Increasing financial access and financial inclusion have proven to be effective in reducing poverty and accelerating economic growth, and are prominent in the new Sustainable Development Goals.
But among different stakeholders.
A recent World Bank and FIRST Initiative project in : Getting the process of developing a financial inclusion strategy right is key to success when implementing reforms later.
While we’ve published these tips for financial policymakers as part of FIRST Initiative’s Lessons Learned Series, here’s a quick summary of Paraguay’s experience.
Globally, around 2 billion people do not use formal financial services. In Southeast Asia, there are 264 million adults who are still “unbanked”; many of them save their money under the mattress and borrow from so-called “loan sharks”, paying exorbitant interest rates on a daily or weekly basis. Recognizing the importance of financial inclusion for economic development, the leaders of the Association of South East Asian Nations (ASEAN) have made this one of their top priorities for the next five years.
Last week, the World Bank Group presented the latest data on financial inclusion in ASEAN to senior representatives of the ministries of finance and central banks of all 10 ASEAN member countries (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam). The session, held in Kuala Lumpur, is one of the joint activities the new World Bank Research and Knowledge Hub and Malaysia is undertaking to support financial inclusion around the world.
Despite transformative innovations in digital technologies, the digital divide is still substantial. What can be done to spread digital dividends - that is, the broader development benefits of digital technologies – more widely? How can digital technologies contribute to the World Bank Group’s twin goals of eradicating extreme poverty and increasing shared prosperity?
As this year’s World Development Report on “Digital Dividends” notes, digital finance is likely to play a key role in answering these questions. One of the main messages of the report is that digital development is not a matter of access alone.
Digital connectivity is key, but it is only a starting point for successful digital development. It is as important to strengthen other factors that interact with technology - such as responsible regulation and accountable institutions - in order to make digital technologies work for the poor. The World Development Report calls these other factors the ‘analog complements’ to digital technologies, which fall into three categories: regulation, skills, and institutions.
Mobile phones are increasingly prevalent throughout the world, and researchers have found that sending text message reminders can help people follow-through with their intentions, significantly increasing the success of development interventions.
“People need to be reminded more often than they need to be instructed.”
These are the wise words of Samuel Johnson, an English author, critic, and lexicographer. Even though he lived more than 200 years ago, international development interventions are proving him correct today.
Reminders for Malaria
It’s widely known that failure to adhere to a full course of antibiotic treatment leads to treatment failure and encourages bacterial resistance to antibiotics, threatening the sustainability of current medications. This is extremely important for malaria, which, according to the World Health Organization, results in 198 million cases each year and around 584,000 deaths. The burden is particularly heavy in Africa, where around 90% of malaria deaths occur, and in children under 5 years of age, who account for 78% of all deaths. Moreover, low rates of adherence to artemisinin-based combination therapy (ACT) treatments has led to a prevalence of antibiotic-resistant Malaria in many parts of the world, particularly Africa. One of the biggest – and simplest – reasons why people fail to complete the full treatment for Malaria is that they forget.
How many bank accounts do you have? One, two or more? For people in developed countries, a bank account is a fact of everyday life. A constant presence. Something that is pivotal to your home, your work and your family. But imagine if you didn’t have one. How would you be paid? How could you pay for your rent or mortgage, your food, utility bills, and so on?
Twin suicide bombers in Beirut were followed the very next day by the coordinated attacks in Paris. These were preceded by news reports that “more likely than not” a bomb brought down the Russian plane over Egypt’s Sinai, together with the claim by a Daesh (the Arabic acronym for ISIS) affiliate that it was behind that attack. , These attacks underscore the dangers of violent extremism. People of many different nationalities have been victims of violent extremist acts in the Middle East, Europe, Africa, Asia, and North America.
Imagine having to skip work every month to travel to the city center just to pay your electricity bill or your child’s school fee? Would you not worry if your income relied on remittances and you were unable to pay rent because they were tied up in a network of agents? And wouldn't it frustrate you if you didn’t have a say in how your salary was spent or invested?
Having a bank account could help in all of these situations. Most of us probably have auto-pay set up so we don't need to worry about our monthly bill payments or money transfers. But the conveniences we take for granted are out of reach for the world's 1.1 billion women who lack an account. According to World Bank’s Global Findex database, men in developing countries are 9 percentage points more likely than women to own an account. The gap is largest in South Asia, where only 37 percent of women have an account compared with 55 percent of men.
The World Bank recently completed two surveys that confirm that large global banks are restricting or terminating relationships with other financial institutions and that banking services for money-transfer operators have become increasingly limited.
The risk is that a decline in correspondent banking services can lead to financial exclusion, particularly for remittance providers – poor people working in richer countries who send money home to their families in poorer countries. To a large extent, these restrictions have come about because of worries about money laundering or financing for terrorism and less appetite for risk.
However, there are alternatives. Mobile money is a fast-growing alternative to traditional banks. CBS’s Lesley Stahl recently reported on how MPesa has transformed financial inclusion in Kenya, where people- many of them poor- do most of their financial transactions via cellphone and outside of traditional banking systems. She also pointed out that tech giants like Google, Facebook, PayPal and Apple are all exploring this new consumer market, where sending money can be as simple as sending a text message. Also, according to the Financial Times, mobile money is making serious inroads in Latin America, where 37 mobile money services are now operational across 19 countries. Unlike the experience of Africa, Latin Americans are using mobile money to support urban middle-class lifestyles.