5 Ways Universal Financial Access Can Help People Build a Better Life

April 28, 2015

by Gloria M. Grandolini

The following post was adapted from a story previously published on the world bank’s “voices: Perspectives on development” blog

During the World Bank-IMF 2015 Spring Meetings, Bank Group President Jim Kim, United Nations Secretary General’s Special Advocate for Inclusive Finance for Development (UNSGSA) Queen Máxima of the Netherlands, United Nations Secretary-General Ban Ki-moon, private sector leaders, heads of multilateral agencies, and Central Bank Governors from around the world discussed the global progress and remaining barriers to achieving universal financial access by 2020 and made ambitious new commitments to accelerate progress to reach the UFA 2020 goal.

If universal financial access is reached, and if it opens the door to wider appropriate financial services, how could that change people’s lives?

1. People could save more securely and conveniently.
Putting away money for tough times is important for everyone, but especially for the poor whose financial lives can be unpredictable. Having access to a transaction account makes it easier to eat more and better foods, be more prepared for health crises, and, when savings starts during youth, develop good financial habits and get an education. With universal financial access, all people would be able to save even small amounts of money in a safe and secure way.
2. Poor people could more easily and safely receive government benefits.
Globally, more and more governments are moving their social transfer programs – including pensions, aid, and social programs – from cash (or in-kind contributions) to electronic payments, which are safer and more convenient. Recipients often now receive the full benefits payment since intermediaries, who used to take a percentage of the money, have been cut from the process. However, there are obstacles related to the level of fees charged and the customer experience, which can be partly addressed through financial awareness and consumer protection.
3. Entrepreneurs could get access to the financial services they need to build small businesses, and exposure to new markets.
Currently 200 million micro, small and medium enterprises (MSME) can’t get sufficient financing to run their business. Transaction accounts can make data on entrepreneurs and businesses available, giving them a “digital footprint,” and help address the costs and risks associated with providing financial services to MSMEs. For example, including small firms in electronic value chains and e-commerce platforms, such as Alibaba in China and its Taobao platform, has opened up access to credit and payment services for 16 million vendor businesses, nearly 90% of whom are small or microenterprises.
4. Inexperienced customers can be more empowered to use formal financial services.
There are physical barriers and social barriers to financial access that transaction accounts can help overcome. Having a transaction account through a retail store or mobile phone can be less intimidating than entering a bank. Research in Mexico shows that financial staff may treat customers differently based on their appearance or financial knowledge. However, easy access to a transaction account should be coupled with financial awareness and education, and consumer protection to protect people from fraud, mis-selling and other market abuses.
5. People in remote areas could tap into financial and other services with just a mobile phone.
Since the 2007 launch of M-PESA in Kenya, 255 mobile money services have emerged around the world, offering services beyond sending payments and remittances. Mobile devices are being used to facilitate access to insurance, credit and savings, clean water, and solar energy. With universal financial access, the poor could do more with inexpensive feature phones.

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