NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, May 3, 2013

With 2.5 billion people around the world still excluded from the formal financial system, there is growing interest in how to extend financial services to the “unbanked”, many of whom live in extreme poverty in developing countries. Their exclusion from formal financial services forces them to rely on risky and expensive alternatives, which stifles both individual and macro-level economic development.

It has been decades since the first microcredit schemes emerged as one way to try and resolve the problem. But exclusion persists, and with the debate rising further up the agenda in recent years, a more holistic understanding of financial inclusion is emerging, one which focuses on savings as well as credit, and financial literacy as well as access to services.

As this fuller financial architecture starts to take root for the world’s poorest, questions inevitably are being asked about how exactly it should be done, what the roles of different stakeholders should be, and how to ensure that this new financial ecosystem actually works well for everyone in the long term.