Access to Financial ServicesOne of the biggest barriers preventing impoverished people from improving their economic status is a lack of access to financial services. In many cases, access to some sort of financial services such as loans, savings accounts, or insurance, is the only thing keeping people impoverished. Below, you can learn how access to financial services fights poverty, as well as find out about organizations which are working to widen the distribution of access to such services.

Types of Services

In the modern-day, digital services are becoming the standard. Digital services are integral to improving the ease of access to financial services on the whole, as it makes those services far more efficient. Such digital services as payments and transfers, insurance, savings, credit and securities are essential to uplifting impoverished people. According to the U.N., digital financial services uplift people in poverty by way of asset accumulation.

Access to devices that can support such services is equally important. Smartphones, for example, have a plethora of finance apps that can be used to level the economic playing field. There are also risks associated with introducing such technology, though it is worth acknowledging that lack of understanding of the technology introduces security risks. To mitigate this, the U.N. recommends not only providing access to these services but also educating the population on how to properly utilize them and manage any necessary risks involved.

Organizations Seeking to Help

A movement organized around how access to financial services fights poverty is no small feat. It takes a significant concerted effort by large groups to make it possible. Thankfully, there are several organizations that are paving paths forward to uplifting impoverished people.

The Bill and Melinda Gates Foundation has a program entitled Financial Services for the Poor (FSP). The FSP program provides funding for partners who are working to establish easily accessible low-cost digital financial services in various at-risk regions. The FSP program prioritizes countries with some of the largest impoverished populations, working in Bangladesh, India, Nigeria, Pakistan, Indonesia and East Africa.

The Grameen Foundation is also working to innovate and improve not only access to financial services to those in poverty but also to the platforms enabling those financial services themselves. The Grameen Foundation works to connect people, especially women (who are disproportionately negatively affected) with necessary technologies such as mobile phones. It also partners itself directly with banks and microfinanciers to provide those services directly to the people who need them. In Kenya, the Grameen Foundation partnered with the 100 percent cashless microfinance institution Musoni to launch a mobile-based agricultural loan known as Kilimo Booster, specifically for small-scale farmers who traditionally lacked access to financial services. Over a three year period ending in 2016, the partnership resulted in more than 6,000 loans and the disbursement of more than $2.2 million.

A Positive Trend for Financial Service Access

Overall, it is important to recognize the ways in which access to financial services fights poverty. Such services are extremely vital in ensuring economic empowerment, and a population of people who can really improve their economic situations. Things are looking up, with a wide array of different organizations all contributing to an improving trend of access to important fiscal services. An estimated 1.2 billion people have gained access to banking since 2011, in part thanks to the efforts of various organizations who are seeking to help. With these collaborations, financial services can be provided and poverty can be downsized significantly as a result.

– Jade Follette
Photo: Flickr

Blockchain Technology
With the development of bitcoin technology and other cryptocurrencies, the avenues for technological progress in the realm of poverty alleviation is improving. With more than 1.3 billion individuals living under the threat of global poverty, it is important to structurally bolster market economies.

Despite the great degree of skepticism regarding the volatility and often, the unpredictability regarding blockchain technology, it can still be a new and innovative solution to potentially remediate global poverty, especially among lesser economically developed countries.

Financial Inclusion

Financial inclusion is an imperative U.N. Sustainable Goal and blockchain technology can finally provide nearly 2.5 billion people with better opportunities and access to banking and financial services in the near future, especially as it allows for a more decentralized database. Blockchain technology will prove particularly effective in more remote, rural communities around the world, especially in the case of increasing social mobility.

Blockchain technology can act as a central banking system especially due to its decentralized nature. It can help cut down on remittance fees because traditional banking systems usually tend to charge high transaction costs. These fees account for nearly $4.32 billion among south Asian countries. In countries like India with a significant expat and migrant population living overseas, blockchain technology helps with transferring funds back home. Virtual currencies can eliminate a number of costs and improve the efficiencies of transactions. They may also be a lot more stable as compared to the financial system as it is vulnerable to national and global economic headwinds.

