Posts

, ,

Increasing Financial Inclusion in Australia Through Fintech

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

, , ,

Postal Initiative: Helping Rural Africans Receive Remittances

Rural AfricansAlthough remittances are a lifeline for many people in Africa, collecting money from abroad has long been a challenge for rural Africans. Postal systems in remote areas are unable to process money transfers because of operational constraints.

Many post offices in sub-Saharan Africa lack computers, Internet access and other modern technologies necessary to provide financial services. The World Bank has reported that postal employees also often have little to no experience in handling transfers.

In an effort to improve access to remittance payments, the International Federation of Agricultural Development (IFAD) is implementing the African Postal Financial Services Initiative. According to IFAD, the initiative which is being implemented in 10 African countries will provide post offices with the technology, business model and expertise necessary to process remittance payments and offer other services in an efficient and safe manner.

Africa is among the world’s leaders in receiving money from remittances—of the $431.6 billion transferred to and within developing countries from abroad in 2015, Africa received $65 billion. Remittances also make up at least five percent of GDP in 14 African states, including Liberia and Mali.

However, high transaction fees have reduced the value of remittances for many Africans. According to the World Bank, sub-Saharan Africa is the most expensive region in the world to send remittances with an average cost of 9.5 percent in 2015. In Western Africa, the cost of collecting remittances can exceed 10 percent.

The high fees are set by money-transfer operators and are in part a result of a lack of competition in the remittance market. Two of the largest money transmitters, Western Union and MoneyGram, have relied on exclusivity agreements that prevent competitors from partnering with banks and other remittance payout agents.

The overall cost of collecting remittances is higher for rural Africans who must sacrifice time at work and risk their safety to travel long distances to and from financial service providers.

The IFAD and World Bank believe that remittance services would become more efficient and less costly once more postal offices in remote sub-Saharan areas are able to process money transfers.

Unlike commercial banks, which are mainly concentrated in sub-Saharan Africa’s largest cities, 80 percent of post offices operate in sparsely-populated areas where they are more accessible for rural Africans. Post offices also enjoy high levels of trust by people who would rather avoid banks, the World Bank has reported.

Postal systems that process remittances transfers and offer financial services are common and have been beneficial in other developing countries around the world. In India, the India Post has nearly 139,000 post offices in rural areas that offer savings accounts and act as an agent for partner institutions. Brazil’s postal operator, Correios, also has a financial operations branch that process remittances and provides basic banking services.

– Sam Turken

Photo: DAWN

,

Greater Access: Financial Services in Developing Countries

Financial Services in Developing Countries
When talking about fighting global poverty, most people discuss solutions to problems of malnutrition, poor shelter, or dirty water. But how about greater access to financial services?

Most individuals in the developed world could never imagine living on wages of less than $10 a day. There are thousands of ways to secure an adequate daily income because of the countless economic opportunities that are supplied by developed markets.

Access to these financial services, a sparse resource in areas suffering from poverty, provides individuals with the chance to actively participate in securing a means of subsistence.

In March, the World Bank released a video interview with Douglas Pearce, the Global Lead for Financial Inclusion at the international organization. The conversation shed light on the lack of access to financial services in developing countries.

“My favorite number is two billion,” said Pearce, “Two billion is the number of adults who don’t have access to formal financial services.” This latest statistic has fueled the World Bank’s new Universal Financial Access Goal which targets 25 countries that account for 73 percent of the world’s “unbanked.”

Access to financial services in developing countries would offer more of the world’s poor the opportunity to feed themselves and increase their potential income. “Being able to tap into savings provides that level of protection, cushion, of falling back into poverty,” Pearce continued. This method of poverty relief plays an important role in sustaining an individual’s rise out of hardship.

The World Bank plans to meet the goal of more financial inclusion by ensuring that each individual helped has a bank account regardless of gender. Pearce hopes that these accounts will be “gateways to a range of credit, insurance, payment, and savings services.” These services then allow people living in poverty to afford education, a home or vehicle and equipment to start a business.

Pearce hopes that these accounts will be “gateways to a range of credit, insurance, payment, and savings services.” These services then allow people living in poverty to afford education, a home or vehicle and equipment to start a business.

