Financial Inclusion in Developing Asia: Transactional Accounts, Savings, and Borrowing
Both theory and evidence suggest that financial inclusion can be a powerful tool for empowering the poor, for augmenting their earning potential, and for improving the quality of their lives.
As a result of growing concerns over rising inequality in Asia, inclusive growth that spreads productive opportunities and the fruits of growth more evenly across the entire population has emerged as a top regionwide strategic priority.
One key ingredient of inclusive growth is a financial system that expands access to financial services to poor households. Access to finance enables the poor to protect themselves against adverse shocks and to balance their consumption and thus improve their welfare. It also expands their human capital and productive opportunities.
- Three key dimensions of financial inclusion are especially relevant for empowering the poor: transactional accounts, savings, and borrowing. There is significant scope for improving all three dimensions. For example, 1.3 billion Asian adults—or 46% of the adult population—have accounts in formal financial institutions, a much lower figure than the 90% in high-income countries.
- In order for finance to empower Asia’s poor, policy efforts must give due regard to the last mile, i.e., not just broadening access to finance, but inducing the actual, beneficial use of finance. Examples include financial literacy and other financial education programs and encouraging banks and other institutions to design simple-touse financial products for poor clients with little education.
- Better data for financial inclusion is required to inform decision making. Until recently few countries tracked the outreach of their financial systems, and no national reporting comparable to that on financial performance is available presently. Therefore, both national and international data efforts will allow for a more granular assessment of financial inclusion challenges.