Moreover, it can be easier to secure property rights and undertake secure investments. Buyers and sellers are able to interact in a secure environment, and record transactions and fraud. With increased ownership of property, a number of countries like Brazil, India, Rwanda and Georgia have set up land magistrates. With more financial inclusion, consumers also have greater opportunities to engage in microtransactions and lending, as well as trading due to minimal interest rates on loans. The chances of setting up start-up businesses and enterprises may also be higher as a result.

Tackling Corruption and Enforcing Accountability

Owing to the reliability of blockchain technologies like Bitcoin, information and transactions are a lot more secure. On the macroeconomic scale, people can channel taxes, loans and funds a lot more efficiently. This can also help improve accountability and transparency of important government funds.

Globally, many countries have inculcated a number of blockchain projects in the health care and education sectors. As a result, governments can take the opportunity to allocate funds to different sectors of the economy and perhaps even extend it to providing development aid and funding to improve social welfare, infrastructure and other services. Likewise, due to transparency, it is also easier to provide people insurance in key realms. For instance, Copenhagen based SPACE10 is embarking on a project that seeks to combine blockchain technology and solar power as centralized sources and off-grid systems are often not economically and cost viable.

Additionally, making donations and conducting philanthropic initiatives may also become more secure and reliable with the further development of blockchain technology. Using this model, nonprofits and international organizations may be able to channel crucial aid, funds and other services through new avenues as well.

To conclude, if bitcoin technology is enforced, it is crucial to transcend the required education and awareness about it to avoid a lack of information and financial risks. With better financial avenues and services, a larger proportion of people will be able to participate in the global market. Further development of blockchain technology can help correct weaknesses and structural limitations in the long run.

– Shivani Ekkanath
Photo: Flickr

Cocoa Farmers in Côte d’IvoireCôte d’Ivoire produces 35 percent of all cocoa, making it the largest cocoa producer in the world. A majority of cocoa farmers in Côte d’Ivoire, however, live below the poverty line. Within the past couple of years, a financial crisis within the cocoa sector has worsened conditions for cocoa farmers. Improving financial inclusion and increasing yields could become ways to bring cocoa farmers out of poverty.

In 2017, the cocoa crisis left many farmers without pay for their work. George Koffi Kouame, a 50-year-old cocoa farmer, told the BBC that he had delivered 1.8 tons of cocoa and had not been paid. This is the result of plummeting cocoa prices, which led up to 80 percent of cocoa buyers to terminate their contracts with farmers.

Living Conditions

However, even without this crisis, most cocoa farmers in Côte d’Ivoire are struggling. As a condition of their poverty, many lack adequate access to education, healthcare and drinking water.

Only 43 percent of farming communities observed in a study by Barry-Callebaut, a major chocolate manufacturer, had a health facility in their village. For 54 percent of the communities, the nearest health facility was, on average, 12 kilometers away, a little over seven miles.

Additionally, 25 percent of villages did not have a primary school, with 22 percent of villages having no school at all. While 87.4 percent of villages had a primary school located within five kilometers, having a school in each village ensures that education is accessible even to the most impoverished, as they may not have the means to travel for schooling.

Finally, access to safe drinking water is also a concern for some cocoa farmers. While 32 percent obtain some of their drinking water from the national water supply and 63 percent have access to pumped water, 5 percent of farming communities do not have access to either source. This suggests that they mainly drink surface water, which is more likely to be unsanitary.

Rural Côte d’Ivoire is in desperate need of better and more abundant schools and healthcare facilities, as well as access to drinkable water in certain villages. These changes would help improve the standard of living of cocoa farmers and their families more generally, potentially aiding in efforts to raise them out of poverty.

Financial Inclusion

Cocoa farmers in Côte d’Ivoire are generally excluded from formal financial services. Rates for all residents of Côte d’Ivoire are high, with 53 percent of men and 64 percent of women lacking access to financial services.

Because of this, the crop cycle generally determines the financial lives of cocoa farmers. Cocoa farmers harvest from October to January and make their money for the year during this period. Then, from February to September, farmers must make the money they earned from this harvest last, as cocoa farming is the main source of income for most farmers.

