Luxembourg Promotes Investment in Favour Of Vulnerable People in Developing Countries

On Thursday 17 October 2024, a roundtable discussion on "Building the future of Inclusive and Sustainable Finance" took place in Luxembourg-Gare.

Ministers for Development Cooperation and Humanitarian Affairs, Xavier Bettel, and for Research and Higher Education, Stéphanie Obertin,  participated in the discussion, together with three key representatives of the Luxembourgish Inclusive Finance Ecosystem, from NGO ADA (Support for Autonomous Development), University Chair in Financial Law (Inclusive Finance) and Inclusive Finance Network (InFiNe).

As an inclusive finance hub, Luxembourg is positioning itself at the forefront of a movement to channel investments towards vulnerable people in the interest of sustainable development. 

Inclusive finance gives people who are vulnerable to poverty and climate change and who do not dispose of a bank account access to financial services, thereby enabling them to participate in the economy and meet their basic needs. While this was often restricted to providing disadvantaged people in developing countries with micro-loans, to enable them to start their own business, the inclusive finance sector is currently undergoing a shift towards professionalising local financial service providers allowing them to help their clients, who are vulnerable to poverty and climate change, adopt sustainable practices. 

This means that the activities they finance must meet environmental, social and governance-related investment criteria and contribute to achieving the United Nations' Sustainable Development Goals. This can take the form of providing households with affordable and clean energy by granting loans for solar-powered lighting, or promoting sustainable land use by granting smallholder farmers loans and the necessary education to switch to organic farming. Instead of merely helping people to launch a micro-business, these financial institutions, in developing countries, are now increasingly contributing to broader sustainability objectives. 

ADA, InFiNe and the University Chair in Inclusive Finance met with key stakeholders to discuss how to overcome investment hurdles in developing countries. The roundtable participants discussed investment opportunities, created by inclusive finance, which contribute to Sustainable Development Goals and generate positive impact. To overcome investment hurdles, the participants called on Luxembourg's financial centre to engage in initiatives to reduce the real or perceived risk and to better assess the contribution of inclusive finance to Sustainable Development Goals.

Minister Bettel explained: "Access to finance is not merely a privilege; it can have a fundamental impact, improving people's lives by allowing them to invest in health, education and entrepreneurship. Financial inclusion also enhances resilience, helping individuals and communities withstand not only economic shocks but also other adversities. I am proud that Luxembourg's Development Cooperation has been supporting the financial inclusion sector for over 30 years. Alongside our trusted partners present today, we remain committed to bridging the existing financing gap, unlocking the potential of millions of underserved people and paving the way for sustainable economic growth and social equity."

Over the past 30 years, Luxembourg has developed a vibrant inclusive finance sector with a broad range of local and international actors that leverage the expertise of the financial centre and of the university. To further strengthen the Luxembourgish inclusive finance hub, the government and ADA extended their sponsorship of a Chair in Financial Law (Inclusive Finance) at the University of Luxembourg, the so-called ADA Chair, at a ceremony following the roundtable discussion. 

Minister Obertin commented: "Over the past ten years, the ADA Chair has developed into a research institution that is recognised world-wide for its research and policy advice. Our continued support will enable Professor Zetzsche to maintain his research team of PhD students, postdoctoral researchers and research assistants in financial inclusion in the years to come." 

The Chair focuses on law and regulation of financial inclusion, sustainable development, financial technology and fundamental financial law research, including investment funds as an important element of the Luxembourgish economy.

On the same occasion, Minister Bettel signed a new Memorandum of Understanding with InFiNe for the upcoming three years until 2026. This new strategy was developed with the active involvement of InFiNe members over the course of 2024. By signing this agreement, the Ministry reaffirmed its partnership with InFiNe to contribute to the promotion of Luxembourgish excellence in the field of inclusive finance. The network also contributes to creating visibility for the Luxembourgish inclusive finance ecosystem by disseminating knowledge and best practices as well as by facilitating networking and collaboration between its members.

Later on, Grand Duchess Maria Teresa attended the celebrations to mark the 30th anniversary of ADA and the 10th anniversary of the ADA Chair and InFiNe, as all three organisations are under her High Patronage.