There are multiple kinds of financial services that are being integrated into poverty-ridden areas:

  1. Microfinancing is a smaller, more intimate version of a traditional loan from a large financial institution. This type of lending is more beneficial for the poor because smaller institutions can work closely with the borrower to design a plan that works for both parties. Also, a relationship of trust between the borrower and the lender can often take the place of a good credit history which allows more people to qualify for loans.
  2. Access to a micro savings account allows people to safely store any additional resources as well as earn interest on money not being spent. Digital services provided by mobile technology can enhance the interaction between those in poverty and financial institutions as electronics get cheaper and internet access increases.
  3. Owning a micro insurance policy may not seem like a useful service for those with few assets, but its importance emerges as individuals start to rise out of poverty. People who are rising out of poverty cannot afford the sudden costs and extreme losses that come with an accident. Without an insurance policy, unexpected events endanger the pathway to a better life.

These financial services are being integrated into many developing countries across the goal. The emergence of these economic opportunities has the power to inspire entrepreneurship and income security in areas with the most poverty. As Pearce says, “financial inclusion has the potential to unlock opportunity for people.”

– Jacob Hess

Photo: Flickr

, ,

Lendwithcare: A New Kind of Microfinance

Lendwithcare

Next time you need to give someone a gift, why not give the gift of giving? That is the idea behind Lendwithcare, a microfinance program established by CARE International UK. The idea is simple: you give someone a gift voucher that they can use to help the less fortunate.

At a minimum of £15, Lendwithcare vouchers enable people eager to give to provide loans for entrepreneurs in developing countries that lack access to financial services and institutions.

Entrepreneurs can fold themselves into the program by applying to local microfinance institutions (MFIs) partnered with Lendwithcare. If the MFI is confident in the entrepreneur, they give them their stamp of approval and put them in touch with Lendwithcare, which makes a profile for the entrepreneur on its website.

Lendwithcare lenders can go online, read about the entrepreneurs and their ambitions and choose which one they would like to support. After that, the entrepreneur’s activities, setbacks and successes can be tracked on the Lendwithcare website. Their profiles will be regularly updated.

Once the loans are repaid, the lender can either withdraw or find another entrepreneur to finance. It’s the gift that keeps on giving.

Since its founding in 2010, Lendwithcare has partnered up with MFIs in Benin, Bosnia and Herzegovina, Cambodia, Ecuador, the Philippines, Togo and Vietnam. According to the Guardian, by 2013, they had processed over 74,000 loans totaling £2.7 million to 4,600 entrepreneurs worldwide.

Best of all, the loans are not cut down by administrative charges. Everything goes to the entrepreneur. Lenders do not have to worry about not getting their money back. Lendwithcare’s default rate is “virtually zero,” says the Guardian.

For over two decades, according to their website, CARE has used microfinance to serve people who otherwise would not be able to find loans to support their businesses and households. Microfinance also helps entrepreneurs avoid loan sharks who prey on low-income areas.

CARE views microfinance “as a long-term and more sustainable approach to helping poor people” than simpler aid provisions. Microfinance encourages and supports self-sufficiency.

Despite the increasing popularity of the method, CARE believes that “the real potential of microfinance is still to be realized.”

Lendwithcare is the next step toward reaching that potential. Rather than restricting lending opportunities to professional institutions, the program allows regular people to get involved with financially supporting entrepreneurs in developing countries, many of whom come from isolated rural areas, according to Lendwithcare’s website.

Guided by its “strong social development mission,” Lendwithcare encourages loans which “create employment opportunities for the very poor, promote sustainable agriculture, recycling and renewable energy and energy efficiency.” It also refuses to promote loans that “involve poor animal welfare.”

Not only do loans help underprivileged entrepreneurs and the communities they live and work in but they also give do-gooders a chance to enjoy a new kind of gift.

BBC Three’s Stacey Dooley, an eager lender herself, wrote a moving article for Huffington Post about meeting the people she supports in Bosnia and Herzegovina. Lendwithcare vouchers are different from charity gifts, Dooley says, “because they keep on giving, year-in and year-out.”

With its skyrocketing success, Lendwithcare has demonstrated that its model works and that other companies can use this revolutionary idea to make development more personal and sustainable.

– Joe D’Amore

Sources: Huffington Post, Lendwithcare, The Guardian
Photo: Care International