Number of Unbanked People in the World and the Path to Financial Inclusion

According to the World Bank, there are approximately 1.7 billion adults worldwide who lack access to a formal financial service, a staggering number that highlights the significance of financial inclusion.

The unbanked population is not evenly distributed, with some countries having a much higher percentage of unbanked adults than others. For instance, in 2017, 47% of the adult population in South Sudan was unbanked.

The lack of access to financial services has a ripple effect on individuals, communities, and even the economy as a whole. In many cases, people are forced to rely on informal financial services, which can be expensive and unreliable.

The good news is that progress is being made towards achieving universal financial inclusion.

The issue of unbanked people is a significant one. Unbanked people generally pay for things in cash or purchase money orders or prepaid debit cards.

Living without a bank account can be a challenge, especially when it comes to managing finances. They may take advantage of alternative financial services, such as check cashing and payday lending, if such services are available to them.

Many unbanked individuals also lack access to basic financial services like insurance and pensions. Unbanked people typically do not have insurance, pensions, or any other type of professional money-related services.

Being a problem, being unbanked can be undesirable for several reasons. Alternative financial services, such as cash-checking services and payday loans, are much more costly.

These extra costs significantly hurt families who are already struggling to make ends meet. Without a bank account, people don't generate the data they need to establish creditworthiness.

The unbanked population is a diverse group, and understanding who they are can help us better address their needs. They are often lower-income households, making up a significant portion of the unbanked population.

Less-educated households are also more likely to be unbanked, which can make it harder for them to access basic financial services. This can create a cycle of poverty that's difficult to break.

Black households, Hispanic households, American Indian or Alaska Native households, and single-mother households are disproportionately represented among the unbanked. This is a concerning trend that highlights the need for targeted solutions.

Working-age disabled households are also more likely to be unbanked, which can further exacerbate their financial struggles. This is a critical issue that requires our attention.

Here's a breakdown of the demographics most affected by unbanking:

These demographics are not mutually exclusive, and many individuals may identify with multiple groups. By understanding who the unbanked are, we can begin to develop effective strategies to reach them and provide them with the financial services they need.

The number of unbanked people in the world is staggering, with over 2 billion individuals lacking access to traditional financial services. This number has been decreasing, however, with 700 million adults becoming account holders between 2011 and 2014.

Mongolia is a notable exception, with a whopping 93% of its population owning a bank account, nearly double the rate of its neighboring countries. Afghanistan, Pakistan, and Azerbaijan have the lowest share of bank account holders in the region, with only 15%, 21%, and 29% of their populations, respectively.

The majority of unbanked adults receive wages or government transfers in cash, and many people in developing countries pay bills and school fees in cash. This lack of access to financial services can have a significant impact on economic and social well-being.

Here are some key statistics on the unbanked population:

Going Forward, financial inclusion can be achieved by learning from regional and global success stories. The People's Republic of China and Kenya present distinctive success models to emulate.

The PRC thrived on the back of a formal banking sector account ownership, primarily supported by state-owned banks and creatively led by tech giants. Kenya, on the other hand, relies on its private sector to take and absorb risks and lead the drive to financial inclusion.

Governments need to collaborate with multilateral development partners to develop synergies and find affordable and sustainable solutions to improving financial inclusion. This requires an enabling policy environment with defined and measurable targets supplemented with a robust implementation mechanism.

Developing and enacting a supportive legal and regulatory system is essential for propelling financial inclusion. The regulatory environment needs to accommodate disruptive innovation led by startups as well as incumbent big players in finance and technology.

Governments need to carefully formulate legal and regulatory policies conducive to a country's economic context, as there are no one-size-fits-all solutions available. This requires a delicate balance between innovation and stability.

The private sector plays a critical role in innovation and service delivery, and governments should engage them right from the beginning in developing financial inclusion strategies and digital adoption policies. This can help ensure equitable provision of financial services across gender, income groups, and age groups.