This is a very interesting topic that I believe should be split in two: (1) savings; (2) borrowing. Saving money will likely be achieved faster than borrowing, given that credit scoring is likely in incipient stages or non-existent in many of the economies with the highest percentages of non-banked adult population.

I would be interested in articles on the subject of credit scores and credit history in developing countries.

I hope the authors are not implying that it is always desirable for poor people to be banked or even served by microfinance providers (most being credit only). Three points about Tanzania:

(1) limited access to banks (only 12% of adults are formally included) is in part a function of poor physical access, poor product design, and delivery and high costs of maintaining accounts;

(2) microfinance providers in total contribute financial access to only about 5% of adults here;

(3) effective and affordable financial access is being provided by an increasing number of well-established informal savings and loans groups based in local communities. These can mobilise local savings (some four times more people save than borrow in Tanzania) and provide returns on that money of well over 30% pa, with portfolio qualities showing barely 2% loan losses. Try getting a bank to offer that sort of return and performance!

Of course, banks provide much greater security and liquidity for people’s money; but this comes at a high price and one that the majority of Tanzanians are not able or ready to afford, certainly not yet. Two banks here are rolling out mobile phone banking platforms and combining these with banks on wheels to reach more remote areas. It will be interesting to see over the next couple of years what contribution these initiatives make to increasing the proportion of those formally banked.

In low-population density countries where infrastructure is poor and formal bank branches cover only limited areas, formal and even semi-formal financial access needs to be complemented by informal services tailored to people’s requirements. Without these, millions of people will continue to remain totally excluded. In Tanzania right now the number of financially excluded is 12.5m or 56% of the adult population.

For those wanting more information, please check out the 2009 FinScope survey of demand for financial services and barriers to access. This is available by clicking on http://dgroups.org/groups/FinScope-Tanzania.

Recent research carried out in Nigeria shows that less than 25% of the bankable populace have bank accounts i.e. over 3/4 of the population are unbanked. Interestingly enough, when questioned as to why this is so, the majority (almost 50%) responded that “they have little or no income” with which they can open bank accounts. I am quite ceratin that this is the case in most countries.

Good short article on the unbanked. There are a lot more people, nomads, etcetera, that go unbanked in the world—I have seen them in Central Asia and Africa. From my experience the majority seem to be more interested in savings accounts than actually borrowing!...

The article was an eye-opener in revealing the magnitude of the unbanked and underbanked sectors of the third world demographies. However, I have a little caveat to add concerning the research methodology behind the article. Vast areas of the rural hinterland in India are served by post office savings institutions which continue to remain highly popular with the masses (despite the increasing penetration of the commercial and cooperative banks) on account of their accessibility. I do not know whether the authors have taken them into account.

Likewise, the large-scale presence of indigenous bankers in rural India can not be wished away, however unpopular they may be in popular folklore and official demonology. The growth of biometric identification technologies may enable the third world to circumvent problems posed by mass illiteracy and deliver financial services to rural poor. We require a three way PPP between the Government, IT Companies, and the financial services industry to deliver financial services to everyone.

I am from the USA, presently living and working in the Philippines. It is very much a challenge to get people from that part of the world to understand the business opportunities available in this part of the world. When I mention financing or micro financing, they look at me like I am crazy. Clearly, what the developed world does not understand is the number of underserved persons living in SE Asia. Thanks for your article.