Across the developed world, access to financial services is largely ubiquitous; there is an abundance of cash and credit on demand, from multiple channels, any locations, and 24hours a day. But, this story is very different in the developing countries which house nearly 90 per cent of the world's unbanked populations. The situation is worse in least developed countries (LDCs), where more than 90 per cent of the population is excluded from access to the formal financial system like saving accounts, insurance, credit and even less to more advanced financial services that could help to improve security, predictability and opportunities for entrepreneurship.
The widespread realization that financial inclusion is critical for poverty alleviation, balanced economic growth and economic stability has resulted in growing leadership and ownership of the issue by policymakers. To make inclusive finance a reality, national banks and governments of developing countries have taken number of initiatives but results are not satisfactory and the reasons are many, including lack of physical and social infrastructure, lack of understanding and knowledge, lack of technology, etc…
Mobile banking fit into this picture well, as it could take the financial inclusion initiative to the next level. It raises the prospect that financial services provided via mobile phones can overcome almost all the barriers to entry in the traditional banking system and has potential to increase the efficiency of payment systems, reduce reliance on cash, and broaden access to financial services by increasing the accessibility and most important lowering the cost of offering formal financial services.
In order to discuss the challenges and possibilities for donor organizations, regulators and private sector corporations to scale up mobile money in the LDCs, the UN Capital Development Fund (UNCDF) and the Australian Agency for International Development organized today a side event on "Branchless Banking in the LDCs: the challenges and possibilities for donor organizations, regulators and private sector corporations to scale up mobile money in a group of LDCs" within the Fourth UN Conference on Least Developed Countries, taking place in Istanbul from 9 to 13 May, 2011.
Financial inclusion represents one of the best ways to accelerate progress toward the MDGs. It is an "enabler" with strong links to all the MDGs.
Financial Inclusion helps to increase economic growth and also – crucially – to ensure that the growth is pro-poor. Credit, savings and insurance products help to empower women. By helping people manage risk and enabling them to smooth consumption, financial inclusion helps people to protect themselves and their families against life's inevitable setbacks as well as invest in their futures. It enables children to go to and stay in school, and families to take preventative measures that improve health outcomes. The same holds true for environmental sustainability -- especially when products such as improved cook stoves or drinking and irrigation water technologies are linked to appropriate financial products.
Particularly, Branchless Banking can effectively promote financial inclusion by broadening the access to financial services, to areas where an overwhelming percentage of the population is unbanked.
Mr. McMullan, Special Envoy of the Prime Minister of Australia has reaffirmed the immense potential of branchless banking as a mechanism that enables vulnerable people to participate in society and economy and that, from an international perspective, can constitute an effective measure to reduce costs linked to transfer of remittances.
The cases of Branchless Banking programs in Cambodia, Papua New Guinea and Solomon Island presented during the side event have illustrated the important role and opportunities that institutions, such as UNCDF, can play as supporting and neutral actors in the launching of platforms for mobile money business and Branchless Banking services in LDC.
Panelists agree that key to making branchless banking a success is "how well the agent network is set up, incentivized and managed". Efforts should not be centered into the technology factors but in enabling agencies and financial institutions to properly manage and assure the service through functional and reliable networks.