Finance Sector in Asia

To support emerging areas such as green and blue financing, climate finance, and agricultural value chain finance, private sources of funding should be mobilized by: (i) creating a pipeline of bankable green projects through a facilities approach; (ii) developing and utilizing diverse innovative green financial instruments; (iii) developing and implementing globally aligned green taxonomies and frameworks; (iv) catalyzing financing for projects designed to protect and restore marine ecosystems (blue financing); (v) aligning ADB’s investments and lending portfolio (sovereign and non-sovereign) with the Paris Agreement to make the organization’s finance flows consistent with a credible transition pathway towards low greenhouse gas emissions and climate-resilient development; and (vi) creating an enabling environment and building the capacity of financial institutions for agricultural value chain financing.

To fill the financing gap for infrastructure investment, long-term private finance should be promoted by: (i) developing domestic capital markets by establishing capital market infrastructure, adopting international standards for regulatory and supervisory frameworks, and enhancing corporate governance; (ii) developing contractual savings institutions such as insurance companies and pension funds; (iii) promoting infrastructure as an asset class by improving DMCs’ ability to measure and maintain historical data on infrastructure asset performance; (iv) achieving quality infrastructure through stronger infrastructure governance among DMCs and enhanced infrastructure maintenance; and (v) preparing bankable projects and creating an environment to “crowd in” institutional investors and foreign investors.

Digitalization of finance and financial inclusion should be promoted by: (i) evaluating, designing, and implementing enabling digital infrastructure, including information and communication infrastructure, national digital ID systems, and interoperable payment systems; (ii) providing funding and capacity building for adoption of digital technologies in finance; (iii) establishing a legal and regulatory framework to promote competition and partnership between fintechs and financial institutions; (iv) addressing the risks and problems involving digitalization of finance; (v) supporting DMCs’ efforts to promote and invest in fintech; and (vi) ensuring that adequate and affordable financial services are available to migrants and working towards reducing the average transaction cost of migrant remittances.

Support to financing for micro, small and medium-sized enterprises (MSMEs) and women should be expanded by: (i) strengthening the capacity of banks in originating and monitoring MSME loans; (ii) providing credit to MSMEs through fintech and alternative credit scoring systems; (iii) enhancing secured lending regimes through reliable collateral registry and efficient contract enforcement mechanisms; (iv) developing credit bureaus and publicly available credit risk databases; (v) expanding the coverage of ADB’s microfinance program; (vi) leveraging credit enhancement products to attract private funds and capital market resources; (vii) developing performance guarantee schemes for MSMEs; (viii) designing and establishing capital market ecosystems for start-ups and ventures; (ix) expanding the range of microfinance services and utilizing crowdfunding; and (x) supporting activities of women microentrepreneurs.

To manage the economic and fiscal impacts of disasters, DMCs should establish a national framework for disaster risk financing by: (i) preparing disaster financial planning through development of policies and financial instruments that allow governments to secure access to financing for relief, recovery, and reconstruction efforts; (ii) providing a wider portfolio of risk transfer and insurance solutions through disaster insurance pool programs; (iii) increasing investment in disaster risk reduction through creation of bankable disaster risk reduction projects; and (v) creating and implementing regional public goods to help DMCs deal with epidemic or pandemic disease.

Support to strengthen finance sector fundamentals; financial stability and integrity; and regional financial cooperation will be continued. The foundations for finance sector development and the banking sector should be strengthened by: (i) developing central banking and public debt markets; (ii) building and maintaining a reliable financial infrastructure; and (iii) enhancing the banking system through upgrading of the regulatory and supervisory framework and promotion of sound governance and risk management.