Geneva, 22 January 2022 (TDI): There is potential to make grave sustainable and green, environmentally friendly social contributions within developing countries however, this can only be achieved if there is grave support from the government’s end in terms of favorable policies and administration – says UNDP (United Nations Development Program) and UNCDF (United Nations Capital Development Fund) study.
BigFintechs could make bold social & environmental contributions in developing countries but 𝒐𝒏𝒍𝒚 if new governance models are adopted. Find out more in @UNDP / @UNCDF study – https://t.co/BcH0455M7U @UNDP_SDGFinance pic.twitter.com/Se5bpHyAl8
— UNDP Geneva (@UNmDPGeneva) January 21, 2022
What are BigFintechs and What are their Effects?
Fintech constitutes a technology that aims to improve the automatic services of delivery of financial services. Currently, within the world there are many global financial technology service companies that are bringing different sectors across the world closer together, making the analysis of impacts these companies have on the environment, government, and customers difficult to analyze.
For this very reason, there needs to be a wide range of grave mechanisms of governance so that the contributions made by these firms can be tied in line with the 2030 United Nations Sustainability Goals. The importance of this was highlighted in a technical report produced by the UNDP, “A Principle-Based Approach to the Governance of BigFentechs”.
According to the UNDP, 1.6 million individuals worldwide are affected by the actions of Amazon. Amongst these 1.6 million, more than 300,000 reside in developing countries and 850,000 people rely solely on this Fintech company for their primary income source.
Even the platforms provided by Meta, have led to grave effects on communication and now there are millions who depend on such social media websites for their livelihoods. While there are some positive outcomes of such Fintech, such as increasing inclusion financially and enhancing livelihoods digitally. Such positive outcomes may result in being insignificant as a result of the negative effects, many of which could be grave.
Amongst some of the negative effects include the erosion of tax bases as well as the crowding of local SME’s (Small, Medium Enterprises), deteriorating working conditions for workers that work digitally, increasing inequalities, worsening the effects on the environment as well as having some effects on the monetary policies along with the macroeconomic activity.
Taking the example of delivery services such as Careem, Grab, or Uber, such companies encourage financial inclusion and also increase the level of employment within the country through creating job opportunities, especially in the developing countries, but also cause more than 69% pollution.
It is estimated that by the year 2030, there will be great growth in SME’s and it will result in an increase of delivery services by 36% which will result in increasing the level of greenhouse emissions by 30%.
Working towards solutions with BigFintechs
The relationship between the tradeoffs of SDGs (Sustainable Development Goals) with BigFintechs is quite a complicated relationship, thus navigating the two may present itself to be a challenging task.
There needs to be greater accountability and incentives to prefer sustainable solutions available to market actors. An example of this is the pack launched by the European Union called the ‘Digital Services Act’, the UK in a similar light has introduced a new set of regulations through which Tech Firms such as Amazon, will need to conduct their business.
China has also introduced a series of rules for the compartmentalization of non-financial and financial activities for BigFintech firms. Within the United States, on the other hand, there have been an increasing number of authorities who have reported complaints of antitrust actions when it came to BigFintechs firms within the nation.
While developed countries have the capacity and are able to fully and easily have their BigFintechs align with the SDGs, developing countries are still struggling to achieve this balance.
There is increased dialogue to now assist these developing countries with the knowledge and the tools that will help them move towards sustainable BigFintechs, as stated by Preeti Sinha, the Executive Secretary of the UNDP.
The study that was conducted on BigFintechs and the principles that could be used by the government to ensure greater measures that would lead to BigFintechs firms’ activities to be more sustainable development, outlined 5 principles that can assist policymakers and regulators.
These principles largely encourage the collaboration of policymakers between different domains within the market, providing greater accountability of cooperating organizations, and greater commitments towards the 2030 SDGs.
The UNDP Administrator, Achim Steiner highlighted the issue of rapidly growing technology which is resulting in the governments struggling to keep up with such firms, however, this phenomenon was only understandable given the situation.
In this case, the principles outlined by the study carried out by the UNDP which had the principles to assist governments to have their Bigfintech firms aligned with the 2030 Sustainability Goals can help the governments regulate these firms.
