Imagine the following scenario: It’s payday and you want to pick up your salary. But first, you have to navigate a series of deteriorating, hazardous dirt roads to get to the bank. It takes you a few days just to talk to a teller. When you finally do, the teller informs you that the bank is currently out of cash – you’ll have to wait some more. By the time you actually get paid, you’ve had to miss several days of work – and to top it all off, between bank fees (including bribes or unofficial fees to bankers and security guards), the cost of lodging, travel and food, you’ve spent 15 percent of your salary just to pick it up.
Tagged: financial inclusion
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Banking on the unbanked
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Financial exclusion is a central component of the poverty trap, foreclosing economic opportunities for the “unbanked” and making it almost impossible to start or grow a business. Billions of working people, mostly in Asia and sub-Saharan Africa, lack access to basic financial services, with women, the uneducated and migrants especially disadvantaged.
The microfinance movement in the 1970s realized that giving people — especially women — access to even tiny amounts of credit unleashes individual initiative and that creating the conditions for people to be more self-reliant is inherently empowering. As microfinance programs grew into established institutions and as emerging economies have become more formalized, the disparity between women’s and men’s access to financial services has grown. Today, approximately 58 percent of women have a bank account compared to 65 percent of men. This is not only an indicator of inequality, but it also exposes the fact that more than 35 percent of working people are excluded from opportunities for upward mobility.