MANILA, Philippines - Around three billion people of the world’s population lacked access to basic financial services, yet it has been reported that probably eight out of every 10 adult males had access to mobile phones.
During the recent World Economic Forum 2011, it was emphasized that extending banking facility to these individuals had the potential to transform economies and improve livelihoods. And that one of the most promising means to do so required expansion of mobile banking services that could become tools for saving money, transferring funds and accessing credit.
But the Forum also revealed that despite the enthusiasm and hype over mobile financial services, only a few smaller countries have seen adoption of mobile financial services reach more than 10 percent of the adult population.
However, expansion of the services was not without risks as the recent controversy surrounding excessive microfinance lending in India demonstrated.
It was agreed that regulation could play a role in improving oversight and verifying financial information.
“In the absence of regulation, the responsibility fell on the microfinance and financial services industry to self-regulate. If these providers could effectively generate their own guidelines, they would be more likely to avoid stringent rules imposed from the outside,” it said.
Furthermore, the meet also highlighted the fact that one of the biggest challenges of improving financial inclusion was achieving economies of scale.
Focusing on SMEs could also greatly increase financial inclusion, but until today microfinance services had not focused on this goal.
WEF discussion likewise focused on mobile banking, which was viewed as offering one of the most promising options for providing financial services to the world’s unbanked population.
It likewise concluded that saving money and processing remittances are among the biggest needs for financial services with underserved populations, and that stringent regulation in some cases is likely to deter the banks and telecommunication businesses from promoting financial inclusion at a time when their participation is greatly needed.
Nonetheless, government engagement and oversight can help improve protection for both lenders and creditors.
One of the biggest challenges however is achieving economies of scale related to financial inclusion, and in the future, greater attention should be paid to extending credit to small and medium enterprises (SMEs).