Isobel Coleman

Democracy in Development

Coleman maps the intersections between political reform, economic growth, and U.S. policy in the developing world.

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Financial Inclusion and the World’s “Unbanked” Population

by Isobel Coleman
May 30, 2013

A man leaves an M-PESA booth after a money transaction in Nairobi on May 12, 2009 (Noor Khamis/Courtesy Reuters). A man leaves an M-Pesa booth after a money transaction in Nairobi on May 12, 2009 (Noor Khamis/Courtesy Reuters).


Imagine life without a bank account. Completing a simple financial transaction can require traveling a distance, incurring expenses, and losing precious income. Savings are more difficult to track and certainly don’t earn interest. Theft or loss of the proverbial “cookie jar” is a constant worry. Indeed, studies show that informal savers lose as much as 25 percent of their hard-earned cash each year due to theft and loss. Yet for over 2.5 billion people globally, this inconvenient, inefficient, and expensive reality is the case.

There are many reasons to believe that the number of unbanked people will shrink significantly in years to come, with important positive implications for economic growth and poverty reduction. First, grassroots and country-level efforts, both nonprofit and for-profit, are already showing how “unbanked” doesn’t have to be the status quo—and these efforts are greatly facilitated by mobile phones. Kenya is well-known for the widespread use of its mobile money system M-Pesa, which allows people to pay for goods and services through cell phones instead of with cash. Started in 2007, M-Pesa has already been used by the vast majority of Kenya’s adults.

Second, major financial institutions are supporting efforts to give more of the world’s population access to bank accounts and standard financial tools. Last summer, I wrote about Visa’s purchase of the mobile payments system Fundamo and the collaboration between USAID and Citi to expand financial inclusion, a promising instance of big financial institutions bringing their resources to bear on closing the financial inclusion gap.

Third, governments–recognizing the value of getting citizens into the financial system–are driving change by increasingly moving to electronic payments. A USAID-backed program in Afghanistan, for instance, has enabled the government to pay civil servants directly through mobile money. Graft was so reduced that some police officers mistakenly believed that they had received a 30 percent raise. Some countries are beginning to migrate their large cash-transfer programs and other socioeconomic support for the poor onto electronic benefit cards and mobile systems. Mexico and Brazil have moved aggressively in this direction. India’s emerging efforts in this area could be a game changer for that country. As of this year, it is now depositing pensions and scholarship money directly into bank accounts for 245,000 people. The real shift could come if and when it is able to achieve its goal of replacing its hugely inefficient subsidy programs with direct cash transfers to the poor distributed electronically through mobile phones and benefit cards. Nonprofits such as GiveDirectly are also experimenting with direct cash transfers through mobile technology.

At a meeting on financial inclusion that I hosted yesterday at the Council on Foreign Relations with Bob Annibale, global director of microfinance at Citigroup, and Shamshad Akhtar, assistant secretary-general for economic development at the UN’s Department of Economic and Social Affairs, we discussed many of these points. You can access the audio here. The speakers noted that the microfinance revolution began the drive for financial inclusion of the world’s poorest some forty years ago. The focus was on credit because extending small, non-collateralized loans was an innovation the nonprofits behind the movement were able to do. Today, due to changes in regulation and technology, microfinance institutions are now able to provide a range of financial services—including savings, insurance and electronic payments—to the very poor, which should speed up the pace of change in financial inclusion around the world. In some sub-Saharan African countries, still upwards of 70 percent of the population has no access to financial services. As Bob Annibale pointed out, even in Mexico, an OECD country with a growing middle class, some 50 percent of the population is still unbanked.

The Center for Financial Inclusion notes that as more developing countries move through their demographic transitions, with larger working-age and smaller dependent populations, greater financial inclusion is critical for realizing the benefits of this “demographic dividend.” Its Financial Inclusion 2020 Campaign aims to help bring about total financial inclusion “using the year 2020 as a focal point to galvanize action.” With partners such as Visa, Citi, MasterCard Worldwide, and the Gates Foundation, it should make great progress in expanding financial services globally. Stay tuned for more about FI2020 in the run-up to their Global Forum in London at the end of October.

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  • Posted by betsy teutsch

    This is especially good for women, who are more geographically isolated, with less freedom of mobility than men. Also women who save are vulnerable not just to theft and loss, but by being kind-hearted to other family members and neighbors who are in a jam. And if their husbands know where their money is stashed…. It is well-documented that even tiny amounts of savings have very positive impacts on women. (On men, too, but women – as we know – spend it more on business, food, education et al, benefiting their whole families.)

  • Posted by Peter W Foster

    There is a growing movement among policymakers in the developing and emerging word, to tackle financial inclusion through specific national targets. It is a movement that is already getting results. At the 2011 Alliance for Financial Inclusion’s ( Global Policy Forum the Maya Declaration was launched and since that time more than 35 policymaking institutions have made specific financial inclusion commitments.

    The countries represented in the Maya Declaration include financial inclusion leaders from across the globe, including SBS Peru, CNBV Mexico, the Central Bank of Kenya and more than 100 more. If you want to see how the developing and emerging world is taking the lead in this area, look no further that the Maya Declaration movement. (

    The next AFI Global Policy Forum will be taking place in Kuala Lumpur from 10-12 September with more than 350 senior policymakers in attendance. Among the expected outputs from this forum will be a further expansion of the Maya Declaration and even more ambitious national financial inclusion targets set. It should be an inspiring event. (

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