Financial inclusion focus can give banks $380-bn biz: Report

But, not many lenders in emerging markets looking at this section seriously

Banks in emerging markets can harvest a potential $380 billion in additional business through financial inclusion, a report has said.

Not many lenders were taking this section seriously, said Accenture and CARE International UK, considering the excluded population as a non-viable business proposition. "Closing the small-business credit gap at average lending spreads and adding fee-based services could generate about $270 billion in additional revenue for banks, while including unbanked adults into the formal financial system could generate another $110 billion," said the report.

Going digital would help in faster scaling up.

Airtel, for example, has helped further financial inclusion in Uganda, it said. The telecom provider has a product that links a savings group's mobile money wallet to a bank savings account.
 
This can be replicated in India if the Reserve Bank allowed technology oriented solutions at banks. In August, the Reserve Bank had allowed 11 companies to open payments banks to further financial inclusion.

The report said financial inclusion can be made viable by simplifying products and by willingly partnering with alternative providers such as mobile wallets. By focusing on digital platforms, bank accounts can be opened in a few seconds, without visiting bank branches.

"It may not seem like an obvious poverty fighting tool. But providing access to basic formal bank accounts has been proven to have a transformative effect for those living in poverty, especially women. Decades of working in this area has proven that even the poorest, those living on less than $2, can save and make for viable customers," said the co-author of the report and senior policy advisor at CARE International, Gerry Boyle.

Accenture and CARE surveyed 30 banks in 12 developing countries in Africa, Asia and Latin America, but only seven had a "coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive business models," the report said. The others were focused on short-term profit-driven motives in a piecemeal manner, or were driven by philanthropic ambitions, corporate social responsibility agenda or regulatory pressures. None of the banks has fully mastered the under-banked market yet, the report added.

KEY TAKEAWAYS

• According to the report Airtel has helped further financial inclusion in Uganda. The telecom provider has a product that links a savings group’s mobile money wallet to a bank savings account
• Further, it said financial inclusion can be made viable by simplifying products and by willingly partnering with alternative providers such as mobile wallets
• Of the 30 banks in 12 developing countries surveyed only seven had a coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive business models

India's unbanked population more than halved to 233 million in 2015, from 557 million in 2011, according to a recent report by PwC.

The numbers fell following the launch of the Pradhan Mantri Jan Dhan Yojana plan on August 15, 2014. So far 192 million accounts have been opened and Rs 26,819 crore deposits mobilised, according to the PMJDY website. Out of these accounts, 36.5 per cent of the accounts are zero-balance or accounts with no minimum |balance requirement.