• 11.03.15

2 Billion People Are Still Left Out Of The Modern Financial System: How Quickly Can We Change That?

New technologies and business models make it easier to include the poor in the financial system. But it’s not as simple as snapping our fingers.

2 Billion People Are Still Left Out Of The Modern Financial System: How Quickly Can We Change That?
[Top Illustration: pizla09 via Shutterstock]

“Financial inclusion” sounds boring until you consider all the things people can do with it. Access to bank accounts, loans, money transfers, insurance–these are the things that allow the poor to climb out of poverty and start living a better life.


The bad news is that two billion worldwide still lack access to basic financial services. The good is that’s 500 million fewer people than three years ago, according to World Bank figures. And, better still, there’s a good chance they’ll be a lot less excluded in the future. Through innovations like mobile banking services and micro-insurance, there’s a lot happening to bring the final millions into the fold.

“At this rate, by 2020 the gap will have closed significantly, with one billion excluded adults remaining. With an added push, the World Bank’s goal of universal access to some type of financial account by 2020 seems within reach,” says a report from the Center for Financial Inclusion, a Washington, D.C.-based think tank.

The Middle East has the lowest rate of bank account ownership, followed by sub-Saharan Africa and South Asia. Pakistan and India have the largest overall numbers of people who are “unbanked,” followed by Bangladesh and Indonesia.

Between 2011 and 2014, many countries saw big increases in account ownership. In Kenya, one third of the population “went from unbanked to banked in three years.” Uganda, Tanzania, and the Democratic Republic of Congo also had impressive rises. However, the mobile money solution isn’t as universally popular as you might think.

“Only 2% of people globally report having a mobile account. Furthermore, users of mobile accounts are not primarily the ‘unbanked,’ as is often hoped. Instead, except in some East African countries, the majority of mobile account users also have an account at a financial institution,” the report says. In Kenya, 20% of mobile customers only bank using their phones.

The CFI says governments can encourage banks to make offers to low-income customers, as in Chile, where five million use Banco del Estado’s simplified banking accounts. And they can create better systems for inclusion, including digital infrastructure, consumer protection, credit reporting, and financial literacy awareness. These aren’t sexy things, but they’re important for building financial inclusion that lasts.


About the author

Ben Schiller is a New York staff writer for Fast Company. Previously, he edited a European management magazine and was a reporter in San Francisco, Prague, and Brussels.