The world’s poorest not really detached from financial services, says expert

Despite being disconnected from the mainstream banking system, many of the world’s poorest actively use informal tools such as moneylenders to meet their financial needs, experts say.   

Ms Megan Oxman, programme officer with Innovative Finance of the Financial Services for the Poor (FSP) under the Bill and Melinda Gates Foundation, said more formal financial tools can substantially lower the cost of shocks to the poor.

“The right financial tools can help a poor household capture a chance to move out of poverty, or weather a shock without being pushed deeper into poverty,” she says.

Currently, banking services are prohibitively expensive for the poor to afford, mainly due to the cost of distributing them through traditional channels such as bank branches and ATMs, high run-rates for opening and maintaining an account as well as providing mortgages.

Ms Oxman states that innovative and sustainable methods are needed to provide affordable financial services to those who earn under $2 per day. Optimistic promotion seems to be in the growing mobile industry.

Thus far, there has been a large drop in costs and increased access when mobile channels are used.

In spite of the success of services like mobile money transaction in Tanzania is utilised by 63 per cent of the population and in Kenya payments system like M-Pesa is now utilised by more than 70 per cent of poor households

This situation indicates that there are many more opportunities to break down the barriers associated with delivering financial services to the poor that are left unexplored for lack of initial funding.

Inspiring has been the upsurge in the number of users of mobile phone financial services, evidently showing the importance of making them accessible.

FSP boss points out that there is huge potential in transferring the innovations to help the poor in the developing world, but change requires action from all types of innovators — from entrepreneurs to inventors to financiers.

FSP is excited about its partnership with Electronic Transactions Association (ETA) and the opportunity to deliver financial services to the world’s poorest with life-changing innovations.
Source: The Citizen, www.thecitizen.co.tz, reported by Victor Karega in Dar es Salaam

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