If their money begins to run out during these months, many are forced to take informal loans with high-interest rates in order to make ends meet. Then, when the next harvest begins generating income, paying back these loans reduces their profit and makes it difficult to save money for the following year.

To improve the financial health of cocoa farmers in Côte d’Ivoire and help them rise out of poverty, more financial products need to be available. Access to formal loans is incredibly important, as loans through the banking sector will have lower interest rates and be easier to repay. Many farmers would benefit from being able to get formal loans for school fees, as these are due before the harvest season has begun.

Additionally, education programs to teach farmers how to best manage their money in combination with access to savings accounts can help farmers become financially sustainable over time. Advans, an international microfinance group, has been working in Côte d’Ivoire since 2015, helping farmers set aside money for the future.

Crop Yields

Another solution, proposed by Barry-Callebaut, is to help farmers increase their crop yields, thereby increasing their income. Farmers sometimes do not use pesticides and fertilizers, decreasing their cocoa yields, partly due to low access to financial services. Improving access to financial services, as well as implementing educational programs for farmers to help them learn better agricultural practices, has the potential to significantly increase farmers’ yields over time.

Overall, improving financial inclusion and crop yields has the potential to help cocoa farmers in Côte d’Ivoire rise out of poverty. Additionally, improving education, healthcare and drinking water access will improve their quality of life. As information about cocoa farming continues to be collected, this knowledge will hopefully be used to benefit impoverished farmers.

Sara Olk
Photo: Flickr

Credit Access in TajikistanTajikistan, located in Central Asia, has a population of over 8 million people. Tajikistan has borders to Afghanistan, Uzbekistan, Kyrgyzstan and China. Although Tajikistan’s financial sector has made significant progress since 2000, many new advancements such as credit access are still in need of improvement. In 2017, almost 30 percent of Tajiks were living below the poverty line. Finding a solution to increase credit access in Tajikistan has become an important task for the government of Tajikistan.

Tajikistan’s Reliance on Remittances

Due to Tajikistan’s limited employment opportunities, about 90 percent of Tajiks travel out of the country for work. They often travel to the Russian Federation in search of employment. Many migrant workers send remittances back to their friends and family in Tajikistan. More than 60 percent of Tajik households reported that half of their income comes from remittances with 30 percent of Tajik households reporting that 100 percent of their income comes from remittances.

A 2010 Labor Organization study reported on how Tajik households save their income and remittances. The study found that only 23 percent of people were able to save their remittances with only 9 percent able to save at a partial amount of 21 to 40 percent of the money. When the money can be saved, it is not often for long. In fact, only 11 percent of the people were able to save their remittances for more than six months.

Income savings did slightly better. At least 63 percent reported being able to save part of their income. For example, 51 percent saved about 20 percent of their income. However, only 3 percent could save between 41-60 percent of their income. Since remittances are the main source of income in many Tajik households, money is spent on immediate needs, which results in low percentages in income saving.

Credit Access in Tajikistan

According to a 2010 International Labor Organization study, 95 percent of Tajik households do not keep their savings in financial institutions. Due to Tajikistan’s remote and unique mountainous terrain, 95 percent of Tajik households are not aware of the savings products available to them or know where financial institutions are located. Credit access in Tajikistan isn’t seen as a necessity in many Tajik households because it is very common and traditional for Tajiks to keep their savings at home. There also seems to be “a general distrust” of financial institutions.

In April 2010, the World Bank Group, with the help of the Government of Switzerland, launched the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project. This three-phase project is aimed at improving the financial infrastructure of Tajikistan and expanding credit for people and small businesses. This would allow for the creation of more jobs.

The project also provided financial literacy training to more than 100,000 Tajiks, which allowed Tajiks to become knowledgable about where their savings go. As a result of the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project, Tajikistan’s financial sector was able to establish the first private Credit Information Bureau with the help of IFC and the National Bank of Tajikistan.

