A major leap for financial inclusion

Nearly three quarters of a billion people opened bank accounts or used mobile money providers for the first time from 2011 to 2014, a major leap forward in access to financial services that development experts say is key to ending global poverty.

The Global Findex survey, produced by the World Bank, found that 62 percent of people worldwide now use financial institutions or mobile money services, up from 51 percent in 2011, a 700 million increase from three years ago.

A 13 percentage point gain in developing countries, and an even faster advance of 17 percentage points amongst the poorest, plus innovations in mobile technologies drove the gains.

But two billion people remain “unbanked”, with over half the adults in the poorest 40 percent of households in developing countries having no access to financial services.

And the gender gap remains stubbornly persistent. Fewer women than men in developing countries have access to financial services, despite a concerted campaign to reach women.

Even many of those with bank accounts still rely on cash transactions for monthly utilities and school fees, and savings are held in cash rather than secure accounts, the survey found.

Asli Demirguc-Kunt, World Bank director of research, said an opportunity remained for banks and e-money providers to develop appropriate products — such as accounts with lower fees, more mobile phone applications and less documentation to open accounts — in order to reach the unbanked.

“We believe that if more accounts are offered that are affordable and convenient, more people would use them,” she said.

Mobile technology holds the greatest promise to reach more of the unbanked in sub-Saharan Africa, where 12 percent of adults have a mobile money account against 2 percent globally, with Kenya leading on 58 percent.

Governments could play an important role in stimulating account ownership by paying welfare benefits electronically into accounts or through e-money cards, said Demirguc-Kunt.

Universal banking by 2020

The G20 leaders of major industrialised and developing countries have made financial inclusion a development priority.

Research indicates that households with bank accounts can better absorb financial shocks by tapping secure savings or accessing credit. They also can use savings and credit to expand small businesses and improve agricultural output.

World Bank President Jim Yong Kim in October 2013 announced the goal of universal financial access by 2020 as a way for low-income workers to gain a foothold on the economic ladder.

The Global Findex survey conducted by Gallup World Poll asked 150,000 people in 143 economies whether they had an account for storing money, and making or receiving electronic payments. It also asked adults about how they saved, borrowed, made payments and managed financial risk over time.

The strongest growth was seen in East Asia and the Pacific where account ownership rose to 69 percent from 55 percent in 2011, the survey found.

The Middle East recorded the lowest rates of account ownership at 14 percent of adults up from 11 percent in 2011, possibly due to a lack of Sharia compliant offerings.

This article is published in collaboration with The Thomson Reuters Foundation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Stella Dawson is the Chief Correspondent, Thomson Reuters Foundation.

Image: A customer withdraws money from an ATM. REUTERS/Ints Kalnins.