Although it may come as a surprise, the Middle East and North Africa (Mena) area is home to some of the world’s largest unbanked populations. Moreover, the gap in financial inclusion is greatest there.
About 22% of people don’t have bank accounts, and that’s in the comparatively rich Gulf Cooperation Council (GCC). Eighty-five million of the world’s two billion unbanked adults call our megacities, both within and outside of the glittering center, home to the majority of the population.
Here’s why these numbers warrant our full attention. Having access to banking services is an important enabler in the fight against severe poverty and for increased shared prosperity. According to a McKinsey study, 2.5 billion of the world’s adults don’t use official financial institutions like banks or microfinance cooperatives to save or borrow money. “Nearly 2.2 billion of these unserved adults live in Africa, Asia, Latin America, and the Middle East,” the paper states.
Global Findex reports that 1.7% of adults globally do not use any form of formal banking. A research from Cambridge University cites CGAP 2020 data to claim that just 41% of persons in the Mena region have access to banks. Policymakers in the region see expanding access to vital financial services and empowering women in the financial sector as the key obstacle to development.
Despite these statistics, there are still people whose lives are diminished by a lack of access to the most fundamental amenities. Perhaps most crucially, “unserved” does not always mean “unservable” from a banking industry opportunity viewpoint.
Once the unbanked has been identified as a population that needs to be brought within a financial inclusion umbrella, it is necessary to return to the technological drawing board in order to develop solutions that meet the needs of the majority of this population.
Even if traditional banking has been unable to help the poor, new tools are available because to technological advancements. The unbanked and underbanked have benefited greatly from financial technology, or Fintech as it is more commonly known today. Most of the time, their answers are applicable on a global scale, promote trust, and improve productivity.
Therefore, a wallet app’s service would make it easier for an agricultural worker to keep track of their wages, bonuses, and deductions on a daily basis, something that modern banks are ill-equipped to handle. Apps like these, as well as other financial solutions, help workers who aren’t banked know when they may get their hands on their paychecks. Those who employ them benefit from a more stable workforce and assurance of continuous service.
To assume, however, that everyone has ready access to modern conveniences would be naive. According to UN statistics, nearly half of the world’s population does not have access to the internet.
These 3.7 billion people are disproportionately female and live in low-income nations. In addition, other challenges, such as gender equality, social empowerment, and sustainable development, are intrinsically linked to financial inclusion.
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Inadequate access to financial services hinders economic development. The OECD estimates that the region loses $575 billion per year because women contribute less than 1/5th to GDP. While technology alone can’t solve every problem, it can accomplish amazing things if it takes a gender-intelligent approach rather than relying solely on “gender-neutral” products.
Providers of these services should take advantage of the region’s advanced technological infrastructure and competitive consumer market. Even the Mena region’s 65 million unbanked women have access to a mobile phone.
As many as three million of them, though, are employed by the private sector and get cash wages. The average working life of a man is longer than a woman’s, although women tend to live longer than males. This disparity, which exists since they still don’t have a bank account, needs to be addressed.
The problem we’ve had thus far is that, despite the fact that smartphone penetration in our region is 96%—much higher than the global average of 58%—a large portion of the population still does not have access to financial services.
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But the good news is that traditional banks are starting to use more advanced data analytics to achieve their goals, thanks to the technology demonstration effect. For some, the priority has shifted to investing on compliance rather than capabilities, with the hope of improved outcomes.
A society where many people do not have bank accounts can suffer consequences. They also don’t make use of banking services like insurance, deposits, credit lines, etc. because they can’t get to a bank easily.
Because they can’t use these vital services, they have to rely on cash and other equivalents to conduct all of their financial transactions. Those who have been left behind need a second chance, even if it’s purely voluntary.
