A conference was held in London this past fall entitled “Financial Inclusion 2020. At the conference, an ambitious — some would say unrealistic — to achieve universal financial access over the next six years. While there is some debate over what is meant by “Universal Access to Financial Services”, the basic idea is that everyone in the whole wide world who wants one will have a bank account, or if not a relationship with a formal financial institution, will be able to transfer money, make payments, buy insurance or otherwise undertake transactions via some means other than physically handing out cash.
While this may seem like an impossible goal, there are some great changes taking place in the financial and technology sectors which make it less than the ranting of some lunatic. For one, mobile phone penetration has grown — and continues to grow, even in the poorest countries — astronomically. There are few of FINCA’s million plus clients in 22 countries who don’t own mobile phones. And mobile phones, increasingly, are being used to save and transfer money. In other cases, agents — who could be owners of gas stations, small groceries stores, or money transfer businesses — are taking the place of bank branches, especially in remote areas where banks do not find it cost effective to build branches.
Then there is the penetration of non-financial businesses — large retail chains, especially — who have “invaded” the space of formal financial institutions in the supply of credit and other financial products, with or without a banking license.
While all this is very exciting for people like myself who recalls the days when only a tiny percentage of the citizens of developing countries could get loans or open savings accounts (and I even remember a time when my mother could not have a bank account or a loan in the U.S.), it does carry risks. The questions is, will this proliferation of “access” bring with it a host of irresponsible actors, as microfinance has opened the door to many predatory consumer lenders who take advantage of customers, especially those who lack financial education to understand the terms of the services and products they are receiving?