World Bank reports big drop in numbers of unbanked

World Bank reports big drop in numbers of unbanked

A new report from the World Bank has recorded a massive 20% drop in the numbers of unbanked consumers, as 700 million adults worldwide joined the formal banking system and became account holders between 2011 and 2014.

Over the past three years, the percentage of adults with an account increased from 51% to 62%, a trend driven by a 13 percentage point rise in account ownership in developing countries and the role of technology.

“Access to financial services can serve as a bridge out of poverty. We have set a hugely ambitious goal - universal financial access by 2020 - and now we have evidence that we’re making major progress,” said World Bank Group President Jim Yong Kim. "This effort will require many partners - credit card companies, banks, microcredit institutions, the United Nations, foundations, and community leaders. But we can do it, and the payoff will be millions of people lifted out of poverty.”

The 2014 Findex found there is still more work to be done to expand financial inclusion among women and the poorest households. More than half of adults in the poorest 40% of households in developing countries were still without accounts in 2014. And the gender gap in account ownership is not significantly narrowing: In 2011, 47% of women and 54% of men had an account; in 2014, 58% of women had an account, compared to 65% of men. Regionally, the gender gap is largest in South Asia, where 37% of women have an account compared to 55% of men.

The indicators in the Global Findex database - set up in 2001 with funding from the Bill & Melinda Gates Foundation and in partnership with Gallup - are drawn from survey data covering more than 150,000 people in 143 economies.

Technology, and in particular mobile money, is seen to play a pivotal role in expanding access to banking services.

The biggest gains can be seen in Sub-Saharan Africa, where on average more than 10% of adults report having a mobile money account. In 13 countries, usage exceeds 10% and, among those, Cote d’Ivoire, Somalia, Tanzania, Uganda, and Zimbabwe have more adults using a mobile money account than an account at a financial institution.

Access to digital payments, through a mobile phone or point-of-sales terminal create opportunities to provide more convenient and affordable payment options, says the World Bank, which is calling on the private and public sector in developing economies to start paying wages digitally.

"Globally, paying government transfers and government wages through accounts (instead of cash) can increase the number of adults with an account by up to 160 million," states the report.

Comments: (10)

A Finextra member
A Finextra member 16 April, 2015, 12:28Be the first to give this comment the thumbs up 0 likes

The positive headline figure of 20% relies on using a particular and broad definition of the word 'Banked'. It may be misleading, in that many of these digital/mobile financial service products dont count as 'Banks' from a regulator persepctive nor are they given access to broader global FS via the correspondent banking players. So to call these users 'banked' doesnt refelct their limited access to FS. What is needed is a regulatory framework and associated enforcement approach that encourages the correspondent banks to recognise these players and facilitate their products and services. 

Brett King
Brett King - Moven - New York 16 April, 2015, 13:04Be the first to give this comment the thumbs up 0 likes

Andrew,

The definition of 'banked' no longer needs to include only banks. Technically you are saying that a value store like a mobile money account is not a bank. That is a definition only bankers would really use.

Before there were banks we used to store wealth in castles and churches. Before there was money we used to use grain, and other commodities to accumulate 'wealth'.

While the newly 'banked' in this report have limited access to FS, especially credit, the gap is definitely closing because of these alternative methods. This can only be a good thing

BK 

A Finextra member
A Finextra member 16 April, 2015, 13:08Be the first to give this comment the thumbs up 0 likes

Quite agree, this is not my positioning, I am highlighting the current challenges brought about by the failure of regulators to keep pace with technology and the risk averse positioning of the 'Banks'.

Brett King
Brett King - Moven - New York 16 April, 2015, 13:10Be the first to give this comment the thumbs up 0 likes

Absolutely agree. 

Neil Young
Neil Young - MEI - 16 April, 2015, 17:06Be the first to give this comment the thumbs up 0 likes

I would suggest that one reads these figures with caution.  There is a significant difference between the number of basic bank accounts set up with government financial inclusion initiatives and the actual utilization rate of those accounts.  It takes a deeper dive into the numbers to see the actual impact.  Good to see the progress regardless, though!

Brett King
Brett King - Moven - New York 16 April, 2015, 17:531 like 1 like

Neil. Absolutely. But that's where we simply should use a bank account as the definition of inclusion any more. If a mobile value store allows you to pay electronically, to save money, but isn't government guaranteed and doesn't come with Financial Literacy requirements, it still has created inclusion. Just not inclusion in the OLD system

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 April, 2015, 11:28Be the first to give this comment the thumbs up 0 likes

I always felt this banking the unbanked thing is BS (Calling B.S On Banking The Unbanked) - this report just confirms it!

On another note, if the scope of "banked" is expanded to unregulated entities including Mobile Money Management Apps (MoMMAs), I wonder how the World Bank or anyone else knows the number of people who belong to them. Except during an M&A event, I hardly see the likes of Simple, Airtel Money and other MoMMA reporting their user base. Besides, why should tech-facilitation alone be a criteria for reckoning the alternatives? For decades, if not centuries, people at the bottom of pyramid in India have participated in so-called chit funds, which are unregulated entities in local neighborhoods running on paper passbooks that take deposits (typically few hundreds or thousands of INR per month) and give loans (typically few thousands or tens of thousands of INR at any one time), two key functions performed by regulated banks. Their customer base is even more difficult to estimate, apart from my personal observation that virtually every Indian who has any money to spare is their customer.

Graham Seel
Graham Seel - BankTech Consulting - Concord 17 April, 2015, 17:41Be the first to give this comment the thumbs up 0 likes

As previous comments indicate, we can't answer multiple questions with a single metric.

(1) We would like to know how many people have access to safe, convenient, affordable financial services including savings, payments, loans and (ideally) insurance. This gives the potential number of "banked" if "safe" includes properly regulated services (whether formal banks or not). 

(2) We need to know the take up of available financial services - this is essentially what this survey seems to measure, along with critical demographic breakdowns.

(3) We also need measures of utilization of financial services (more difficult to define the right metrics) - savings, borrowing, payments (including remittances), insurance. Again demographics would help.

(4) Hardest of all, we need measures of the social and economic impact of this increasing financial inclusion. I'm not sure we've made much progress in this as yet.

Graham Seel
Graham Seel - BankTech Consulting - Concord 17 April, 2015, 17:54Be the first to give this comment the thumbs up 0 likes

My the way my last comment, I use the term "properly regulated" - intentionally vague. But I would suggest that financial inclusion should include the goal of balancing risk to the customer (e.g. deposit insurance), risk to the provider (credit risk), and political risk (money laundering, terrorist financing) against the costs of regulation and supervision. Light regulation needs to be designed - some governments are working on it, but we have a very long way to go.

Prasenjit Das
Prasenjit Das - Virtusa - Hyderabad, India 18 April, 2015, 05:49Be the first to give this comment the thumbs up 0 likes

The report says that ‘Technology, and in particular mobile money, is seen to play a pivotal role in expanding access to banking services’ .The biggest gains can be seen in Sub-Saharan Africa, where on average more than 10% of adults report having a mobile money account.

If such is the case the potential for a drastic reduction of unbanked populace can be gauged from the  fact that India has opened  115 million bank accounts of which about  80 million having no money in them towards the end of 2014.Further one in every 300 Indian(compared to 76% in Kenya) uses mobile payment and of every 9  out of 10 transaction are paid in cash and coins. India is grabbing the opportunity by calling for and having received application for ‘payments bank’. India’s’ largest bank with over 17K branches and asset size over $ 400b is in the fray. So also an ‘ outsourcing company’.

 

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