Thank you very much, Mr. Chair and committee members, and thank you for the invitation.
I’m Wendy Hannam, executive vice-president for sales and service, products and marketing, in international banking with Scotiabank. Scotiabank is Canada's most international bank, with operations in 55 countries and a team of more than 75,000 employees serving over 19 million customers around the world.
Our international banking division encompasses all of the bank's personal and commercial banking services outside Canada, primarily in the Caribbean, Latin America, and Asia. I am responsible for strategic planning, management, and delivery of personal banking services and small business banking services through our team of 36,000 employees in 45 countries.
I've been engaged in conversations throughout the past year with the Canadian International Development Agency on enhancing collaboration between Scotiabank and CIDA. I'm pleased to have the opportunity to address this committee about Scotiabank's experience and its ideas about achieving international development goals.
The committee has specifically noted an interest in how private sector entities can be catalysts in generating long-term economic growth and alleviating poverty in developing countries. We strongly support this vision and approach. There's a growing consensus that growth, poverty reduction, and improving people's lives require a vibrant private sector and active partnership in economic development.
Today I'd like to speak with you about Scotiabank's history and approach in developing markets, the link between development objectives and the business of banking, and some relevant success Scotiabank has had in this area. I'll also offer some recommendations based on what has worked well.
First I'll speak about our approach to developing markets. The issue of how best to achieve development goals in emerging markets is a very important one for Scotiabank, given our deep roots and more than 120 years of history in developing countries, beginning with the opening of our first branch in Jamaica in 1889.
We take a grassroots approach and keep a long-term view of how best to contribute to the growth and development of local economies. We learn the market first, build strong relationships with governments and the private sector, establish a presence, and grow our operations over time. We hire locally and build our teams as much as possible with people who understand the unique local context. Because of our approach and long-term commitment, we are seen as a local bank in each market, and in many important ways we operate as a local bank.
Part of our commitment to corporate social responsibility is to have a very strong presence in local communities, which we do through our support of hundreds of local and regional charities, civic causes, and non-profit organizations. Scotiabank Bright Future, our global philanthropic and employee volunteer program, is aimed at addressing the needs of local communities at a grassroots level.
Scotiabank supports financial literacy initiatives that provide customers with access to education, resources, and advice related to personal finances. For example, we're partners with Junior Achievement on the Economics for Success program in 10 countries in Canada, Latin America, and the Caribbean. This program teaches students the fundamentals of personal finance and explores related education and career opportunities.
But while philanthropy does have a meaningful impact on local communities in developing markets and is a major component of what might be considered traditional CSR, it is not what I want to highlight today. Over 90% of jobs in developing countries are in the private sector. The pace of job growth and quality of employment in the private sector are critical to development. The involvement of the poor in economic growth through formal markets—known as pro-poor growth—is the best way to get people out of poverty and represents the exit strategy for government aid.
Making businesses more inclusive is essential. An inclusive business is one that seeks to alleviate poverty by including lower-income communities within its value chain, while not losing sight of the ultimate goal of business, which is to generate a profit. A real impact can be made by leveraging these for-profit businesses.
Inclusive growth is both broad-based across sectors and inclusive of the large part of the country's labour force. It includes attention to the welfare of the poor, but also to the opportunities for the majority of the labour force, poor and middle class alike. The inclusive growth approach looks to productive employment as an important means of increasing incomes of excluded groups.
I'll now be looking at the special role of the banking sector. The banking sector has a critical role to play. Generally it alleviates poverty and inequality by enabling economic growth through the provision of credit. In addition, the institutional infrastructure of the financial sector contributes by bringing down the cost of information, contracting, and transactions, which in turn accelerate growth.
In addition, with governments facing the challenge of developing infrastructure with limited budgets, banks help to address this gap through the design, structuring, and implementation of financial solutions for infrastructure projects. Scotiabank has a specialized unit, Global Infrastructure Finance, with dedicated teams for Latin America, Europe, and Asia. For the developing countries in Latin America, we focus mainly on those countries where the bank has a banking presence—Mexico, Chile, Peru, Colombia, and Brazil.
Perhaps most important, banks directly address poverty by providing access to basic banking services in a formal market, acting as a force of inclusion. In most developing countries, access to formal financial services is limited to 20% to 50% of the population. There is now growing awareness that access to a wide set of financial tools, such as savings products, payment services, and microfinance, provides the poor with much greater capacity to increase or stabilize their income, build assets, and become more resilient to economic shocks while increasing family security.
