Businesses Addressing Those Left Behind By The Modern Economy
Imagine your daily financial life—from grocery shopping to handling bills to paying rent. Now imagine trying to manage all of it without a bank account, credit card or any established savings.
According to the World Bank, for about 1.7 billion adults all over the world, that is daily life. They are the “unbanked”—lacking an account at any financial institution. They still save, borrow and manage daily expenses. But without a bank account, line of credit or debit card to their name, they’re left to participate in an informal economy often involving a strung-together system of cash, money orders, payday loans—even pawn brokers.
And while this may be a lifestyle choice for some, the vast majority of unbanked people in the world are in this predicament purely due to a lack of financial options, leaving them open to high levels of risk, expense and uncertainty.
Empowering the poor and other disadvantaged populations to take part in the mainstream financial system is the concept of financial inclusion, an objective that is increasingly recognized as a priority by a number of companies and governments worldwide.
Meant to improve the ability of underserved communities to participate in the mainstream financial system in a responsible and sustainable way, financial inclusion enables people to make day-to-day transactions, safeguard their savings, finance small businesses, plan and pay for recurring expenses, and manage unexpected expenses, according to a CGAP 2014 report.
And the good news is this: Access to basic financial services is increasing.
According to the 2017 World Bank Global Findex report, 1.2 billion adults have obtained a financial account since 2011, including 515 million since 2014. Between 2014 and 2017, the share of adults who have an account with a financial institution or through a mobile money service rose globally from 62 percent to 69 percent. And in developing economies, the share rose from 54 percent to 63 percent.
A 2018 report, Financial Inclusion in the Digital Age, highlights 100 financial technology (Fintech) companies globally that are promoting equitable practices in digital and mobile payments, lending and credit access, savings and financial planning, and even insurance.
The report recognizes companies that are enabling financial inclusion around the world, offering glimpses into the kinds of initiatives businesses are using—such as mobile capabilities, online marketplaces and big data—to foster financial inclusion.
One of the companies cited in the report is BIMA, which has improved access to insurance in Asia, Latin America, and Africa by allowing consumers to get insurance on their phones—a process supplemented by 3,500 agents who help customers understand and access a policy, many for the first time ever.
The report notes that in the United States, HealthSherpa was founded to help Americans navigate the Affordable Care Act, allowing people to assess their healthcare coverage options and select one that best suits their situation.
Fair was also featured in the report for offering customers—including some with imperfect or even non-existent credit—a payments platform that enables them to apply for and get a car right through their phones without being subjected to the rigid and complicated auto loan process.
Despite these examples of modern companies addressing traditional financial inequities, the report acknowledged that a significant number of adults still lack access to basic financial services, with common obstacles including unavailability of services in rural areas, confusing and complicated terms, limited transparency, and poor usability.
Indeed, the 2018 Financial Inclusion report acknowledges that technology alone isn’t enough to fuel financial inclusion worldwide.
“To sustain the efforts of the growing private sector and to extend the reach to the wider target group, it takes concerted efforts from multiple players: entrepreneurs, regulators, investors, policymakers, large incumbents, and consumers,” the report states. “It is therefore up to us in how we drive the next step forward.”