These crucial advancements have led Tajikistan’s financial sector in the right direction toward improving credit access in Tajikistan as well as addressing the needs of the people of Tajikistan. With impoved credit access comes financial security, an increase in small businesses and a better economic standing.

Jocelyn Aguilar
Photo: Flickr

Credit Access in the Solomon Islands
The Solomon Islands, one of the third largest archipelago countries, consists of nearly 900 islands with a total population of 400,000. It is located between the sea routes of the South Pacific Ocean, the Solomon Sea and the Coral Sea. Given its unique landscape and dispersed population, there is limited banking and credit access in the Solomon Islands. Currently, there are about 300 islands that are inhabited and within those islands, there are only 14 bank branches.

Current Status of Financial Inclusion

Limited banking and credit access in the Solomon Islands impact the way Solomon Islanders handle their finances. According to the Solomon Islands’ financial demand-side survey, the following statistics reveal the involvement in the Solomon Islands’ financial sector.

  • 8 percent own a bank account in different financial institutions such as a credit union or loan company
  • 26 percent of adults over the age of 15 own a bank account
  • 31 percent are not able to access any type of financial services
  • 35 percent of Solomon Islanders use services such as a moneylender or a savings club

It is important to note the barriers that Solomon Islanders face when they attempt to enter the financial sector. One of the many barriers includes the country’s mountainous and rainforest-covered landscape which constrains their ability to access financial services such as banks or ATMs.

It was reported that those without bank accounts live an average of 6 hours away from a bank while those with bank accounts must travel about 2 hours to access banking services. The farther away Solomon Islanders are from accessible financial services the more costly it is to participate in the financial sector.

Understanding the Gender Gap

It is important to address gender disparity when it comes to the financial involvement between men and women in the Solomon Islands. Only 20 percent of adult women have a commercial bank account compared to 32 percent of males. The Solomon Islands National Financial Inclusion Strategy 2016-2020 (NFIS) notes that “Banked adults now average 4.5 years more schooling than the unbanked: a factor that helps explain the widening gender divide.” The gap is also evident in terms of literacy rates as 89 percent of men in the country are able to read and write compared to only 79 percent of women.

Solutions for Financial Exclusion

The government is prioritizing efforts to provide accessible banking and credit access in the Solomon Islands and though it has been a tedious process there has been some progress. The updated NFIS strategy has a goal of helping men, women and young people “to be financially competent and have access to a full range of financial services that help them achieve greater financial security and financial opportunity.” Overall, the goal is to ensure that 300,000 adults to have a form of formal or semi-formal financial accounts by 2020. The NFIS also seeks to ensure that 90 percent of the population will be able to access financial services within one hour of ordinary travel from their homes.

The Solomon Islands Government also launched the Women’s Financial Inclusion in the Solomon Islands which focuses on empowering women to realize “their full potential, importance, and status, and be increasingly recognized and heard in Solomon Islands society.” The program also seeks to provide women with the necessary tools to become business owners and participate in the private sector. A number of initiatives have been spearheaded under the Women’s’ Financial Inclusion program:

  • Jorio Java Dovele Women’s Association Saving Club
  • Gizo Environment, Livelihood and Conservation Association
  • West Are’Are Rokotanikeni Association

Overall, promoting financial inclusion through greater credit access to the Solomon Islands has the potential to bridge the gender gap in the country while creating economic opportunity for those in rural areas.

– Jocelyn Aguilar

Photo: Unsplash

Credit Access in Bhutan
The Kingdom of Bhutan is a small sovereign state saddled between India and China, with an estimated population of less than 800,000. For hundreds of years, Bhutan existed in almost total isolation from the outside world. Upon King Jigme Wangchuck’s ascension to the throne in 1972, he began an ambitious program of modernization and reform that continues today. Despite much progress in poverty reduction, institutional development and new infrastructure, Bhutan still has a large number of poor, rural workers who lack credit access.

Microcredit: A Way Forward for Credit Access in Bhutan?

