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Bancarization, as in the process towards the financial inclusion of all of the population, remains a key instrument to boost development in many countries.Only six out of 10 adults have an account in a financial institution. According to the WB, the impulse of bancarization or financial inclusión is a consequence of the economic growth of a country.There are development gaps between countries, and gender gaps between people everywhere, but mostly on those countries with less financial tradition. In this ebook all the progress in the field is analyzed through interviews, studies and an infographic in which the figures of this trend can be scrutinized.
Citation preview
InclusionFinancial
01 02
Towards full bankingpenetration?
INFOGRAFAFinancial inclusion2011/2014
03
04 INTERVIEWGema Sacristn05 Banking penetration in Africa driven by mobile
devices
FINTECH SERIE BY innovation edge
BANKING PENETRATION,
AN INSTRUMENT
TO PROMOTE DEVELOPMENT
The gaps of banking penetration
01Towards full banking penetration? Between 2011 and 2014, 700 million people opened a bank account. The number of
people outside the banking system fell by 20% worldwide.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Between 2011 and 2014, 700 million people
opened a bank account. In the same period, the
number of people outside the banking system
fell by 20%, or 2 billion adults. In 2014, 62% of
adults held an account, well above the 54%
registered in 2011.
The World Bank's 2014 Global Findex study,
funded by the Bill and Melinda Gates Foundation
in partnership with Gallup, Inc., highlights the
importance of banking penetration for a country's
development: It is a critical factor in reducing
poverty and is the result of economic growth. It is
not an end in itself, but it leads us towards an end
since it offers substantial benefits for individuals.
The year 2020 is one of the dates set by the
World Bank for many countries in Latin America to
achieve full banking penetration. Meanwhile,
governments are implementing programs to put
an end to the so-called financial illiteracy of the
population. This report stresses that to the extent
that people participate in the financial system,
they are better prepared to run their businesses,
invest in education or face risks. financiero est
ms capacitada para desarrollar sus negocios,
invertir en educacin o enfrentarse a los riesgos.
Pedro Ramiro, coordinator of the Latin American
Multinational Company Observatory (OMAL),
points out in this article published in El Pas the
possibilities that banking penetration offers to
financial institutions: Workers are paid in an
envelope, families do not use standing orders, or
mortgages there is a huge potentiality for
customers.
Turning to the report, Global Findex shows that
Latin America and the Caribbean have made
significant progress in banking penetration. 51%
of adults (over the age of 15) in Latin America and
the Caribbean hold an account, compared with
39% in 2011, but even though this progress is
significant, there are still 210 million adults outside
the banking system. These account for 10% of the
total 2 billion people who are still not using
financial services worldwide.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Today, 40 million adults receive government
payments in accounts. In Brazil, 88% of the
beneficiaries of government transfers received
them in an account. In Argentina, the number of
account holders among the poorest 40% of
households doubled to 44% between 2011 and
2014.
In Mexico, the percentage of the adult population
with an account increased from 27.4% in 2011 to
31.1% in 2014, a level well below countries like
Brazil (68.1% of adults with an account), Chile
(63.3%), Venezuela (57%), Ecuador (46.2%),
Uruguay (45.6%), Panama (43.7%), Bolivia
(41.8%) and Guatemala (41.3%).
The most notable change in access to financial
services in the region comes from Central
America: in El Salvador, Guatemala, Panama and
Honduras the number of account holders
increased by more than 50% between 2011 and
2014. Lagging behind are Peru (with only 29% of
adults with an account), Nicaragua (19%) and Haiti
(18%).
In the region as a whole, 28% of adults make
payments directly against their accounts using a
debit card, compared with 14% in developing
countries on average.
Central America the number of account
holders increased by more than
50%
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
The role of governments
and private institutions in
banking penetration
These figures show that there
is still a long way to go in
promoting the use of banking:
135 million adults hold an
account, but they pay for their
utility bills in cash. The report
says: By paying wages in the
public sector and government
wages and transfers in digital
format (instead of in cash),
governments and the private
sector can play a key role in
accelerating the opening of
accounts and boosting financial
inclusion. Worldwide, payment
of government wages and
transfers through accounts
could increase to 160 million
the number of adults holding
an account.
The report also addresses
another important part of
banking penetration: saving.
However, holding a checking
account does not guarantee
that people will save money at
a financial institution.
Of the 41% of people who
claimed to have saved in
2014, more than half did not
to so through financial and
similar institutions, although
compared with 2011 there
was a 13% increase in those
who saved using bank
branches.
