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financial inclusion

The FinTech revolution: A perspective from Asia

José de Luna-Martínez's picture

Will cash and checks still exist 15 or 20 years from now given the increasing digitization of money? Is the smartphone our new bank? Will many people working in the financial sector industry lose their jobs due to growing use of technology, robots, algorithms, and online banking? Is financial technology (FinTech) the solution to providing financial services to the 2 billion people in the planet that still lack access to finance? Will digital currencies and other innovative FinTech products pose systemic risks in the future? What is the best approach to regulate FinTech companies?

Islamic finance in Malaysia: Filling the gaps in financial inclusion

José de Luna-Martínez's picture

In the past decade, the Islamic finance industry has grown at double digits despite the weak global economic environment. By 2020, the Islamic finance industry is projected to reach $3 trillion in total assets with 1 billion users. However, despite its rapid growth and enormous potential, 7 out of 10 adults still do not have access to a bank account in Muslim countries. This means that 682 million adult Muslims still do not have an account at a banking institution. While some Muslim countries have high levels of account ownership (above 90 percent), there are others with less than 5 percent of their adult population who reported having a bank account.

Improving the Odds of Being Formally Financially Included in Senegal

Siegfried Zottel's picture

While most adults in developed countries have an account at a bank or another formal financial institution, this is not the reality in many developing countries, including Senegal. A recent World Bank Group (WBG) Financial Capability Survey revealed that less than one in five Senegalese adults (17%) report owning an account at a formal institution, which includes banks, microfinance institutions, or e-money agents. While Senegal’s financial inclusion levels are similar to those in other lower-middle income economies, the country lags behind the average inclusion rate among Sub-Saharan African economies.

Powerful panel weighs progress on financial inclusion

Donna Barne's picture
Event Replay

Government leaders and advocates came together during the Annual Meetings to discuss a major development goal – ensuring everyone has access to affordable financial services such as a bank or mobile money account. While a lot of progress has been made on “financial inclusion,” new rules affecting the flow of funds threatens to slow or even reverse some gains.

Financial Inclusion not Exclusion: Managing De-Risking brought together Queen Máxima of the Netherlands, US Treasury Secretary Jack Lew, Zhou Xiaochuan, Governor of the People’s Bank of China, Sri Mulyani Indrawati, Indonesia’s Minister of Finance. Arun Jaitley, India’s Minister of Finance, World Bank Group President Jim Yong Kim, and Juan Manuel Vega-Serrano, the president of the Financial Action Tax Force (FATF), which sets international standards for  combating money laundering, terrorist financing and other related threats.

Some 700 million people were brought into the formal financial system between 2011 and 2014 – a major success – but 2 billion people remain cut off, said Queen Máxima, who is the United Nations Secretary-General’s special advocate for inclusive finance for development.

A new challenge to financial inclusion is a trend toward “de-risking” by banks. Many larger banks are increasingly terminating or restricting business relationships with remittance companies and smaller local banks in certain regions of the world. De-risking has therefore made money transfers more difficult for migrant workers and humanitarian organizations working in war-torn places.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Global Anticorruption blog
International summits come and go, and all too often the promises made at these summits are quickly forgotten, lost in an online catacomb or otherwise hard to track. We at Transparency International are determined that the commitments made by government representatives at last May’s London Anticorruption Summit (648 total commitments by 41 of the 43 participating governments) must not slide into oblivion in this way. That’s why, as Matthew announced in a post earlier this month, we’ve gone through every single country statement and compiled all commitments into one central database, sortable by country, theme, and region. Our goal is for this database to be used by anticorruption advocates and activists to monitor what their countries have committed to, and whether and where they are making progress.
Wall Street Journal
The ubiquity of cellphones could allow a rapid expansion of financial services throughout the developing world, with major implications for growth and credit accessibility, a McKinsey & Co. report concludes. “With the technology that’s available today you could provide billions of people and millions of businesses opportunities that don’t exist to them today,” Susan Lund, co-author of the McKinsey Global Institute report on digital finance, said in an interview. The report found that with coordinated action by financial firms, telecommunications companies and developing-country governments, some 1.6 billion people could gain access to financial services by 2025, all without major new expenditures on physical infrastructure.

