Written by Tasnuba Sinha

Financial inclusion has accelerated globally in the past decade. Millions of people have now been brought into the formal financial system thanks to mobile financial services and alternate banking channels such as agency banking. This is crucial because financial inclusion helps people save money for future investments or unforeseeable risks, get loans to start businesses, get insurance services, all of which, eventually results in an improvement in the overall wellbeing.

Universally, 69 percent of adults—that is 3.8 billion people—now have a bank account or a mobile money account. This is an increase from 62 percent in 2014 and just 51 percent in 2011. As per the Global Findex Database, 515 million adults have obtained an account from 2014 to 2017, and 1.2 billion have done so since 2011.

Bangladesh for instance, has risen as a fascinating example of digital innovation because of the rapid growth of digital financial services, especially mobile financial services. The nation reached lower middle-income country status in 2015 and has showcased an extraordinary ability to fight rural poverty through inclusive digital financial services. At 7.3% GDP, Bangladesh is also one of the fastest growing economies of the world.

There have been tremendous efforts by different stakeholders to bring financial products and services to the poor population in rural areas. Over 50 million people in Bangladesh access and use financial services from their mobile phones and the percentage of adults with financial accounts have risen from 31 to 50%.

However, despite rapid growth, according to the Findex data of 2017, only around 50 percent of Bangladeshis have an account either through a financial institution or a mobile money provider.

From my anecdotal experience from working in the financial inclusion space of Bangladesh, I believe most of these people lack a bank account because they operate only with cash – that is, they receive a cash salary, make all their transactions in cash and have cash savings. People employed in the informal sector in Bangladesh are all getting paid in cash, and the majority of the Ready-Made Garment factory workers get paid in cash. There are numerous problems associated with this; physical money can get stolen and is susceptible to natural disasters.

Other barriers include a lack of digital, financial and traditional literacy awareness, as well as gender-based barriers such as social and cultural norms. Development organisations, financial service providers and regulators have been working diligently to eradicate the aforementioned barriers. While the approaches taken by them are certainly necessary and praiseworthy, I believe there still needs to be a more critical and in depth look at the way we are looking at providing services to the unbanked.

There are other ways to advance financial inclusion. If financial institutions want to encourage higher adoption and greater usage of financial services then they need to ensure that their products are designed to fit their unique financial lives.

However, despite rapid growth… only around 50 percent of Bangladeshis have an account .

Despite the clear case for targeting the rural low-income population, too often financial products are designed for urban customers. The products are rarely designed with low income populations in mind. They therefore need to better understand the needs of the population and create products that serve them. Their products have to suit the lifestyle and access needs of the rural population.

One size unquestionably does not fit all particularly with financial products.

They need to take a client-centered approach – developing products for the unbanked should begin with understanding their wants and needs, such as their priorities for their money. Financial institutions, for instance, need to go beyond the popular urban concept of gender neutrality when designing a product. In rural settings, men and women have polarising needs and demands when deciding about a new product or service.

Women traditionally give more importance to household responsibilities and children’s education and men prioritise business investments. Savings product can be therefore designed in such a way that  cater towards the specific demands of women with flexible terms and conditions and attractive interest rates.

Investing in financial innovations that work with existing informal networks in ways that enhance their benefits and reduce risk can help millions of people attain greater financial security and access other financial services including insurance, mobile banking services, and others.

The financial sector should also incorporate lessons from the existing products and solutions that people use and generate additional value. And finally, financial institutions and other agencies working with the unbanked need to address the barriers that prevent the population from benefiting from inclusion — ranging from education and lack of literacy, gendered barriers, and problems of geographical access.

At the end of the day, financial inclusion for the unbanked is not going to be achieved by trying to make the population bankable, but by ensuring that financial services, products, and systems are people-focused.

Tasnuba Sinha is a feminist writer from Bangladesh whose research and passion centres on financial inclusion. Photo Credit: CC by Flickr/ILO in Asia and the Pacific.