Big banks see rich opportunities in world's poorest
By Julia Fioretti
LONDON (Reuters) - When the Afghan government used mobile phones instead of cash to pay some of its policemen, the officers thought they'd just had a 30 percent pay rise. In truth, they had just been paid the full amount, with nothing skimmed off by middlemen, for the first time.
This anecdote from the U.S. Agency for International Development shows how technological innovations such as mobile banking and biometrics have helped integrate more people in emerging markets into the formal financial system, opening up opportunities for banks willing to take a chance.
While the market for more affluent and business clients becomes saturated, providing the world's poorest with access to financial products is an unmatched growth opportunity.
Half the world's adults, over 2.5 billion people, do not have a formal bank account, according to the World Bank. In low-income economies it can be less than a quarter.
Many developing countries also offer banks the allure of a growing working-age population and an emerging middle class.
"Twenty years ago we spoke about the poor with a sense of futility, and I think now when you talk about the base of the pyramid, more often than not you're talking about markets and opportunities," said Michael Schlein, chief executive of Accion, a non-profit organization that invests in microfinance institutions and companies advancing financial inclusion.
Between 2010 and 2020, the world's poorest 40 percent will nearly double their spending power to $5.8 trillion from $3 trillion, according to Accion's Center for Financial Inclusion (CFI).
The idea of providing the world's poorest with small loans was pioneered 30 years ago by Nobel Peace Prize winner Mohammad Yunus and Grameen Bank in Bangladesh. Continued...