While the most glaring financial dilemma that most people talk about is that of the great divide between the rich and the poor, there is an equally important chasm that affects about 1.7 billion people around the world, according to the latest estimates from the World Bank.
Many people do not have access to formal financial services, such as bank accounts, investments and loans.
In the UAE, our research shows that about 32 percent of the working population, approximately 1.7 million individuals, are underbanked. The challenge is greater in the wider Gulf region, where the share of the population with access to the banking system remains below the average as 70 percent does not have a bank account.
Throughout the GCC, the underbanked population consists mainly of low-income migrants and students. In the UAE, foreign workers make up about 70 percent of the working population, and earn less than AED5,000 a month – not enough to meet the minimum level required to open a traditional bank account.
Without a doubt, the region has a long way to go to achieve financial inclusion. It is a matter that needs to be addressed, not only to put the underbanked or the underserved in the financial sector into the mainstream, but also contribute to economic growth. The World Bank says financial inclusion can have a multiplier effect, contribute to the economic development and stability of a country, as well as help achieve UN Sustainable Development Goals.
An EY report published a few years back, when inclusion was just becoming a mainstream discussion in financial circles, showed that financial inclusion can contribute as much as 14 percent to GDP, an increment that would be welcome in an economy such as the UAE’s.
Thankfully, new technologies and disruptive innovations in the fintech sector are helping to address the challenges of financial inclusion. Current and emerging fintech solutions are playing a significant role in ensuring that the benefits of financial services are experienced by everyone, regardless of their status or income level.
Inclusive fintech products enable the digitisation of both income (pay into account vs cash) and consumption (pay digitally vs cash), while providing customers with full visibility on how their money is being spent and allowing them to set monthly limits and category restrictions on what their salary can be used for.
Bruno Martorano is the CEO of Monty Finance