Since the 1970s, microfinance has — in best cases — transformed poor workers in developing countries into successful entrepreneurs making vital contributions to their local economies. By extending small lines of credit at low rates, microcredit lenders enable workers to invest in wealth-generating capital such as plows, stone ovens and weaving looms.

Microfinance has been slow to catch on in Bhutan owing to underdeveloped infrastructure and a lingering barter economy. A 2010 Institute of Microfinance report concluded that microfinance was then still a nascent form, but remained upbeat about its potential, stating “easy access to institutional credit is prerequisite to convert agriculture enterprise into profitable activity (sic).”

According to the report, only an estimated 20 percent of all Bhutanese farmers—and just 10 percent of small farmers—had access to credit in 2010. It also highlighted a number of challenges to expanding microcredit in Bhutan, such as a tendency for rural workers to trade in goods rather than currency.

The World Bank suggests that for microfinance to really take root, it has to operate within a larger context that includes favorable government policies, available technology—as well as sensitivity to the real needs of borrowers.

The effectiveness of microfinance in reducing poverty has increasingly come into question in recent years, but most studies suggest it still brings benefits when implemented correctly and with the correct motives. In addition to addressing the conditions necessary for effective microfinance operations, The World Bank emphasizes that credit rates must be subsidized below market levels to truly benefit poor borrowers— highlighting the role of government and non-profit organizations.

Obstacles to Credit Access in Bhutan

Despite overwhelming needs, microcredit options are few in Bhutan. An article by the International Finance Corporation concludes that lack of access to finance remains a key inhibitor of private investment and business growth.

As of 2013, there was only one national program offering microfinance options, but the Royal Government has shown willingness to facilitate increased levels of fair and profitable micro-financing. For instance, in 2016, Bhutan’s Royal Monetary Authority produced a set of guidelines for governing the conduct of micro-financial institutions that protect the interests of borrowers. It will, however, be a challenge for the government to enforce these regulations in rural areas where most economic activity goes unrecorded.

Bhutan’s rural population and underdeveloped transit infrastructure present additional obstacles to sustainable micro-finance. Bernd Baehr, Project Director of RENEW Microfinance—one of the largest NGO micro-financers operating in Bhutan—told Bhutanese media source, Kuensel, that, “micro-finance in Bhutan cannot be profitable unless the infrastructure and technology keep up with the pace of development.” To illustrate this, Baehr pointed to the vast inefficiencies resulting from field officers often having to have to drive for up to six hours to reach clients.

Looking Forward

Considering these obstacles, the overall picture for Bhutan’s economic development looks positive. When the country’s per capita GDP was first recorded in 1961 it was the lowest in the world at just $52. Now, Bhutan’s per capita GDP is more than $3,000 and the economy is experiencing sustained annual growth of around seven percent.

By capitalizing on these gains, Bhutan’s Royal Government can establish the groundwork for sustainable future investments. Improving infrastructure and financial regulation, and incentivizing subsidized lending to poor, rural borrowers could begin to help poor workers access credit and secure essential capital to elevate them from serfdom and poverty.

– Jamie Wiggan
Photo: Flickr

Credit Access in Grenada
Grenada is a small, densely populated island located in the southern Caribbean. The country is often nicknamed “Spice Isle” for its legacy of exceptional spice production. In recent years, Grenada has had stable economic growth averaging more than 5 percent annually, making it one of the fastest growing economies in the region. However, its location within the hurricane belt and its heavy reliance on commodity exports make the country vulnerable to economic shocks caused by natural disasters and market fluctuations.

Financial Infrastructure

Grenada has two main bodies regulating its financial operations. The Eastern Caribbean Central Bank (ECCB) is a regional body established in 1983 in order to maintain the stability of the eastern Caribbean currency and the integrity of the banking system. The ECCB serves as Grenada’s central bank, setting the country’s monetary supplies, lending rates and enforcing regulations upon the banking sector. A second body, the Grenada Authority for the Regulation of Financial Institutions (GARFIN), was introduced in 2007 by an act of parliament for the regulation of the non-bank financial sector that includes insurance agencies, credit unions, pension schemes and other financial services.

