William Kramer

TN4B: Focus on Financial Services

The Next 4 Billion includes a whole chapter on a topic for which we were unable to present a single, real number from our analysis of household surveys. Not surprisingly, the chapter is short. So, why did we include it, if we couldn?t report any numbers? And why do we recommend it to you?

Well, as these pages have shown numerous times, we believe that financial services are a breakout sector – for the BOP, for business, and for the development community. For the BOP, access to financial services means new jobs and income; the creation of formal identity (perhaps for the first time); the reduction of physical risk (it’s dangerous to carry cash on your person, or store it in your home, in many parts of the world); the economic empowerment of women, perhaps the single most critical element of development; among other positive impacts.But wait, there’s more! Special for the readers of NextBillion, something you won?t find in the chapter (we ran out of time and space?.) The Inter-American Development Bank created for us a set of two graphics that represent why businesses need to look at the BOP. Here they are:

TN4B Remittances Mex1TN4B Remittances Mex2

What these maps are saying, to me at least, is that there is a huge, unmet need waiting for smart businesses to serve. A lot of money is going places where there are no financial institutions. Were these not poor people, you can bet that this market opportunity would have been acted upon long before.

For business, the increasing understanding that the poor need more than microcredit opens their eyes to what I believe is likely a trillion dollar market at a minimum. Why a trillion? Just the tracked country-to-country remittances are approaching $350 billion; most informed observers are confident that this underestimates the between-countries market by as much as 50%, which gets us around half a trillion. And then there are the within-country money flows, which informed observers believe is at least as much as the between-country flow; it’s probably considerably more. We?re at a trillion already, and that doesn?t begin to count what other services are in demand at the BOP – savings, credit for business enterprise, insurance of all types.

To understand the real market, we need real numbers – and that is a task which lies ahead. It’s a good one for the private sector, to be sure, but it’s also a responsibility of the development community. Grow the universe of publicly available data and everyone will benefit.