Two billion people -- or 38% of adults in the world -- do not use formal financial services, and 73% poor people are unbanked because of costs, travel distances and the often-burdensome requirements involved in opening a financial account. Their ranks include more than half of adults in the poorest 40% of households in developing countries.
Being financially excluded is linked to income level: The richest 20% of adults in developing countries are more than twice as likely to have a formal account as the poorest 20%. Yet, while the poor don't have the same access to financial products as wealthier individuals, their need for financial services may be even greater. Research shows that access to savings products – and, in particular, to “commitment” savings, in which individuals restrict their right to withdraw funds until they have reached a self-specified goal – can have important benefits beyond simply increasing one’s amount of savings: It can also help empower women, increase productive investment and consumption, raise productivity and incomes, and increase expenditures on preventive health.
Over the past several decades, different types of financial-services providers have offered new possibilities for the financially excluded. Such providers include non-government organizations, cooperatives, community-based development institutions, commercial and state banks, insurance and credit-card companies, telecommunications and wire services, post offices, and other businesses that provide point–of-sale (POS) access. New business models and providers have, in many cases, become viable due to technological breakthroughs, including the worldwide spread of mobile phones.
A transaction or deposit account can be the stepping stone to full financial inclusion, providing a pathway to a broader range of responsible financial services provided through stronger and more diverse financial institutions. Emerging evidence indicates that access to financial services through formal accounts can enable individuals and firms to smooth consumption, manage risk, and invest in education, health and enterprises.