Our Financial Services for the Poor strategy aims to expand the availability of affordable and reliable financial services that serve the needs of all, including the poorest.
Digital technology and changes in national policy are clearing away obstacles that once kept these services out of reach for many, but tough challenges remain.
We are working with our partners to support public and private investment in digital payment infrastructure, new regulatory standards, and gender equality initiatives such as digitized government benefit payments, to ensure continued progress toward the promise of financial inclusion.
Our team is led by Michael Wiegand and is part of the foundation’s Global Growth and Opportunity Division.
(1) World Bank, “Global Findex 2017”
Every year, millions of people around the world transition out of poverty. Regional growth and economic opportunities like new jobs, technologies, and business opportunities, help people build more stable economic lives. At the same time, millions of people remain trapped in a cycle of poverty that is very difficult to escape. We believe financial exclusion is a significant driver of this cycle.
About 1.7 billion people worldwide are excluded from formal financial services, such as savings, payments, insurance, and credit. In developing economies, only 63 percent of adults have an account. Women are excluded from these beneficial financial systems more often. Nearly one billion are still left out of the formal financial system, and there is a 9 percent persistent gender gap in financial inclusion in developing economies.
Most poor households instead, operate almost entirely through a cash economy. This means they have to save in physical assets, such as livestock or jewelry. Cash gets spent, animals die, and jewelry can be lost or stolen. What’s more, these forms of savings earn no interest and can actually lose value over time. To send money to family, those without a bank account have to rely on couriers or friends who carry cash by bus, which is expensive, insecure, and slow. To borrow money in an emergency, they must turn to moneylenders who charge notoriously high interest rates.
Without formal financial histories, people are also cut off from potentially stabilizing and uplifting opportunities like building credit or getting a loan to start a business. And it’s harder to weather common financial setbacks, such as serious illness, a poor harvest, or an economic downturn. All too often, financial exclusion makes the expenses of poverty difficult to overcome.