World Bank Report Finds Massive Drop in Number of Unbanked

TEMPO.CO, Jakarta - A new report released by the World Bank on Wednesday, April 15, 2015, found that between 2011 and 2014, 700 million people across the globe became account holders at banks and/or other financial institutions - which meant a 20 percent decrease in the number of 'unbanked' individuals to 2 billion adults.

The report found that between 2011 and 2014, the percentage of adults with an account increased from 51 percent to 62 percent, a trend driven by a 13 percentage point rise in account ownership in developing countries and the role of technology - especially in sub-Saharan Africa where mobile money accounts has helped the extend the reach of financial services to include women and those in the low income bracket.

The findings was released in the latest edition of the Global Findex, which defines financial inclusion as having an account that allows adults to store money and make and receive electronic payments. Studies show that broader access to, and participation in, the financial system can boost job creation, increase investments in education, and directly help poor people manage risk and absorb financial shocks - as such, is critical step towards ending global poverty.

"Access to financial services can serve as a bridge out of poverty. We have set a hugely ambitious goal – universal financial access by 2020 – and now we have evidence that we’re making major progress," said World Bank Group President Jim Yong Kim. "This effort will require many partners – credit card companies, banks, microcredit institutions, the United Nations, foundations, and community leaders. But we can do it, and the payoff will be millions of people lifted out of poverty."

That said, the study also found several areas that still needs to be worked on, including the gender gap that has yet to significantly decline. For example, in 2011, 47 percent of women and 54 percent of men had an account; in 2014, 58 percent of women had an account, compared to 65 percent of men.

"When a woman has an account and a safe place to save outside the home, she also has greater control over finances and household incomes," said Sri Mulyani Indrawati, World Bank Managing Director and Chief Operating Officer. "Equipped with access to formal savings and credit, women participate more in the economy. They can set aside funds for emergencies, for schooling, or for starting a business. This is an important stepping stone out of poverty and towards more equality."

Expanding financial inclusion to include even the poorest households also need to be worked on - as more than half of adults in the poorest 40 percent of households in developing countries were still without accounts in 2014. The study found that globally, 76 percent of adults reported that they could come up with the local currency, and 28 percent—1.2 billion adults—in developing countries report they would use their savings in case of an emergency. Yet 56 percent of these adults do not save at a financial institution.

"Having a source of emergency funds when calamity hits, whether the death of a family member, a medical emergency, or a natural disaster, can keep people from falling into extreme poverty and my hope is that access to formal savings instruments—providing a safe place to save—can be made easier and less onerous for people at the bottom 40 percent of societies everywhere," said Asli Demirguc-Kunt, World Bank Research Director and co-author of the Global Findex 2014.

RAMA ARIADI