When asked why they do not
hold an account, their answer
is that they are very expensive
and they believe that they
have no need to hold an
account. The report highlights
that the moment costs go
down, many people will be
willing to hold an account.
Full banking penetration is
one of the most effective
instruments in fighting
poverty.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
The gaps of banking penetration
02
More than one billion women have no access to
the financial system ( ) ; 58% are bank account
holders compared with 65% of men.
More than one billion women --40% of women
worldwide-- have no access to the financial system.
According to the Global Findex 2014 report, the
gender gap is obvious: 58% are bank account holders
compared with 65% of men.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Poor women bear the brunt:
because of their low income
they are still being denied
access to financial tools. As
pointed out in this article by Sri
Mulyani Indrawati, Managing
Director and Chief Operating
Officer of the World Bank:
Women in particular are in a
situation of disadvantage as
regards access to financial
services. In developing
economies they are 20% less
likely than men to hold a bank
account and 17% less likely to
apply formally for a loan.
Moreover, they have less access
to secure saving mechanisms
and are more likely to use
informal, and therefore,
probably riskier and more
expensive methods.
of wome are bankaccount holders
compared with 65% of men
58%
of women worldwide, have no access to the
financial system
40%This represents an 11% increase
for both sexes if we take the
initial 2011 survey as a
reference, although the
inequality between men and
women stands at 7% (globally)
and increases to 9% in
developing economies. In
Southeast Asia only 35% of
women have access to an
account, while the percentage
for men increases to 55%.
The gap is particularly significant
in the Middle East, where
women are half as likely to hold
an account compared with men.
In Latin America, inequality has
decreased and tends to level off:
47% of women hold an account,
compared with 54% of men.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
According to Ursula Heimann,
managing partner of Solliv:
Women usually manage their
money in the short term better
than men, but they have less
financial expertise and
confidence in their abilities, which
leads to less access to formal
financial products.
And what happens when a
woman applies for a loan? This
report by Chile's Bank and
Financial Institution Association
(ABIF) points out that women
are better payers than men.
Despite facing a more complex
financial situation at home,
women make a relatively bigger
effort to pay off their debts (...)
and tend to assess in a more
critical way the financial situation
of their households, which leads
to better financial planning and,
in turn, to better payment
behavior.
The benefits of giving women
access to finance extends to
their children and goes much
further, since women spend
money on health and
education. In South Africa or
Brazil, for example,
granddaughters are more
likely to enroll in school when
the grandmothers receive a
pension.
A woman who has access to a
bank account looks after her
family and after herself and can
change the future. This is
illustrated by a Huffington Post
article, Bank on Her: 5 Women
Prove Why They Belong in the
Formal Financial System, that
shows how access to the
financial system changes the
lives of women and of their
families completely.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
The obstacles
Women face many barriers
when it comes to having
access to financial services and
sometimes are not aware of the
services available or are
prevented from having access
to them. In less developed
economies, women cannot
have access to banks because
they live in remote areas and
even on some occasions, as
stated in this report by the
World Bank, are regarded as
second-class clients by financial
institutions.
Another problem they face is
that 200 million women,
according to this study by
GSMA, have no cell phones,
which excludes them from all
digital banking opportunities,.
that very vigorous in countries
with less banking penetration.
To achieve gender equity in
access to financial products and
services the institutions need to
recognize the key aspects of the
financial lives of women and their
motivations.
As Sri Mulyani Indrawati
concludes: Financial inclusion
matters not only because it
promotes growth, but also
because it helps to ensure that
prosperity is widely shared.
Access to financial services plays
a key role in the task of lifting
people out of poverty, in
empowering women and helping
governments deliver services to
the population. It is decisive in
the fight against poverty.
FINTECH SERIE JULY 2015
INFOGRAPHIC
FinancialinclusionIn 2011 the World Bank set up the Global
Findex databases in order to study the
financial transactions people use to save, ask
for loans, make payments and manage risks.
Share on Pinterest
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Growth of financial inclusion
Between 2011 and 2014 there has been a significantgrowth in financial inclusin worldwide.
Growth in developing countries
Adults in the worldwith a bank account
20142011
51% 62%
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Opportunities
GenderIn devoloping countries there is still a gender gap in terms of financialinclusion.
By residenceWith a formal account in low-income economies:
Less likelyto have anaccount.
Less likely to have savedformally.
