money account and your bank accounts on your phone were reduced, that caused, I think, a big upsurge in the use of savings on those bank platforms. So important to make that distinction, I think, between the savings that numbers we're seeing and use of mobile money as a payment platform. On the other question of inflation, so yes, of course, across the world, if we're looking at an environment where we're having sustained much higher inflation, that is something to worry about. We would all hope that inflation is reduced and comes back into target levels. Otherwise, I do worry that that could have negative implications on not just savings, but also investment levels. We want to get back to that macro stability. Thank you, Tobi, that's... And obviously, once you have high inflation, we can also have negative real deposit rates, which is clearly not at all helpful for financial savings. Let me now go to Amir. Amir, there was already a question, which I noticed that your co-author, Tony Addison, has kind of answered for you, which is the question that a sovereign fund is not just one objective, it's multiple objectives. So is it easy to separate out the separation objective from the generational transfer objective from the development to bank objective? So quick response on that. Another question that came up in the chat is, well, we're moving to this world of clean energy. So what's the future of sovereign funds, which are, as you argued, is very much funded by commodity price for commodities itself. So what's the future then? I think you sort of suggest there's still a future. So maybe you can quickly answer in less than a minute if you can, thank you. Yeah, I'll be very quick, especially as Tony already started to answer. And the first on Santiago's question is true that sovereign funds with more than one objectives or more than one fund exists, like Botswana Spula fund or Mozambique's prospective fund that have both stabilization and intergenerational savings objectives. But the problem is when the purpose of a fund isn't clear, the government becomes harder, right? So, and in a way, if it's a single fund, then the portfolio should reflect that with a relative weight of each objective to policymakers. So running several funds that are separate entails additional administration, but at least it has the merits of having only waiting one objective. There's only one objective against which to match assets. On the second question, that's a very important question. And that's why the role of the fund becomes even more crucial in terms of helping the transition, right? Helping sustain returns, even after non-renewable resources deplete or after fossil fuels that the men drop because of the carbonization. So they should have a climate mandate as well, especially when the revenues come from fossil fuels, which means that the standard policy advice is not suited and turning towards the development fund is perhaps more advisable. Thank you. Thanks, Amir. I noticed there's still more questions coming in the chat, but unfortunately we are definitely out of time, actually. Thanks so much to Rose and Gugge and Dundugud, especially I know how busy the schedule that you have and to give us some time for this panel. Tobias Rasmussen and Amir Levdui. And of course, again, a lot of this will present you back with really good papers that are on our website. So do take a look at that. And thanks so much to the audience for a really nice questions, for a very active participation. And again, looking forward to seeing all of you virtually in the next webinar, which we'll have in March. Thanks so much, everyone. Take care. Bye.