There are close to 7 billion people on our planet, and the majority of them are not being served by traditional banking models. This is inhibiting economic growth, and furthering the divide between the “haves” the “have nots.” Understanding the reasons that lead to financial exclusion is the key to devising strategies that effectively counter it.
Because of this, I was eager to read “The Road to Inclusion” — a report conducted by MasterCard that goes into considerable detail about who the financially under-served and the financially excluded are. The findings are significant, and I’m encouraged that they can be used to affect real change that can change the world for the better.
The following are 5 points I found to be of particular interest:
- While the report was conducted on a global scale, trends and outcomes were similar in almost every country that was studied. This is a strong indication that strategies that promote access to technology, electronic payments, and the use of prepaid cards to foster financial inclusion work regardless of where they are applied.
- The vast majority of those experiencing financial exclusion are economically active adults between the ages of 30 and 40 years old who have obtained secondary education or beyond. Thus, there is a strong potential for them to become educated in the use of new technologies, payment options, and savings plans.
- Clothing, food, transportation, and telecom represent the greatest expenses for the financially underserved. In fact, most are living with friends, family, or in some other arrangement that does not require rent payments. Even so, disposable income is low, which makes it difficult for families to save and stabilize their financial situation.
- When money is saved, the financially underserved prefer to save in cash or in a social savings scheme. This is because there is widespread distrust of banks throughout the Asia-Pacific region, as well as a widespread belief that the government is a reliable manager of financial assets.
- Mobile phones are widely available, accepted, and broadly serviceable throughout Asia. This makes the use of mobile technologies to facilitate financial inclusion highly advisable for two reasons: 1) The infrastructure is already in place and 2) People trust it.
In the end, the report showed that financial exclusion is perpetuating poverty. Ending poverty begins by making sure everyone has access to the technologies and tools that make effective money management possible.