Three quarters of the world’s poor, 2.5 billion in terms of number, do not have bank accounts, not only because of poverty but also because of the cost, travel distance and amount of paper work involved in opening one, according to a World Bank report.
Those without access to formal banking often have to rely on money lenders who often charge high fees. The ‘unbanked’ are also less likely to start their own business or insure themselves against unexpected events, said World Bank’s Global Financial Inclusion Database or Global Findex posted on its web site.
It said financial inclusion or being ‘banked’ could be transformative as it allows poor people to build a more secure future. The ability to save and borrow allows them to build their assets, start a business, invest in education, establish a credit rating, and eventually own a home.
‘Providing financial services to the 2.5 billion people who are ‘unbanked’ could boost economic growth and opportunity for the world’s poor,’ said the World Bank president, Robert B Zoellick.
He added: ‘Harnessing the power of financial services can really help people to pay for schooling, save for a home, or start a small business that can provide jobs for others. This new report on the world’s ‘unbanked’ makes the case: the more poor people are banking today, the more they are banking on their future.’
The report stated that women are particularly disadvantaged when it comes to access to financial services. Only 37 per cent women in the developing countries have accounts whereas 46 per cent men do. The gap is even bigger among those in poverty: Women living below $2 a day are 28 per cent less likely than men to have a bank account.
Worldwide, 22 per cent adults report having saved at a formal financial institution in the past 12 months, according to the Global Findex. Findex provides the most comprehensive picture yet of how people around the world save, borrow, make payments and manage risks.
Even among those who do have formal bank accounts, only 43 per cent adults use their accounts to save. Yet 61 per cent account holders worldwide use their accounts to receive payments from an employer and the government or family members living elsewhere, said the report.
The data was collected by Gallup, Inc. using the Gallup World Poll Survey. The World Bank’s Development Research Group is building the database with a 10-year grant from the Bill & Melinda Gates Foundation.
Few adults in developing countries use formal financial products to manage risk. More than 11 per cent adults in developing countries have an outstanding loan for emergencies or health care needs, but more than 80 per cent of these adults use only informal sources of credit.
‘Good, comparable national data is so important for the development of effective policies. I hope policy makers will use this research to help make sure everyone, everywhere, has access to financial services,’ said Princess Máxima of the Netherlands and the UN secretary general’s special advocate for inclusive finance for development.
-With UNB/New Age input