What is financial inclusion? Financial inclusion is when all members of society have access to financial services at affordable prices.
What does financial inclusion have to do with poverty? Some people may not be able to afford certain financial services. In addition, financial inclusion can help decrease global poverty. For example, when people have access to financial services, they can start and expand businesses, invest in higher education for their children and withstand financial hardships more easily. When other marginalized groups like women and disabled people have access to financial services, this can improve the economy of a country as the whole.
In 2011, 51% of adults,, or roughly 2.5 billion people, did not have a bank account. Now, 62% of the world’s adult population, or 2 billion, have an account.
China, India, Indonesia, Mexico and Tanzania have seen significant increases in account ownership. Account ownership in China increased from 64% to 79%, from 20% to 36% in Indonesia, from 35% to 53% in India, from 27% to 39% in Mexico, and from 17% to 40% in Tanzania.
Mobile money accounts have also helped increase financial inclusion. In Cote d’Ivoire, Somalia, Tanzania, Uganda and Zimbabwe, adults are more likely to have a mobile money account than an account at a financial institution. Mobile money accounts are the sole reason for the dramatic increase of account ownership in Tanzania.
In terms of the poor, account ownership increased disproportionately among adults in the poorest 40% of households. In 2011, only 29% of the poorest individuals had an account. Now, 46% of these individuals own an account. This is great news!
Overall, women are more likely to own an account than ever before. In 2011, 47% of women owned an account. Now, 58% of women own an account. Again, this is significant progress.
Account holders are using their accounts. About half of account owners in developing countries use their account to make or receive a payment. About a quarter of account owners in developing countries use their debit card to make direct payments. About 39% of account holders in developing countries use their accounts to save. This is secure and helps the economy grow.
Can we still make progress? The short answer is, of course we can. About half of the poorest individuals still do not have an account. Additionally, there is about a 7% gender gap in account ownership. The good news is that there are many ways that we can decrease this number.
Governments and businesses could drastically decrease the number of unbanked adults by digitizing wages and transfers. Additionally, many farmers are unbanked. About 23% of people in developing countries receive cash for agricultural sales. Countries could focus on banking these farmers. Additionally, mobile money accounts could be a way to expand account ownership significantly, especially among women and the poorest individuals.
Overall, financial inclusion is improving in developing countries. More adults than ever own an account. This will help improve both financial equality and financial prosperity.
– Ella Cady