The Nexus of financial inclusion and stability: Implications for holistic financial policy-making

Martin Melecky's picture

Both financial inclusion and financial stability are high on international policy makers’ agenda. For instance, the G-20 has called for global commitments to both advancing financial inclusion (the Maya Declaration and the Global Partnership for Financial Inclusion) and enhancing financial stability (the Financial Stability Board, Basel III Implementation, and other regulatory reforms). One challenge is that there can be important policy trade-offs between the two objectives.

A rapid increase in financial inclusion in credit, for example, can impair financial stability, because not everyone is creditworthy or can handle credit responsibly—as illustrated in the last decade by the subprime mortgage crisis in the United States and the Andhra Pradesh microfinance crisis in India. In addition, trade-offs between inclusion and stability could arise as an unintended consequence of bad or badly implemented polices.

Establishing payments interoperability: coordination is key

Thomas Lammer's picture

Efficient, accessible and safe retail payment systems and services are necessary to extend access to transaction accounts to the 2 billion people worldwide who are still unserved by regulated financial service providers.
Having interoperable payment services addresses several important challenges regarding financial access and broader financial inclusion. This is because interoperability enables people to make payments to anyone else in a convenient, affordable, fast, seamless and secure way via a single transaction account.
Establishing payments interoperability is a formidable task. Our experience shows it is important to find the right balance between cooperation and competition when reforming retail payment systems.  Despite the advantages that interoperability brings, not all market participants will necessarily embrace interoperability initiatives, e.g. if they fear to lose their dominant position and/or competitive advantage. In an earlier Blog the role authorities to facilitate interoperability has been discussed. Central banks are a key driving force in any payment system reform, but they cannot – and should not – act alone. Other regulators – such as financial and telecom regulators – are also important to achieving interoperability.

Building an inclusive financial sector in Myanmar: The road ahead

Alexandra Drees-Gross's picture

Myanmar’s financial sector is undergoing a historic transition. It has witnessed a number of reforms and liberalizations since 2012: private banks have expanded their operations rapidly; more than 1.4 million debit cards have been issued for the first time; thousands of ATMs have been set up; and credit to the private sector has grown steadily, albeit from a low base.

Financial inclusion has a big role to play in reaching the SDGs

Leora Klapper's picture

Scan the United Nations’ 17 Sustainable Development Goals (SDGs). You’ll see inclusive growth, clean water and greater equality, among other objectives. But you won’t see this: Giving people access to savings accounts, loans, insurance and other financial services.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

The Internet
Global Governance Monitor

The Internet has revolutionized communication and radically altered the conduct of business, politics, and personal lives. Information is now widely available and shared through instant message, email, and social media. Businesses can operate internationally with virtually no delay, enabling previously unimaginable opportunities such as providing medical advice across oceans. Moreover, the embedding of sensors, processors, and monitors in everyday products links the physical and virtual worlds, expanding vast streams of data and creating new markets. The Internet has also altered the relationship between governments and societies. Low-cost, nearly ubiquitous communication platforms allow citizens to mobilize and build transnational networks. The speed of communication can make governments more accountable, and open-data initiatives enable the participation of nongovernmental organizations and increased transparency. Though the technology has facilitated unprecedented economic growth, increased access to information, and delivered innovative solutions to historic challenges, the expansion of the Internet has also brought challenges and vulnerabilities.

The 2016 Brookings Financial and Digital Inclusion Project Report, Advancing equitable financial ecosystems
Brookings Institution

The 2016 Brookings Financial and Digital Inclusion Project (FDIP) evaluates access to and usage of affordable financial services by underserved people across 26 geographically, politically, and economically diverse countries. The 2016 report assesses these countries’ financial inclusion ecosystems based on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of selected traditional and digital financial services. The 2016 report builds upon the first annual FDIP report, published in August 2015. The 2016 report analyzes key changes in the global financial inclusion landscape over the previous year, broadens its scope by adding five new countries to the study, and provides recommendations aimed at advancing financial inclusion among marginalized groups, such as women, migrants, refugees, and youth.