World Bank reports big drop in numbers of unbanked

The positive headline figure of 20% relies on using a particular and broad definition of the word 'Banked'. It may be misleading, in that many of these digital/mobile financial service products dont count as 'Banks' from a regulator persepctive nor are they given access to broader global FS via the correspondent banking players. So to call these users 'banked' doesnt refelct their limited access to FS. What is needed is a regulatory framework and associated enforcement approach that encourages the correspondent banks to recognise these players and facilitate their products and services. 

Andrew,

The definition of 'banked' no longer needs to include only banks. Technically you are saying that a value store like a mobile money account is not a bank. That is a definition only bankers would really use.

Before there were banks we used to store wealth in castles and churches. Before there was money we used to use grain, and other commodities to accumulate 'wealth'.

While the newly 'banked' in this report have limited access to FS, especially credit, the gap is definitely closing because of these alternative methods. This can only be a good thing

BK 

Quite agree, this is not my positioning, I am highlighting the current challenges brought about by the failure of regulators to keep pace with technology and the risk averse positioning of the 'Banks'.

Absolutely agree. 

I would suggest that one reads these figures with caution.  There is a significant difference between the number of basic bank accounts set up with government financial inclusion initiatives and the actual utilization rate of those accounts.  It takes a deeper dive into the numbers to see the actual impact.  Good to see the progress regardless, though!

Neil. Absolutely. But that's where we simply should use a bank account as the definition of inclusion any more. If a mobile value store allows you to pay electronically, to save money, but isn't government guaranteed and doesn't come with Financial Literacy requirements, it still has created inclusion. Just not inclusion in the OLD system

I always felt this banking the unbanked thing is BS (Calling B.S On Banking The Unbanked) - this report just confirms it!

On another note, if the scope of "banked" is expanded to unregulated entities including Mobile Money Management Apps (MoMMAs), I wonder how the World Bank or anyone else knows the number of people who belong to them. Except during an M&A event, I hardly see the likes of Simple, Airtel Money and other MoMMA reporting their user base. Besides, why should tech-facilitation alone be a criteria for reckoning the alternatives? For decades, if not centuries, people at the bottom of pyramid in India have participated in so-called chit funds, which are unregulated entities in local neighborhoods running on paper passbooks that take deposits (typically few hundreds or thousands of INR per month) and give loans (typically few thousands or tens of thousands of INR at any one time), two key functions performed by regulated banks. Their customer base is even more difficult to estimate, apart from my personal observation that virtually every Indian who has any money to spare is their customer.

As previous comments indicate, we can't answer multiple questions with a single metric.

(1) We would like to know how many people have access to safe, convenient, affordable financial services including savings, payments, loans and (ideally) insurance. This gives the potential number of "banked" if "safe" includes properly regulated services (whether formal banks or not). 

(2) We need to know the take up of available financial services - this is essentially what this survey seems to measure, along with critical demographic breakdowns.

(3) We also need measures of utilization of financial services (more difficult to define the right metrics) - savings, borrowing, payments (including remittances), insurance. Again demographics would help.

(4) Hardest of all, we need measures of the social and economic impact of this increasing financial inclusion. I'm not sure we've made much progress in this as yet.

My the way my last comment, I use the term "properly regulated" - intentionally vague. But I would suggest that financial inclusion should include the goal of balancing risk to the customer (e.g. deposit insurance), risk to the provider (credit risk), and political risk (money laundering, terrorist financing) against the costs of regulation and supervision. Light regulation needs to be designed - some governments are working on it, but we have a very long way to go.

The report says that ‘Technology, and in particular mobile money, is seen to play a pivotal role in expanding access to banking services’ .The biggest gains can be seen in Sub-Saharan Africa, where on average more than 10% of adults report having a mobile money account.

If such is the case the potential for a drastic reduction of unbanked populace can be gauged from the  fact that India has opened  115 million bank accounts of which about  80 million having no money in them towards the end of 2014.Further one in every 300 Indian(compared to 76% in Kenya) uses mobile payment and of every 9  out of 10 transaction are paid in cash and coins. India is grabbing the opportunity by calling for and having received application for ‘payments bank’. India’s’ largest bank with over 17K branches and asset size over $ 400b is in the fray. So also an ‘ outsourcing company’.