Urbanresidence
Rural residence
Men Women
Formal bankaccount
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
By agePeople aged between15 and 24 are
Cellphone accountWhile only 2% of adults around the world have their money account on their cellphone, 12% in sub-Saharan African countries have an account of this kind, and of this number, half have only this account.
Cash paymentsIn developing countries over 400 million non-bankarized adults receive their wages or government support payments in cash.
Account usesHaving an account is the first step towards financial inclusion. In developing countries, account holders use their accounts for a range of functions.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Millions of adults with money account on their cellphones:
Agriculturalpaymentsin cash
Gema Sacristn heads the Financial Markets Division at the
Structured and Corporate Finance Department at the IDB, the area
responsible for development and capital markets, financing
foreign trade, and relations with financial intermediaries mainly
banks and mutual funds.
04/INTERVIEWFinancial literacy plays a key role in responsible decision-making GEMA SACRISTN
227 million adults in Latin
America and the Caribbean do
not have access to formal
financial services How can we
fight to achieve financial
inclusion?
We are currently seeing a
redoubling of the efforts to
increase access to financial
services worldwide through a
range of public and private
initiatives and community
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
support schemes, such as
opening accounts for depositing
payroll checks or for transferring
funds to the beneficiaries of
public programs; financing
guarantee systems for targeted
loans; creating financial
intermediaries; their funding and
capitalization; subsidies for
acquiring physical and
technological infrastructure;
providing technical assistance;
and in terms of the legal
framework the creation and
adaptation of specific laws to
regulate the activity of non-
banking financial intermediaries.
In addition large-scale financial
services with a business focus
are being provided by the banks
(downscaling) and other
companies and financial
intermediaries.
the Caribbean (LAC). These
include regulatory reforms for
the supply of electronic money,
increased coverage of physical
access points by financial
intermediaries, and the use of
systems for making government
payments.
What are the IDB's proposals?
Recent years have seen a
number of public and private
initiatives aimed at generating
major changes in the financial
systems of Latin America and
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
The IDB works in several areas
to improve financial inclusion in
the region. Transactions and
product knowledge focus on
expanding the financing frontier
for the productive sector,
developing capital markets and
risk management instruments,
and implementing and
reinforcing the rules and
institutions for the effective
management of macro-financial
risks. The aim of our beyond
Banking program is to promote
practices of social and
environmental sustainability and
corporate governance among
the financial intermediaries in
the region.
What should the involvement
of governments be?
In spite of the advances in
recent years, the governments
in the region need to reinforce
public policies aimed at
increasing financial inclusion,
and this requires more work in
the areas of service supply and
demand and in the institutional
framework. For example, even
in countries with greater
regulatory advances, there is still
a need for reforms to simplify
the basic accounts and reduce
the regulatory cost of accessing
the system, to facilitate the
expansion and financial viability
of non-banking correspondents
to lower transaction costs for
users and providers, and to put
in place sensible frameworks to
back the regulations governing
electronic money. This will
ensure they are proportional to
the risk assumed by the
providers, and grant the
necessary legal security while
guaranteeing the financial
stability of the system.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
And how should the private
sector be involved?
Financial literacy plays a key
role in responsible decision-
making. It offers considerable
benefits both for individuals
and for the economy as a
whole, as it helps develop
the necessary skills to assess
the risks and consider the
potential gains of a financial
transaction; in short, it
teaches people how to weigh
up the positive and negative
aspects of a financial
alternative and reach a
responsible decision.
Financial literacy also benefits
individuals in all stages of their
lives: children, by teaching
them the value of money and
saving; young people, by
preparing them to exercise
responsible citizenship; adults,
by helping them to plan
crucial economic decisions
throughout their lives such as
buying a home or preparing
for retirement. It also helps
families to adapt their savings and investment
decisions to their risk profile and to their needs,
which builds confidence and confers stability on
the financial system. Equally, it promotes the
development of new quality products and
services, competition and financial innovation.
of Latin AmericanWomen still do not have a bank account
%52
What is the position of women in terms of
financial inclusion in Latin America and the
Caribbean?
The proportion of women in this area who have a
bank account in a formal institution rose from
35% in 2011 to 48.5% in 2014, which narrows
the gap with men from 9.3 points to 5.5 points.
In spite of these advances, there is still work to be
done to include the region's women, as more than
half (52%) still do not have a bank account. This
figure continues to be higher than the average for
women excluded worldwide (43%), in middle-
income countries (47%), and significantly higher
than in OECD countries (6%). In addition, the
improvements in the regional average are largely
due to specific advances in particular countries
such as Brazil, Costa Rica, Jamaica, Mexico and
the Dominican Republic, which saw increases in
the number of women included and a narrowing
of the gap. Countries like Chile, El Salvador and
Uruguay considerably improved the proportion of
women included, but at the same time show an
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
increase in the gender gap,
which suggests that the
intensive processes of inclusion
are not always equitable.