Credit Access Constraints

In addition to having a firm regulatory system, Grenada currently has five commercial banks and 10 credit unions operating in the country that offer a range of credit options for individuals and businesses. However, with around 65 percent of the country’s population living outside of urban settings, along with unattractive interest rates and a risk-averse corporate climate, credit access in Grenada remains an obstacle to equal and sustainable development. In fact, a recent report by the World Bank ranked Grenada 130th out of 189 countries in terms of access to credit. Similarly, a 2013 report by the Caribbean Development Bank cites lack of access to credit as one of three widely recognized constraints to the development of the private sector.

Grenada Development Bank

Being aware of the lingering issues, the government established the Grenada Development Bank (GDB) in a concentrated effort to improve credit access in Grenada. Overseen by GARFIN, the development bank was created to serve five core purposes:

  • Expand the development enterprises.
  • Assist with high education costs.
  • Foster the development of capital markets.
  • Mobilize and coordinate resources for financing industrial and agricultural projects.
  • Provide loans for home construction and renovation.

The bank operates under close government oversight to ensure it is guided primarily by Grenada’s development needs. Although in existence since 1976, GDB has undergone a series of structural revisions and has recently seen significant improvements to both its profits and its lending contributions. In an interview with the OECS Business Focus magazine, GDB Managing Director, Mervyn Lord, said the role of the bank is to finance the gap in the economy, thereby providing the only financing option for a whole range of Grenadians who do not qualify for commercial or credit union loans.

For instance, GDB offers mortgages to homebuyers who can demonstrate their ability to make monthly repayments even though they do not have the available funds to pay a deposit. Lord also added that GDB tries to accommodate borrowers by reducing red tape requirements and accepting any source of capital (rather than just cash) to secure business loans.

Future of Credit Access in Grenada

While many development indicators are pointing in the right direction for Grenada, there are still steps that need to be taken to safeguard its recent growth. A 2018 IMF report commends the Grenadine authorities for strengthening the financial system but advises that GARFIN improves its data monitoring and stress-testing system. Although a sign of improved credit access in Grenada, the rapid uptick seen in credit union lending could lead to high default rates if not closely monitored and regulated.

– Jamie Wiggan

Photo: Flickr

Financial Inclusion in Australia
Recent reports estimate that globally, nearly two billion adults do not have access to a bank account. As a result, services such as loan credit and financial planning advice are denied to people all over the world. The primary reason that people do not have access to bank services is the lack of accessibility and affordability, especially as major banks all but dominate the entire market share regarding financial services.

However, there has been a global movement to make financial services more readily available to people who could not normally afford them. Financial technology (fintech for short) is an industry that uses technology to offer premium financial services at much more affordable costs and sometimes even for free. While fintech companies do not aim to compete with large banks, they do offer specific services, such as loan credit or financial planning advice. 

Fintech is used to describe new tech that seeks to improve and automate the delivery and use of financial services. In achieving this goal, fintech allows access to financial services to more people and helps fight poverty.

Financial Inclusion in Australia through Fintech

There has been a rise of fintech in Australia. Over the past 12 months, the financial technology sector of Australia has been rapidly evolving. An estimated 600 financial technology companies are currently being operated in Australia and this number has doubled since 2015. In fact, fintech is the largest startup sector in the country, with one in every five startups targeting fintech.

Some of the most successful startups in Australia include Prospa, Zip Money, and AfterPay Touch.

Prospa is Australia’s leading online lender to small businesses. This company has funded over $500 million, allowing small businesses to receive funding in a short period, as little as twenty-four hours. By making these funding more accessible, small and medium business owners will have the proper financial means to expand their businesses.

Zip Money provides microloans to people, free of fees. With over 700,000 users, ZipMoney allows consumers to make important purchases without any delays.

AfterPay Touch is a digital payment service that targets consumer-facing organizations. With over 800,000 customers and 6,000 retail merchants onboard, AfterPay Touch provides payment security, compliance, and fraud services at much more affordable costs.

