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Special Report: Financial Inclusion: Reaching the unbanked

05/09/2014Research / Global


Despite rapid economic growth in emerging markets over the past decade, access to and use of financial services still lags behind the developed world. A new special report from Standard Chartered Global Research looks at why this is, why it is important for individuals and small firms to have access to financial services, and identifies some of the barriers to financial inclusion which still need to be overcome.

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Financial inclusion is a measure of the proportion of individuals and firms that use formal financial services or are ‘banked’. Nearly 50% or 2.5 billion adults are currently ‘unbanked’, most of them living in developing countries in South Asia, Africa, and the MENA region.

The micro and macro benefits of inclusion are potentially immense. Individuals can cope better with irregular income and unexpected spending needs; inclusion may also help pull them out of poverty through being able to access better education and health care. For micro-enterprises, financial inclusion can provide funds for setting up, expanding and improving risk-management. On a wider scale, it can help improve potential growth in an economy by mobilising savings.

Our report presents a heatmap of how 30 countries fare on 12 indicators of inclusion, including access to ATM machines, payments made by credit or debit card, savings, and usage of loans. Many emerging countries lag far behind on most indicators, with Nigeria, Uganda, Pakistan, Ghana and Egypt at the bottom of the 30 country universe.

There is also huge divergence across emerging market economies, with East Asian countries in general doing better than countries in Sub-Saharan Africa. There are, however, pockets of strength even amongst the less financially inclusive countries. Around a fifth of the adults in Bangladesh, Vietnam and Thailand have savings at a financial institution, while around two-thirds of the adult population in Kenya make or receive payments using their mobile phones.

Although working from a very low base, some countries are making significant strides in improving the number of ‘banked’ adults, including the expansion of ‘newer’ innovations in financial inclusion; usage of electronic banking and retail points of sale in Indonesia and Malaysia, for example.

The report goes on to identify five barriers to financial inclusion; ‘natural’ barriers such as geographic distance, lack of financial infrastructure, restrictive regulations, governance failures, and lack of suitable products that cater to the needs of poor people. The gains made in financial inclusion can be explained by the progress made in surmounting these barriers, driven by initiatives by policymakers and financial institutions, and helped by technological innovations.

New technologies and innovations are increasingly driving financial inclusion, making it economically viable for banks to reach poorer people. For example, mobile money or ‘branchless’ banking schemes have seen rapid growth in countries where branch banking has been hampered by transportation and infrastructure problems, fuelled by the success of M-PESA in Kenya.

John Calverley, Head of Economic Research, commented: “Removing the physical, bureaucratic and regulatory barriers to financial inclusion remains a challenge for many emerging and developing countries. There is still much more to do, but it is promising that countries are pushing through reforms that are starting to bear fruit and should enable them to move many steps closer to greater financial inclusion.”

For further information please contact:

Shaun Gamble
Senior Manager, External Communications
Standard Chartered Bank
Tel: +44 20 7885 5934

John Calverley
Head of Economic Research
Standard Chartered Bank
Tel: +1 905 534 0763

Notes to Editors:

Standard Chartered

We are a leading international banking group, with more than 86,000 employees and a 150-year history in some of the world’s most dynamic markets. We bank the people and companies driving investment, trade and the creation of wealth across Asia, Africa and the Middle East, where we earn around 90 per cent of our income and profits. Our heritage and values are expressed in our brand promise, Here for good.

Standard Chartered PLC is listed on the London and Hong Kong Stock Exchanges as well as the Bombay and National Stock Exchanges in India.

For more information please visit Hear from Standard Chartered’s experts and comment on our blog at Follow Standard Chartered on Twitter, LinkedIn and Facebook.


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