By Kosta Peric – Deputy Director, Financial Services for the Poor at Bill & Melinda Gates Foundation.
We often reference the “global economy,” but is that really accurate when you consider the 2 billion people who lack access to financial services? Conducting all their transactions in cash, the unbanked are really excluded. Thus, the global economy as we know it is actually only semi-global.
We also have a tremendous opportunity to make it whole. As Bill Gates said last December, 2016 is the year of financial inclusion. And the fintech industry is in prime position to help build a stronger economy that includes and benefits everyone.
The Bill & Melinda Gates Foundation is the largest private foundation in the world focused on poverty relief, health and opportunity. In a panel at the Innovate Finance Global Summit on April 11, Kosta Peric, deputy director of the foundation’s Financial Services of the Poor program, joins leading minds from the private and public sectors to discuss the shortcomings of the semi-global economy, the hurdles we face in making it universally inclusive, and how we can find our way past those hurdles.
The shortcomings begin with the individual. Life without financial services is dependent on cash, which is actually very expensive to use. It’s almost like paying a tax with every transaction: Fees for informal services are high, and paying a bill in cash can mean walking for miles and waiting in line for hours. This “poverty tax” whittles down a poor person’s funds and energy even further, making poverty nearly impossible to escape.
Digital and mobile products are emerging as a rapid and effective way to bring financial services to this population. Indeed, one of the reasons they’re spreading so successfully is that they’re profitable. The mobile money market in Africa is expected to top US$14 billion in the next four years, and the two largest mobile money providers in the world, M-Pesa (Kenya) and bKash (Bangladesh), each enrolled more than 10 million subscribers in their first three years of business.
With 2 billion more people still awaiting services that fit their lives and financial habits, our industry has much to offer and even more to gain. But what does it take to be successful? How do we create a truly global economy that is both equitable and profitable? The challenges are varied.
Regulatory environments need to welcome innovation by both banks and non-banks. Transactions need to be secure and immediate. Digital financial services need to be seen as safe and comfortable by people who have only ever known cash.
None of these hurdles is insurmountable. But none are surmountable by any one player or sector.
In the panel discussion, representatives from across industries and sectors will examine what each can do to promote healthy digital financial services markets in countries around the world. It promises to be a fascinating and fruitful talk about one of today’s greatest opportunities for economic growth and innovation.