The Need for Financial Inclusion
0 Million
Households in the US are unbanked
– FDIC
0 Billion
Adults are unbanked globally
– World Bank
Less than 0 %
Americans have access to prime credit
– Upstart
Tenets of Financial Inclusion
Financial Literacy
- According to the S&P FinLit survey, globally only 1/3 of adults understand basic financial concepts, and Northern European countries are the most financially literate, whereas South Asia has the lowest financial literacy rate (25%).
- According to a study by the Champlain College Center for Financial Literacy, less than 38% of all public high school students receive more than 15 hours of formal Financial Literacy instruction in high school.
- According to the US Federal Reserve, 73% of people who had high financial literacy scores received financial education from personal experience, rather than formal instruction.
- India has hosted many immersive practical “financial literacy camps,” which has led to up to 95% of the attendees becoming banked.
FinTech
- As per the World Bank, in the last decade, 1.1 billion previously unbanked adults gained access to financial services, primarily due to the increase in FinTech and mobile money accounts.
- According to the Center for Financial Inclusion, in Sub-Saharan Africa, mobile money account ownership rose from 12% to 21% and is set to continue increasing at a faster rate.
- In Africa alone, there is the potential for more than 110 million new mobile money accounts to be created over the next few years, giving many access to financial services (Center for Financial Inclusion).
- Micro, small, and medium size enterprises are crucial in Sub-Saharan Africa, and comprise 90% of all businesses there. FinTech and Mobile Money Providers are able to cater to the needs of these enterprises and better serve their financial needs, and help bridge the financial inclusion gap.
Accessibility/Affordability
- A 2020 study by NYU Stern found that a “mobile footprint” of a customer was a better predicting factor than traditional credit scores in many cases, while allowing expanded access to credit.
- Recently, Equifax, which is one of the largest “credit score” providers, has partnered with a lab at GaTech to help research and utilize additional factors in their “Credit score”, to make better and more inclusive decisions to impact the un/underbanked.
- According to the World Bank, the number one cited reason for not having a bank account is not having enough money to create one.
- In India, the government sponsored Jan Dhan initiative incentivized the population to open a bank account, and was a huge success, leading to more than 400 million people becoming banked.
- According to the Federal Reserve Bank of New York, there are 1214 banking deserts in the US, which are locations with no bank branches or financial institutions within 10 miles. More than 75% of these banking deserts tend to be in rural locations. This lack of proximity to physically located financial institutions only hinders the un/underbanked, by making it harder for them to utilize financial services. COVID-19 has further exacerbated this situation with more closures of physical banking and financial institution branches.
Public Policy & Regulation
- According to a study by the Champlain College Center for Financial Literacy, only 11 states have public policies that require at least 15 hours of formal Financial Literacy instruction within high school.
- In 2022, 37 states have introduced financial literacy public policy legislation, while others are working to follow in their footsteps.
- According to McKinsey, there is a substantial productivity gap between SME’s (Small and Medium Enterprises) and large companies: 26% in France, 41% in Germany, and 54% in Italy. There is a need for governmental public policy to help improve the productivity of SME’s, as between 50-90% of the world’s labor force works for an SME, and by just halving the difference in productivity of SME’s and large companies, $15 trillion could be added to the global economy.
A message from our Founder & CEO
Dear Readers,
If I may ask, how many of you have a bank account or access to financial services?
We are privileged to have access to these financial services: according to the World Bank and FDIC, globally, 1.4 billion adults do not have a bank account, and in the US alone, 7.1 million households do not. Many of the unbanked have lower income statuses, compelling them to use predatory financial services, such as check cashing or payday loans, which often have extremely inflated costs and fees, leading to a vicious debt cycle. The annual inflation rate of US has accelerated to record highs since the past few decades. This increase in the cost of living has exacerbated the need to manage and strategize our finances. It is imperative that everyone has safe and affordable access to savings and credit within the financial system, to work their way out of poverty, and expand economic opportunities. Financial Inclusion is defined as providing equal, easier, affordable, and larger access to financial services. Financial Inclusion empowers a person’s economic well-being, by allowing access to education, healthcare, home ownership, and basic necessities of life. A well-functioning financial system is key to increased national economic growth and welfare.
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