World Bank sees mobile phone services as key to financial inclusion

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Mobile phones can play an important role in alleviating global poverty by providing the 2.5 billion of the world’s unbanked population, those earning less than $2 a day, with access to a bank account, according to a report published by the World Bank.

The report, which is based on data collected by the Gallup World Poll Survey, found that three quarters of the world’s poor do not have access to a bank account, not only because of poverty, but also because of the cost, travel distance, and amount of paper work involved in opening one. Those without access to formal banking often have to rely on lenders who often charge high fees. The unbanked are also less likely to start their own business or insure themselves against unexpected events, the report found.

Robert Zoellick, president of the World Bank Group, said providing financial services to the unbanked could boost economic growth and opportunity for the world’s poor. ‘Harnessing the power of financial services can really help people to pay for schooling, save for a home, or start a small business that can provide jobs for others. The more poor people are banking today, the more they are banking on their future,’ Zoellick said.

The report found that access to a bank account can help the poor build a more secure future, allowing them to save and borrow to build their assets, start a business, invest in education, establish a credit rating, and eventually own a home. It said money transfers through mobile phones had become an increasingly popular banking tool to achieve this, as it allows account holders to pay bills, make deposits or conduct other transactions via text messaging and doesn’t require users to travel.

In Sub-Saharan Africa where traditional banking has been hampered by transportation and other infrastructure problems, mobile banking has expanded to 16% of the entire banking market. Meanwhile, in Kenya, where 68% of adults report using a mobile phone for money transactions, there has been particularly impressive growth in this market.

‘Nearly two-thirds of the unbanked cite poverty as the obstacle to financial access, but about a third also blame the cost of opening and maintaining an account or the banks being too far away, which means long bus rides for many,’ said Asli Demirguc-Kunt, the World Bank’s director of development policy and chief economist of the Finance and Private Sector Network.

The World Bank’s financial inclusion portfolio totals over $3 billion, with projects in over 60 countries. It supports country action plans for financial inclusion as well as increasing access to financial products and services such as credit, savings, payments, and insurance through low cost delivery mechanisms such as ATM kiosks and mobile phones.