However only 11.4% of women
in LAC save in a financial
institution; that is, less than half
the world average (25%) for
middle-income countries (22%),
and far below the average for
OECD countries (50.4%).
Are there any countries that
are doing particularly well in
terms of female inclusion and
which could serve as an
example for the rest?
Brazil, Costa Rica, Jamaica,
Mexico and the Dominican
Republic, which saw advances in
both the number of women
included and a narrowing of the
gap. According to the report
What can be done to reduce
the financial gap for women-
owned SMEs in Latin
America and the Caribbean?
In the future, both public
programs and policies and
products should be designed
to adapt to women, by taking
into account their specific
preferences and restrictions.
However, there is a systematic
lack of gender-disaggregated
data in the public and private
sector on both the demand
side (data from users of
household or special surveys)
and on the supply side (data
from banks). This dearth of
information makes it difficult
to reach a satisfactory
diagnosis, and to design
policies and assess public
interventions.
WEVentureScope by the FOMIN
and Economist Intelligence Unit,
Chile ranks first in the region for
its support for women's
entrepreneurial initiatives,
followed by Peru, Colombia and
Mexico. Chile heads the general
ranking with low
macroeconomic risk, particularly
strong initiatives for diversity of
providers and solid social
services.
Peru comes just below Chile
thanks to its strong business
networks, technical support
programs for SMEs and its stable
macroeconomic environment.
Colombia comes in third: it has
well-developed training
programs for SMEs and offers
ample access to university
education for women.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
In the private sector, the business case for
investing in women-owned SMEs should be
promoted more intensively. Organizations such as
the IDB, FOMIN and Global Banking Alliance for
Women (GBA) are spearheading this effort.
Academic studies have shown that providing
women with access to capital, savings accounts,
training in business management, professional
training and employment receipts helps raise the
productivity and income of self-employed women
workers. The private sector will certainly play an
important role in narrowing the gap, and the IDB
helps banks in Latin America and the Caribbean
through its women entrepreneurship Banking
initiative (weB) to implement funding models that
support the growth of businesses owned by
women. The aim is to incentivize banks and other
financial institutions to testdrive innovative and
inclusive funding products and services. Until June
2015, the IDB through weB has approved 14
projects, which are expected to benefit
approximately 100,000 micro, small and medium-
sized enterprises through to 2019.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
What are the main problems
facing the population in Latin
America?
The slowdown in economic
growth and the diminished hope
of a substantial upturn pose a
challenge for the LAC region,
exemplified by a "new normality"
featuring stagnant growth rates
and less room to maneuver to
bring the situation to an end.
Experts and policy designers are
concerned that these more
limited outlooks may jeopardize
the social advances of the last
decade and push the Latin
American economies towards
the so-called middle-income trap
a situation where a country's
development prospects become
bogged down.
The economic growth of LAC
could recover slightly to 2.2%
in 2015, compared to 1.3% in
2014, the lowest rate since
the global financial crisis. In
the words of Luis Alberto
Moreno, chairman of the IDB,
Latin American and Caribbean
countries should prioritize
reforms that ensure sustained
and inclusive growth in the
medium and long term. The
answer today, more than ever
before, lies in internal order
growth sources, he says.
Here the overriding challenge
is to increase productivity".
This is the factor that explains
our relative backwardness
compared to other parts of
the world.
In the last ten years, Latin
America has succeeded in lifting
over 70 million people out of
poverty; meanwhile its middle
classes have expanded until they
now represent over 50% of the
population. Education,
infrastructure, security and
better quality healthcare services
now form the core demands of
the region's growing middle
classes. While it works to meet
these new expectations, the
region is in turn facing the
challenge of having a large part
of its population living in a
situation of chronic poverty
130 million people, according to
a recent study.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
64 million people hold mobile money accounts
in Sub-Saharan Africa. Beyond the M-Pesa app,
which has been such a huge success in Kenya,
here we examine some of the other startups
that are thriving in Africa.
05Banking penetration in Africa driven by mobile devices
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
In the year 2030 two billion people will use their
cell phones to save, lend and make payments,
according to Bill Gates. But you don't need to peer
that far into the future to recognize the potential
that mobile banking offers as a driver of financial
inclusion.