Speaking to our success in Haiti, Scotiabank's experience in Haiti following the devastating earthquake in January 2010 provides a good example of the different roles philanthropy and inclusive business each play in a crisis in a developing country. Immediately following the earthquake, our team in Haiti worked around the clock to ensure branches were safe and secure for the return of our customers and employees, opening three of our four Haitian branches within just a few days. Scotiabank assisted international agencies in distributing aid to 100,000 people, donated funds to the Red Cross and our employee relief fund, and helped arrange temporary housing for those who needed it.
In late 2010 the bank, together with Digicel, launched a mobile wallet financial service under the brand name TchoTcho Mobile. This service helped make banking accessible in a country where only 10% of people have a traditional bank account but 85% of households have access to a mobile phone. With much of the country's infrastructure damaged or destroyed by the earthquake, the service allowed customers to safely perform basic financial functions such as withdrawals, deposits, transfers, and payments to keep the economy moving. Businesses used the mobile wallet to accept payments from customers for goods and services and to pay their employees. The project has been a huge success in terms of financial inclusion and supporting development. It is also profitable.
At the end of 2011, TchoTcho Mobile had more than 473,000 users and handled almost 10,000 transactions a day in a country where just 4 million people have cellphones. The project is supported by a nationwide network of more than 900 correspondent agents. This project received international acclaim for its contribution to economic development, including the beyondBanking award of the Inter-American Development Bank and the 2011 Global Telecoms Business Innovation Award for consumer service innovation.
We're now preparing to launch a mobile wallet in Peru and El Salvador, and we plan to offer the service in other Latin American and Caribbean countries.
Another inclusive business initiative we've been very successful with is microfinance. Scotiabank provides innovative microfinance services to small-scale entrepreneurs and micro-business owners in Peru, Chile, Dominican Republic, Guatemala, and Jamaica. Our CrediScotia subsidiary in Peru is the bank's biggest microfinance operation. We define microfinance clients as self-employed or micro-business owners with annual gross revenues below $100,000 Canadian who need funding to invest in the development and growth of their business.
Microfinance has been shown to be an important driver of economic development in underserved communities. It is a key tool for supporting the goals and aspirations of women in particular. Approximately 60% of our microfinance clients in Peru are women. It also helps to grow the formal economy by providing accessible financing to people who would otherwise have to turn to informal channels.
To end with some recommendations, CIDA's three priority themes are already closely aligned with Scotiabank's values and activities. As described above, there is strong evidence that financial sector development provides a high impact on development overall. In Haiti, the Caribbean region, and Peru, there are already successes where the bank is working with CIDA, but there is clearly potential for our two organizations to do more. I have had very open and productive discussions with CIDA over the past year and look forward to continuing those discussions in specific areas we've identified.
Specifically, one, encourage CIDA to publish a private sector development strategy.
Two, as the role of the private sector becomes the increasing focus of governments, development agencies, and international financial institutions, the contributions of the private sector are not well understood or communicated by other stakeholders or the public. Increased communication among CIDA, private sector partners, and the public would help.
Three, given the limited resources and focus on budget restraint, the efficiency of assistance and maximum impact becomes critical. It is important that the public and private sectors leverage their comparative advantages. In light of this, CIDA should have flexibility to fund feasibility studies, co-invest, or assist in risk mitigation for private sector projects.
Four, scale is a key factor in maximizing impact and needs to be recognized. This means leveraging the strengths of large private sector partners and collaborating with multiple partners.
Five, ask whether CIDA is currently structured to have the flexibility and mandate to effectively engage with the private sector. There are a range of models for development agencies, development banks, and international finance institutions. The committee should consider whether CIDA has the structure and the mandate to effectively partner with these institutions and with the private sector. For instance, some national development agencies—in the U.K., the U.S., and Germany, for example—have established funds or development finance institutions specifically to support their private sector development efforts.
Finally, six, directly engage in building basic financial infrastructure: property rights, secure transaction laws, collateral rights, credit bureaus, small and medium enterprise tool kits, financial literacy, regional regulatory harmonization, and financial regulation.
I believe that Scotiabank’s history and our deep commitment to the development of emerging markets, including our recent inclusive business successes, put us in a unique position to offer our insights on this matter. I hope these recommendations are helpful to you in your deliberations.
I’ll be very pleased to answer any questions you may have.