Five challenges prevent financial access for people in developing countries


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Financial products must be adapted to women’s needs, like enabling them to open their own account or improving their financial literacy. Photograph: World Bank Photo Collection

Two billion people worldwide still lack access to regulated financial services. Despite significant progress and the increased technical and financial resources devoted to financial inclusion, much work remains ahead.
There is broad consensus that access to a transaction account can help people better manage their life and plan for emergencies.

But financial access and the underlying financial infrastructure taken for granted in rich countries, such as savings accounts, debit cards or credit as well as the payment systems on which they operate, still aren’t available to many people in developing countries. This past September, I participated in the Global Policy Forum of the Alliance for Financial Inclusion (AFI) held in Mozambique.  This annual meeting convened policymakers, the private sector and other stakeholders to assume new commitments, discuss best practices and agree on the way forward.

 I was impressed by rich discussions I had with AFI members and representatives of different institutions on successes and obstacles in expanding access to finance in their countries.
These hurdles can be distilled into five main challenges:

Financial literacy and capability. Countries must develop financial literacy programs to ensure people can make sound financial decisions, select financial products, which best fit their needs, and know how to use related channels, such as ATMs or mobile banking.  Recent World Bank Group Financial Capability Surveys on Morocco and Mozambique, and studies on remittance services among migrants in France and Italy show that a lack of awareness prevents people from using  suitable financial products and services. Behavioral insights are leading to more effective – and lower cost – financial literacy efforts, which can improve uptake of new accounts and increase savings, including through tailored SMS texts.

 Valid identification documents. Providing people with a valid ID is essential to access financial services. Without a proper ID, it’s not possible to shift large payment flows like social benefit transfers and wages into transaction accounts. The process to obtain an ID card and to open an account needs to be streamlined. In countries where several ID documents are needed to open an account, financial inclusion efforts haven’t made as many inroads as in those countries where this process has been simplified.  

Consumer protection and regulation. While payment services like mobile money and e-money products can further expand financial access, it’s critical to establish secured and reliable platforms to protect data privacy and funds. To promote confidence in using electronic payments, it’s important to treat new customers fairly, adequately disclose key product information and establish safety and reliability standards to allow customers to make informed choices about products they select.  

Women and the rural poor. Women in developing countries are 20% less likely than men to have an account and 17% less likely to have borrowed from a formal financial institution in the past year. Financial institutions must adapt financial products to suit women’s needs. This effort can range from providing women with valid ID cards and enabling them to independently open an account to enhancing their ability to make basic financial decisions. The 2014 World Bank Group Financial Capability Survey in Morocco showed that women and people living in rural areas score significantly lower on various financial capability metrics (budgeting, coping with unforeseen events, etc.) compared to men and the urban population.  Overall, they tend to be less educated or less likely to be formally employed.

 Usefulness. Opening a transaction account is the first step, not the end goal. Transaction accounts must be useful and serve as a gateway to other financial products such as savings, credit and insurance. Some 355 million adults in developing countries who report having an account still remit money in cash or over-the-counter. Governments and the private sector can play a key role in accelerating usage by depositing wages into accounts versus paying cash.  For example, India’s Pradhan Mantri Jan-Dhan Yojana (PMJDY) initiative is shifting benefits, including for the LGP-fuel subsidies, into transaction accounts on a large scale, and has reportedly opened more than 170 million accounts.  

To tackle these challenges, we need to work together.

