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OVERVIEW

Financial services can provide the unbanked poor the opportunity to climb out of poverty and weather personal financial crises. Financial products such as credit, savings, payments, and insurance must be coupled with behavior change and education programs to ensure informed decision making by new banking customers.

Size/Magnitude of Problem

Quality financial services for low-income households build self-employment opportunities, higher income, a better ability to cope with risk and even increased well-being, making it an important component of global development. Access to financial services for small and growing businesses is associated with innovation, job creation, and growth.i On a macroeconomic level, financial inclusion is directly tied to stronger local economic activity, increased development, and lower levels of inequality.ii

  • Approximately 50-60% of the world’s population works in the informal economy, with inconsistent sources of income, high vulnerability to economic shocks, and minimal access to common financial services.iii
  • An estimated 1.6 billion working poor people – farmers, day laborers, micro-entrepreneursiv – and 2.5 billion people are considered “unbanked” by the World Bank.v
  • 50% of formal small and medium enterprises (SMEs) – approximately 70% if micro and informal enterprises are taken into account – lack access to formal credit. The total global credit cap for both formal and informal SMEs is $2.1-$2.6 trillion.vi
Desired Equilibrium

Every individual or enterprise has equitable access to quality financial services, enabling them to reduce financial vulnerability by increasing incomes and economic opportunity.

Ways Skoll social entrepreneurs are addressing the issue:
  • Providing financial education and services for under-served individuals (Aflatoun, Fundacion Capital, Kashf Foundation, Slum Dwellers International, Water.org)
  • Utilizing targeted financing and technology for micro-business loans (Fundacion Paraguaya, Kiva, Nidan, One Acre Fund, Proximity Designs)
  • Filling small and medium enterprise funding gaps and building private markets (Building Markets, Kiva, Root Capital)
References

i World Bank (link)
ii Consultative Group to Assist the Poor (CGAP) (link)
iii CGAP (link)
iv CGAP (link)
v World Bank (link)
vi World Bank (link)

Critical Geographies
Adult Population with Bank Accounts

As defined by World Bank (< 10% of population age 15+)
Turkmenistan, Niger, Madagascar, Guinea, Yemen, Burundi, Chad, Somalia, Pakistan, Afghanistan