Digital services lowered cost of connecting excluded groups to formal financial system

The World Bank has noted that many poor population segments tend to be excluded from financial services, including credit, savings, insurance, and e-payments or mobile money.

The World Bank said Financial Inclusion, through the use of savings groups, formal banking services, microcredit, government-to-person payments has the potential to improve resilience and opportunities for the extreme poor and the vulnerable, particularly women.

“An increasing proportion of countries are using mechanisms to deliver social protection transfers directly to bank accounts, electronically or otherwise, creating an entry point to bring people into the formal financial sector and offering a pathway to a broader range of financial services, including savings and credit.

“More recently, digital services have lowered the cost of connecting excluded groups to the formal financial system, using new technologies and business models such as pay-as-you-go asset finance and fintech,” the State of Economic Report 20201 released by the World Bank said.

It added “Because of the multidimensional nature of economic inclusion programs, there may be considerable overlap between the entry points to scale. Most programs have a secondary entry point that balances the emphasis of the focus of an intervention.

“For instance, an economic inclusion program with a social safety net (SSN) at its core may overlap with an financial inclusion (FI) intervention—the former being the primary intervention and the latter being the secondary. There tends to be strong overlap across SSN and livelihoods and jobs (L&J) interventions, often reflecting common objectives around income diversification and productivity. Moving to scale will therefore involve linking and integrating different interventions and programs across the various entry points.

“As programs scale up, they will be strongly shaped by each country’s political realities and customized along several policy and institutional dimensions. Economic inclusion at scale must consider several programmatic and institutional mechanisms required to embed programs at the national level. As noted previously, the report focuses on the scale-up of economic inclusion programs through large-scale antipoverty programs led by governments, with clear alignment   to national strategies, partnership development, and underlying political economy considerations.”

Source:3News