The Promise of Digital Finance
Financial inclusion is vital to inclusive economic growth and gender equality, and it has assumed a prominent role in global development efforts. With billions of people in emerging economies already using mobile phones, the means to introduce them to formal banking and financial services already exist.
BERKELEY – An economic development revolution lies literally in the palm of a single hand. As mobile phones and digital technologies rapidly spread around the world, their implications for economic development, and particularly finance, have yet to be fully realized. The sooner that changes, the better for people worldwide.
In emerging economies today, two billion people – 45% of all adults – do not have a formal account at a bank, financial institution, or with a mobile-money provider. The “unbanked” rate is even higher for women, the poor, and people living in rural areas. Moreover, at least 200 million small- and medium-size enterprises lack sufficient credit, or have no access to credit at all.
Entrepreneurship, investment, and economic growth suffer when savings are stored outside the financial system, and credit is scarce and expensive. Fortunately, according to a recent report by the McKinsey Global Institute (MGI), digital technologies – starting with mobile phones – can rapidly fix this problem and foster faster, more inclusive growth.