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Financial Inclusion in Emerging Markets

With the consecutive effects of the pandemic and global conflicts, the momentum of economic recovery has been drastically disrupted. In the 2022 International Monetary Fund - World Bank Annual Meetings, the panel discussed how reviving the private sector is needed to obtain a resilient and inclusive recovery. Thanks to technology, unbanked households and small businesses in emerging markets are gaining access to finance for the first time through digital platforms. However, one of the panelists, Mayada El-Zoghbi, Managing Director of the Center for Financial Inclusion, stated that only 12% of small firms used digital financial channels during the pandemic, despite the government’s relief attempts. If that is the case, what might be the other ways we can achieve financial inclusion in emerging markets?


According to OECD, only 17% of surveyed adults said their financial knowledge was high. Without assistance, users with less experience are unlikely to benefit from banking services and are vulnerable to fraud or higher bank fees. In order to solve this, governments need to promote safe, affordable, and convenient financial products accessible to all adults in their economies. By doing so, small firms with less experience can access digital services and obtain appropriate benefits, such as government support.


Currently, about 55% of the unbanked population worldwide is female. El-Zoghbi added that there was a concerning trend due to the reversal in mobile internet access for women and the stagnation of smartphone adoption. In support of that, Mary Ellen Iskenderian, President and CEO of Women's World Banking, also remarked that the critical barrier to financial products was that they were not designed with the needs and constraints of low-income women in mind. Thus, innovations and solutions are necessary to achieve financial inclusion for women. Using digital ID, for example, can help improve women's ability to verify their identity and ensure the security of their personal information. These would allow them to access new services to serve entrepreneurship or provide a safety net with automated insurance policies. According to various surveys from IHS, ILO, and Oxford University, fully incorporating women into the economy would add 12 trillion USD to the global GDP by 2025.

Without achieving financial inclusion in emerging markets, it won't be easy to regain the pre-pandemic momentum of the private sector, a key to achieving a resilient and inclusive recovery.

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