What Brazil and Malaysia Can Teach the U.S. About Financial Inclusion
Monday, March 23, 2015
When people think about financial inclusion, their minds tend to go first to highly-publicized unbanked regions in Africa and parts of Asia. But many people right here in the United States lack access to traditional financial services.
Of the 2.5 billion people in the world that don’t have a bank account, 10 million households are in the U.S, according to the Federal Deposit Insurance Corp. In addition, 20% of households in the U.S. (24.8 million) are in the underbanked bracket, whereby they have bank accounts but also use alternative financial services outside the banking system, according to the FDIC’s 2013 study.
Despite differences in the economic development of various countries, the primary reasons that lead people to lack access to financial services appear to be universal. The most predominant reasons unbanked consumers cited in a 2012 Nigerian survey were distrust in the formal financial system, concerns over the fees and costs associated with having a bank account and a lack of financial literacy. This list also reflects the experiences of many U.S. consumers.
Today, numerous financial inclusion schemes are achieving success across the globe. Here are a few lessons the U.S. can take from these initiatives.
Malaysia is the self-proclaimed center of financial inclusion. Its capital, Kuala Lumpur, has recently been announced the permanent host for the Alliance for Financial Inclusion, a global network of policymakers.
Malaysia is determined to lead by example. The country is developing a microfinance framework and establishing outreach programs at bank branches that offer both customers and non-customers easily accessible financial planning advice. Banks in the U.S. could take a page out of Malaysia’s book by spreading financial planning awareness across the country rather than limiting their outreach to specific customers.