Fintech Advantages

Although these companies provide vastly different services, they all have a common goal: to make financial services more convenient, accessible and affordable. These companies allow people to absorb unexpected losses, be financially mobile and save for the future. They are very helpful in achieving financial inclusion in Australia and in other countries as well.

Additionally, because these fintech companies are increasing financial inclusion for small and medium business owners, they are allowing business owners more opportunities to grow and expand their businesses. As a result, more jobs will be created and more people will be lifted out of unemployment and poverty. 

The Impact of Fintech in Australia and Other Countries

The impact of fintech in Australia and its booming economy is not just felt domestically, but globally as well. For instance, Australian fintech startups are also working together with the Indonesian government to increase financial inclusion in Australia and Indonesia.

Indonesia has 49 million unbanked micro-enterprises. Australia has a new $1 billion New Payments Platform (NPP) that allows people to make real-time payments over the digital economy. This platform has the potential of advancing financial inclusion for both businesses and individuals in Indonesia. Increased financial inclusion will allow people not just to have access to a banking account, but also to escape poverty and recover from financial setbacks.

Recognizing that financial inclusion reduces inequality and helps millions of people lift themselves out of poverty is key to the development of fintech startups around the globe. As more governments start working together with the private sector, the impact of this new technology can be monumental.

– Shefali Kumar
Photo: Flickr

Bill and Melinda Gates Foundation
The importance of financial inclusion for developing countries has become much more evident in recent years. Financial inclusion, the process of making financial services accessible and affordable, connects people to a formal financial system. This allows them to make better investment decisions, build assets and savings and make general daily living easier.

Often times, poor people around the world rely on cash to facilitate transactions, which can be unsafe and difficult to manage. Financial services, such as bank accounts and digital payments, can help people escape poverty by helping them to make investments in education, business and healthcare.

In fact, financial inclusion for developing countries is part of seven of the seventeen U.N. Sustainable Development Goals, including zero poverty, reduced inequality, and decent work and economic growth. Studies by the World Bank show that mobile money services that allow users to store and transfer funds on their phones lead to higher income earning potential, thereby reducing poverty.

Providing Financial Inclusion for Developing Countries

In 2011, The World Bank Group launched the Global Findex Database, funded by The Bill and Melinda Gates Foundation. The Global Findex increases financial inclusion by tracing financial inclusion efforts globally. By putting a quantitative measure to global financial inclusion efforts, The World Bank Group and other large organizations are able to track and record progress as it relates to increasing financial inclusion and its role in reducing poverty.

The World Bank recently published a report called The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. The report demonstrated that the 69 percent of adults owned a bank account in 2017, which is an 18 percent increase from the 2011 report. This translates to over 1.2 billion adults receiving access to financial tools.

Overall, the rise of financial technology (fintech for short) alongside the greater use of mobile phones and the internet have bolstered financial inclusion efforts over the past decade. Additionally, the data underscores the idea that not only are financial services expanding to more adults across the world but also the increase in financial technology is promoting greater services for those who already have bank accounts.

Financial Inclusion at Work Around the World

A recent study in Kenya found that access to mobile money reduced extreme poverty by 22 percent in households headed by women. Because mobile money allowed users to increase their savings by over 20 percent, 185,000 women in Kenya were able to leave the farming industry and move on to business development and retail, increasing their incomes and overall development.

These women were able to save at higher rates and, therefore, invested an average of 60 percent more in their businesses. Similarly, in Nepal, women who received free savings accounts spent 15 percent more on nutritious food and 20 percent more on education.

The intersection of information and technology is changing how we perceive poverty and financial access around the world. The Global Findex increases financial inclusion by allowing researchers, scholars, technology founders, development practitioners and banks across the globe to have access to data that can help navigate where financial inclusion needs to be more accessible.

The Global Findex increases financial inclusion for developing countries by creating accountability. With The Global Findex, The World Bank will be much closer to its goal of achieving Universal Financial Access by 2020. Furthermore, more people living in poverty will have the means to better allocate, save and eventually invest money in their futures.

– Shefali Kumar

Photo: Flickr