Figures from the World Bank demonstrate just
how vital mobile devices are for the unbanked
population: in Sub-Saharan Africa 12% of adults
(64 million people) have mobile money accounts,
10% more than in the rest of the world (2%).
Kenya leads the way, with mobile money account
ownership at 58%, while Tanzania and Uganda
have rates of close to 35%. In Kenya more than
half of adults who pay utility bills use a cell phone
to do so. One success story that corroborates this
trend is that of the M-Pesa app.
In Ivory Coast, Somalia, Tanzania, Uganda and
Zimbabwe more adults have mobile money
accounts than bank accounts. In Tanzania nearly a
quarter of individuals who collect payments for
agricultural products do so with their cell phones
in hand.
More figures: 48% of adults in Sub-Saharan Africa
send or receive remittances. In the wake of M-
Pesa's success in Kenya, plenty of startups are
emerging with the intent to provide financial
services to the 75% of the African population that
is excluded from traditional banking.
FINTECH SERIE
In March of 2013 the Moroccan entrepreneur
Rania Belkahia partnered with Jrmy Stoss and
Franois Sevaistre to launch this startup, which
aims to compete with the giant names dominating
the remittance business. Every year emigrants
send 60 billion dollars to Africa. However, just 5%
of Africans hold bank accounts, which means this
money is either moved by "informal" means or via
the two major players in money transfers: Western
Union and MoneyGram, which together account
for 75% of the market.
As Belkahia explained to La Tribune, on average a
fee of 12.5% of each transfer amount is charged,
plus a commission on the exchange rate. We
provide a cheaper alternative that also guarantees
that the funds will be put to good use."
Afrimarket puts the person making the transfer in
control of how the money is spent. They can
specify whether it can be used to buy food, make
payments on a home, education, domestic
appliances, etc. An SMS is sent to the beneficiary
detailing how much they have to spend on items
via a catalog or at any of the 300 partner
establishments, which are equipped with
Afrimarket mobile payment terminals.
"Beneficiaries simply waive their cell phone close to
the terminal to authenticate the transaction: we use
encrypted sound technology that works with all
operators and devices. Including the 10 euro
Chinese cell phones that are so widely used in
Africa," says Belkahia. Orange has invested in the
business, which operates in Abidjan, Dakar, Lom,
Cotonou and Bamako.
Afrimarket: a cash-to-goods transfer service
that is breaking Western Union's monopoly.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Bouquet Pass Sant in Senegal: paying
medical bills from abroad.
Bouquet Pass Sant is a startup
from Senegalese entrepreneur
Moussa Traor, which allows
money to be made available
to cover medical emergencies
and healthcare bills. The
process is simple: if, for
example, someone falls ill in
Dakar, a relative living in Spain
could use the Bouquet Pass
Sant website to select a
doctor for them. The relative
makes the payment online
and the patient is sent a
message with a code detailing
their appointment. In Senegal
around 80% of remittances are
used to buy food, while just
4% is spent on health.
Nigeria: Simple Pay.
Uber and the travel agency
Jovago have created an app that
supports secure and instant
direct payments, competing with
PayPal.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
SnapScan: South Africa's Apple Pay
SnapScan provides contract-
free payment services in Cape
Town, Durban and Pretoria,
just as Apple Pay does in the
United States. The process is
as follows: once the SnapScan
app has been downloaded, the
user takes a photo of a
product's QR code and enters
a 4 digit code to confirm the
purchase. SnapScan provides
contract-free payment services
in Cape Town, Durban and
Pretoria, just as Apple Pay does
in the United States. The
process is as follows: once the
SnapScan app has been
downloaded, the user takes a
photo of a product's QR code
and enters a 4 digit code to
confirm the purchase. By
2017 350 million Africans will
own cell phones. These
startups have a huge market
open to them.
Bitcoin in Ghana.
The Bean app is designed to do
away with commissions. It
therefore uses bitcoins instead of
the local currency. Nikunj Handa
says in this report carried by Le
Monde, the aim is to attract a
significant share of remittance
flows. We are focusing on Ghana
and Nigeria. By using bitcoins,
transfer costs are reduced from
the 12% charged by traditional
operators to 3% with Beam. We
are far more competitive. Of the
60 billion dollars that are sent to
Africa, 7 billion goes toward
transfer costs.
Beam converts its customers'
money into bitcoins, which can
then be changed into Ghanaian
cedis via the recipient's mobile
device.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
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