Authored by: Martin Herrndorf
Understanding the financial inclusion challenge
While micro-credit has been one of the most visible and prominent success stories over the last decade, other financial services have received less attention (but still, some here and there). This is likely to change - due to various reasons.
The first is demand for the full-range of financial products. People consistently demand products beyond credit - which may not even rank highest in their priorities. The book, Portfolios of the Poor has shed light on the multitudes of services already used by the poor - both formal and informal. The poor have long used savings and credit clubs - called ROSCAs, SACCOs, Stokvels or Arisans depending on governance rules and location - before micro-credit entered the scene. And even with credit, over 60% of borrowing is done through money-lenders, according to the numbers in the McKinsey Global Financial Inclusion report. Globally, 60 % of adults globally remain without access to formal or semi-formal financial services. For Sub-Saharan Africa, 80% or 326 million adults are without access, in East and South-East Asia, 59 % or 876 million are excluded. This exclusion comes with a price: people rely on insecure places to store wealth, or do so in depreciating assets like livestock. They have high costs in making payments, for example for utilities, or for receiving money from abroad. And they have difficulties to protect themselves against ever-prevalent risks: death of a household member, illness, or drought and floods affecting their crops.
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