Poor people lead incredibly complex financial lives. Cut off from even the most basic banking services, they are trapped in cash-based systems that are risky, expensive, and inefficient – systems that prevent them from insuring against risk and investing in their futures.
While living in Africa, I saw poor people juggling many different informal financial services, relying on family members and using unregulated money-lenders and saving clubs to manage their daily finances. Conducting eventhe most basic financial transactions was difficult, time-consuming, and costly. In 2002, I helped launch a bank in Malawi that provided people with better ways to manage their finances and ensure more stable futures for themselves and their families.
For farmers in particular, this meant having a safe place to save their money following harvest, so they would be able to buy fertilizer throughout the year. This led to higher crop yields and more income, which, among many benefits, allowed families to send children to school and replace thatched roofs with tin ones.
Growing evidence indicates that poor people could see significant improvements in their lives if they had access to financial services that many of us take for granted – things like savings accounts, loans and insurance. Yet despite the huge consumer base, the market still fails to serve the poor. Only 16 percent of low-income consumers globally have access to formal financial accounts. Access for women and rural consumers tends to be even lower.
Digital money technology – enabled in part by the widespread use of mobile phones – is helping to bring more formal financial services to poor people around the world. Mobile network signals cover about 90 percent of the world’s poor. On average, there are more than 89 mobile phone accounts for every 100 people living in developing countries. This presents opportunities for mobile-based financial tools that dramatically lower the cost of delivering banking services to the poor.
Here are a few examples of how progress in digital banking is changing the financial landscape by allowing people to send, receive and transfer money in ways that are faster, safer and cheaper:
There are complex challenges involved in developing digital payment systems, but as these innovative businesses in Africa and Asia are showing, the opportunity to help poor people worldwide build better futures is at our fingertips – and it is far too significant to overlook.
As digital money technology continues to grow and evolve – particularly with increased involvement from the private sector – it’s an exciting time to be a part of the progress taking place, and to help spur change for those that can benefit from it most. To capture the pent-up demand that exists in communities around the globe today, banks along with telecommunications and technology companies must innovate new approaches, services and products that sustainably serve the poor.
By providing simple, convenient services that enable the world’s poorest to save and mitigate against financial risks, we have the opportunity to transform people’s lives and lay the groundwork for a more sustainable and prosperous future.
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