Last week at Davos there were many conversations about how to make the global economy more resilient. But the answer to that question won’t come from Davos alone.
It also lies with the billions who don’t attend the forum, including the more than 2 billion people around the world who lack access to basic financial services such as savings accounts, credit cards, insurance, and a way to make or receive payments. Many work, but can’t save for their children’s education, access credit to make important large purchases, or rely on insurance when a natural disaster hits—holding back local and national economies to the detriment of our interconnected global economy.
The good news is that today, the conditions exist to bring these people into the tent. Indeed, to truly make our global economy resilient, we must ensure financial inclusion: universal access to quality financial services at affordable prices, delivered with convenience and with client protections in place.
The notion of financial inclusion is an idea whose time has come, thanks to several defining trends in developing countries: millions of people are moving out of extreme poverty, small businesses continue to be the lifeblood of many local economies, and technological innovations are spreading quickly, making access to them cheaper and easier. Financial inclusion promises to be more than just a bridge for a single person; it can serve as a multiplier for the economy as a whole, helping entrepreneurs succeed, generating more income in the formal economy and raising GDP levels.
That’s why we are now working alongside the centre for Financial Inclusion at Accion to spearhead the Financial Inclusion 2020 campaign—a broad movement to achieve full financial inclusion for all by the year 2020. While just seven years away, this goal is actually within reach, but only if the right groups—including public- and private-sector actors across industries ranging from technology and consumer goods to banking and insurance—come together.
We are under no illusion that the task will be easy. The barriers to financial inclusion are varied and entrenched. In many countries, client protections are weak, infrastructure remains outmoded, and there is a general lack of understanding of customer needs, including the critical need for financial education to complement access to products and services. Most importantly, until increased coordination across industries and geographies is achieved, meaningful progress toward greater financial inclusion will be difficult to attain.
Yet we remain encouraged, as previously underserved markets are poised to benefit from rapid advancements in the provision of basic banking services.
For example, many argue that application of technologies already available will allow poor populations to develop financial services previously only accessible in the developed world. Technology is bringing the price to reach unserved populations to a point that makes business sense. With mobile subscriptions exceeding 86 per cent of the global population and growing, there is tremendous opportunity to reach more people, even in the most remote parts of the world.
Other trends show increasing momentum toward access to additional financial services. The International labour organisation reports that microinsurance is now reaching half a billion people, providing a previously unavailable safety net for the world’s most at-risk groups. The potential market for microinsurance, according to Lloyds, is between 1.5 billion and 3 billion policies. Fast-moving consumer goods companies increasingly are buying from and selling to the customers who make up the “invisible market” that is excluded from financial services. Additionally, “big data” has the potential to revolutionise credit reporting, which can form the basis for financial profiles for those otherwise excluded from opaque reporting systems.
Financial inclusion is also gaining prominence among policymakers. For example, the G20 has backed a broad policy initiative that goes as far as integrating financial inclusion into mainstream standard-setting bodies such as the Basel Committee on Banking Supervision (BCBS) and the Financial Action Task Force (FATF). In addition, over 80 countries from Armenia to Zambia have supported The Maya Declaration, the first global and measurable set of commitments by developing and emerging country governments to unlock the economic and social potential of over 2 billion people who could benefit from financial inclusion.
Advancing financial inclusion is not only a social imperative. By stimulating formal economic activity, financial inclusion makes sound business sense. Unlocking access to hard-to-reach markets is as much a business development strategy as it is a way to bolster economic stability for individuals and communities—both local and global. This is smart long-term business planning with massive social benefits.
Building on the good work of the G20 and many private, public and non-profit actors, we call on the business community, microfinance institutions, NGOs and policymakers to join us in envisioning a world of full financial inclusion for all by 2020. This is a major task, and one that no single sector or institution can solve alone. But the pay-off will be significant: if we do this, we have the possibility to grow economies and transform lives. We welcome you to join us in this effort.
Director of Corporate Citizenship, Citi
President & CEO, Citi Foundation
Head of Global Mobile Product, Visa Inc.