In the last two years, the World Bank Group has committed more than $8 billion in financial support for financial access and inclusion and for developing national and regional financial infrastructure.
This past spring, the World Bank Group and a number of public and private-sector stakeholders committed to reaching 2 billion people in the next five years through the Universal Financial Access 2020 (UFA2020) initiative. The UFA2020 is focusing on 25 countries where 73% of the world’s unbanked population lives. However, we are eager to work with all countries where we can add value as a technical partner or provide critical financial support.
This global initiative complements the Maya Declaration that many AFI member countries committed to over the last four years.  More than 85% of the reduction in the global unbanked population between 2011 and 2014 came from AFI member countries — some 55% were from countries with a Maya Declaration commitment.
At the global level, the World Bank Group and the Committee of Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS) have analyzed these challenges in the just released consultative report on Payment Aspects of Financial Inclusion, which will help us understand how payment systems and services promote access to and use of financial services.
The report will suggest key actions countries should take to advance access to transaction accounts. These actions will be crucial to making financial inclusion a reality, which will help reduce global poverty and boost shared prosperity.  

This blog post originally appeared in The Guardian.


Gloria M. Grandolini

Former Senior Director for Finance and Markets Global Practice, Finance & Markets, and Chair of the Global Remittances Working Group

Join the Conversation

Graziosi Ascanio
October 16, 2015

In my view the challenges should be six and may be the sixth should have a top position: economic inclusion. Without acting on the income side financial inclusion is an illusion. Give people a job and then inclusion will follow.

Alfred Hannig, AFI
October 22, 2015

We very much agree with the access challenges which have been outlined by Gloria. In particularly we support the view that opening a transaction account can only be the first step to other financial products.
In fact, also the Maya Declaration which has mobilized numerous country-led financial inclusion commitments puts the necessary emphasis on the importance of usage and quality of financial services for poor and low-income populations.
The current thinking of country-led approaches to financial inclusion is also reflected in the recently announced United Nations Sustainable Development Goals and in particular the supporting Addis Ababa Action Agenda (AAAA). The new UN goals heavily emphasize the need for a country led approaches for a variety of targets, including financial inclusion.
Also the IMF is increasingly showing interest in the role of financial inclusion in maintaining financial stability, driving economic growth and reducing inequality, and recognizing the financial inclusion target setting of individual countries, as it was discussed at the recent IMF Flagship Seminar at the IMF/World Bank Annual Meetings in Lima.
In conclusion, we appear to have reached a point of convergence, where the priorities of the international community are coming in line with the needs and realities of individual nations. We appreciate the broad recognition of the countries' leadership in making financial inclusion a reality for everyone everywhere.

Peter van Dijk
May 23, 2019

In addition to the article and Dr. Hannig's comment I would like to congratulate the United Nations to have added Goal nr. 16 Inclusive societies that provide access to justice for all, where public authorities can ensure effective accountability at all levels. Surely this is the key to indeed effectively protecting and supporting all citizens. If all people are regulated and effectively supervised, effectively protected and supported, only then can minimum wages and markets be inclusively supervised and enforced.
This then also means that only then will it be possible to also hold foreign aid agencies, including UN, World Bank, national and international charities accountable for their work. Foreign aid needs to be a part of building local effective societies, to finally play a meaningful role in reducing frustration and instability in the South that still increases and to stem the dangerous flow of migrants to nations that so far covered their arrogance with the mantle of philanthropy, charity

Wilson Magaya
October 24, 2015

Interesting. I worked with many groups accross Africa and in Australia and found that there exists a system that requires monetization. I think that all the points you have put here are valid, however the context, the disxourse underlaying these pounts maybe part of the challenge when putting forward solutions. Why would anyone bank or use the finacial institutions if they dont have products suitable for them indeed?

Linah Njoroge
October 26, 2015

I believe financial inclusion in countries prone to poverty is not enough when these people are illiterate.Most people living in poverty are illiterate and giving them money they wouldnt make clear decisions,so my suggestion is give them education first then the issue of money come later.

Tom Sanderson
November 03, 2015

Thank you. On literacy and capability I think governments should think about doing a mass media campaign to inform their citizens about financial inclusion risks and rewards, to build knowledge and confidence and to protect consumers from exploitation. This could accelerate inclusion and raise capability.

Ochan Mosrs
August 11, 2020

Its true that is the case in the developing countries.
I think the great issue starts with lack of knowledge and skills in financial discipline.May that area may need need more concentration before finance support is given out.