World’s Poor “Unbanked” - Measuring Financial Inclusion

Three quarters of the world's poor are financially excluded according to the World Bank. Photo courtesy worldbank.org

Three quarters of the world’s poor do not have a bank account, and most of these people also lack credit and insurance, the World Bank reveals in a new report.

The World Bank’s Global Financial Inclusion Database, or Global Findex survey, shows that of the 2.5 billion people who live on less than $2 per day and are without access to formal banking, they often have to rely on money lenders who often charge high fees.

The report says the “unbanked” are also less likely to start their own business or insure themselves against unexpected events.

"Providing financial services to the 2.5 billion people who are ‘unbanked’ could boost economic growth and opportunity for the world's poor,” World Bank Group President Robert Zoellick said.

The report found that women are particularly disadvantaged when it comes to access to financial services. Only 37% of women in developing countries have an account, whereas 46% of men do. That gap is even bigger among those in poverty: Women living below $2 a day are 28% less likely than men to have a bank account.

Worldwide, 22% of adults report having saved at a formal financial institution in the past 12 months, according to the Findex.

World Bank says the Findex research provides the most comprehensive picture yet of how people around the world save, borrow, make payments and manage risks.

Even among those who do have a formal bank account, only 43% of adults use their account to save. Yet 61% of account holders worldwide use their account to receive payments from an employer, the government or family members living elsewhere.

The data was collected by Gallup, Inc. using the Gallup World Poll Survey. The Bank’s Development Research Group is building the database with a 10-year grant from the Bill & Melinda Gates Foundation.

Few adults in developing countries use formal financial products to manage risk. More than 11% of adults in developing countries have an outstanding loan for emergencies or health-care needs, but more than 80% of these adults use only informal sources of credit. Of adults in developing countries working in farming, forestry or fishing, only 6% of them have crop, rainfall or livestock insurance.

Regional Highlights:

High Income: Nine out of 10 adults in high-income economies report having an account at a formal financial institution.
East Asia and Pacific: 28% of adults in EAP reported having saved at a formal financial institution in the past 12 months, compared to 10 percent in the rest of the developing world.
Europe and Central Asia: 61% of account holders in ECA use their accounts to receive wages, compared to 32% in the rest of the developing world.
Latin America and Caribbean: 41% of non-account-holders in LAC cite cost as a reason for not having a formal account. 19% of adults in LAC report having a credit card, compared to 5 percent in the rest of the developing world.
Middle East and North Africa: Account holders in MENA access their accounts less frequently than do account holders in other regions: 17% of adults with a formal account report zero deposits and withdrawals in a typical month, compared to 8% globally.
South Asia: The relative gender gap in formal account ownership is highest in South Asia: 41 percent of men and 25 percent women have an account. 73% of savers in South Asia report saving for an expense in the future such as an education or a wedding.
Sub-Saharan Africa: 16% of adults in SSA report having used a mobile phone to pay bills, send or receive money in the past 12 months, compared to 3% in the rest of the developing world.