Why we need inclusive finance


Professor Dirk Zetzsche, who holds the ADA chair in “inclusive finance”, in a portrait provided by the University of Luxembourg 

Carte blanche: Luxembourg’s financial sector can help developing countries develop their own risk management solutions, writes Dirk Zetzsche.

The University of Luxembourg from 16 to 28 January 2017 will for the first time host a new professional education programme, the Certificate in Law and Regulation of Inclusive Finance, bringing together financial institutions from the developing world and Luxembourg’s international financial centre.

When looking at the risks faced by financial sector clients, customers, investors and institutions--ranking from disasters to fraud, misselling, theft and systemic risks--there is a striking difference in risks associated with developing countries and sophisticated financial centres. In Luxembourg, for example, certain risks such as health and age are covered by public insurance schemes, while sophisticated contracts lead to a pooling and reallocation of risks. As a result, Luxembourg investors and clients are very close to bearing only the risks for which they are compensated in forms of interests and dividends; negative surprises play a lesser role in the lives of people, leading to an overall more stable environment.

In developing countries, however, this stability is lacking, which has led many investors from Europe to forego investments in these countries, and left clients and customers in developing regions exposed to the risks associated with their local set-up.

To enable financial institutions in developing countries to provide the same stability-enhancing function by applying modern principles of financial intermediation, capitalisation, organisation and compliance, the University of Luxembourg set up the new Certificate in Law and Regulation of Inclusive Finance together with Appui au Développement Autonome, an NGO supported by the Luxembourg ministry of foreign affairs, as well as partners from the Luxembourg financial centre. The programme is one of the activities to come out of the university’s cooperation with ADA on the Chair in Financial Law (Inclusive Finance). By bringing together professionals working at regulators, intermediaries, and other inclusive finance and civil society organisations with lawyers and regulators, it introduces participants to financial law and regulation relevant for activities in developing countries.

To enable participation from developing countries, up to 50% of places in the programme will be reserved for students from developing countries. These students will receive scholarships, as well as travel and accommodation support for their stay in Luxembourg, financed through the tuition fees of €6,000 paid per person by participants from the Luxembourg financial centre interested in preparing their organisation for future business with developing countries. With the certificate hosted for the first time next year, it is hoped that it will be able to attract further support from the Luxembourg financial centre to ensure a lasting success for this unique programme.

Professor Dirk Zetzsche holds the ADA Chair in Financial Law (Inclusive Finance) at the University of Luxembourg.

This article was first published in the December 2016 issue of Delano magazine. Be the first to read Delano articles on paper before they’re posted online, plus read exclusive features and interviews that only appear in the print edition, by subscribing online.