‘2.5 billion World’s Adults remain Unbanked’, Barclays Report

Microfinance Focus, June 14, 2010: Barclays, a major global financial services provider along with the Economist Intelligence Unit has today launched its report ‘Banking for Billions’ which examines the current global landscape of financial inclusion, studies recent trends, the impact of the economic downturn and assesses the potential role of new technologies and delivery models.

The report is the second publication in the Barclays Social Intelligence series which tackles global social and environmental issues and the role of the financial services sector in delivering solutions. The Economist Intelligence Unit is the business–to–business arm of The Economist Group and provides timely, reliable and impartial analysis on worldwide market trends and business strategies.

‘Banking for Billions’ report highlights facts like despite considerable progress, a large part of the global population still lacks access to financial services. 2.5 billion of the world’s adults remain “unbanked” and do not use formal or semi-formal financial services. According to the report, In the UK, about 890,000 people are estimated to be unbanked, and in the US, the figure is about 28 million.The global economic downturn has had a considerable impact, despite previous surveys of microfinance institutions which had raised hopes that they would be insulated from the “real economy”. Issues like lack of official identification, displaced or migrant people and country’s geography often contribute to the financial exclusion of poor.

The report concludes that although there is a strong groundswell behind efforts to improve financial inclusion, there are also numerous barriers preventing further progress, including a lack of education, outdated regulation and policy, and a cultural mistrust of formal financial providers. Towards a solution the report suggest that a billion people with mobile phones don’t currently have a bank account, representing an attractive opportunity for delivering banking services on a mobile platform.  New technologies, such as mobile banking, combined with innovative business models can deliver a step change in effectively servicing low income customers. Greater cooperation between banks, policy makers, NGOs and technology providers is vital to improving access to financial services and fostering prosperity in the post-financial crisis world. Branchless banking, micro investment models and mobile banking are some of the suggestive methods of accelerating financial inclusion.

Deanna Oppenheimer, chief executive of Barclays UK retail bank and member of the UK Financial Inclusion Taskforce says: “Access to financial services lifts people from poverty and fosters economic growth, but what this research shows is that there is still a long way to go with efforts to extend financial inclusion. The solutions lie in innovative financial products, new technology, change to outdated policy and increase financial literacy. But none of these can solve the problem in isolation.”

“The report also shows there is a growing consensus among experts that the most critical issue now is how to extend financial inclusion to more of the world’s population, and that the only way of ensuring progress is for financial institutions to work with NGOs and policymakers to create innovative solutions and a sustainable policy platform.”

On getting the balance right between technological advances and effective regulation, Deanna says: “Mobile telephony, smart cards and electronic transfers have already made inroads in mainstream banking. It is this sort of technology that will present the lifeline to the unbanked. However, as new technologies and payment innovations advance, the regulatory frameworks that are needed to guarantee their fair and legal operation cannot always adapt quickly enough. The challenge for regulators will be to reshape legislation in ways that protect the customer, but do not hamper the development of innovation.”

“The report also recognises these are not solely problems for the developing world. The repercussions of financial exclusion are just as evident in developed countries. Life is harder and more expensive. In the UK, the annual cost of not having a bank account is estimated at around £1000.”   

This year Barclays joined with NGOs CARE International and Plan International to launch ‘Banking on Change,’ a three-year £10 million microfinance initiative. This partnership is aimed at improving the lives of 500,000 people in eleven countries across Africa, Asia and South America by promoting savings led community managed microfinance in disadvantaged communities.

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