We use cookies to improve your experience on our website.

By using our website you consent to all

I accept
cookies in accordance with our updated Cookie Notice.

5 ways digital finance can help people

escape poverty

Image: REUTERS/Simon Akam

16 Dec 2016

Leora Klapper
Lead Economist, Development Research Group, World Bank

Jake Hess
, World Bank

Almost half of adults in emerging economies still lack basic financial services. Here are five
ways to help more people benefit from digital finance.

1) Make sure digital technology is available to everyone. Accessing economic opportunities

increasingly depends on access to technology. These days, everything from job searching to
managing money is done through mobile phones and the internet. The millions who lack
digital technology are at a big disadvantage. In our set of major emerging economies, the
share of adults with their own mobile phone ranges from 61% in Mexico to more than 90% in
China and the Russian Federation. The internet is less widespread, even among people who
have a mobile phone. About three-quarters of adults in India have their own mobile phone,
for example, but only a fraction have both a mobile and the internet. In recent years more
and more people in emerging countries have logged on via mobile broadband – but there's
still a long way to go.

Adults who have a personal mobile phone and access to the internet, 2015 and Image: Gallup World Poll
2016. The height of the bar is the total percentage of adults with a cellphone.

Women are less likely to have a mobile phone than men – and that makes it harder for
women to take control of their economic lives. The mobile money industry group GSMA
surveyed working women in a set of major emerging economies and found that two-thirds
believed that mobile phones helped them get access to business and employment
opportunities. Yet roughly 200 million fewer women than men own a mobile phone, the
GSMA estimates, and women won't be able to fully benefit from much-vaunted innovations
in mobile financial services unless that inequality is curbed.

Gender gap by emerging region, 2014 Image: GSMA/World Bank

Poor people continue to trail the rich in mobile phone ownership. In sub-Saharan Africa,
about three-fourths of wealthier adults have their own mobile phone, versus roughly half of
poorer adults. That gap is eight percentage points in East Asia and the Pacific. Not
surprisingly, the rich are much more likely than the poor to use digital payments.

Adults who make or receive digital payments through an Image: Global Findex database;
account at a financial institution, 2014 https://www.worldbank.org/globalfindex

2) Take advantage of biometrics to serve the poor. About a fifth of the world's 2 billion
unbanked adults say one reason they lack an account is that they do not have the
documentation needed to open one. India points the way to a solution: using digital forms of
identification, like fingerprint or iris scans, to help people get basic accounts. Biometrics also
can be used by women to register SIM cards in their own name so they don't have to rely on
a relative's cellphone. Accounts set up with biometric capabilities are often easier to use. For
example, people who struggle to remember long PIN numbers might prefer fingerprint scans
as an alternative.

3) Ramp up use of direct deposit by the private sector. The biggest opportunity to help
poor people get good financial services arguably lies with large employers paying electronic
wages and large buyers paying suppliers directly into an account. Governments are way
ahead of the private sector when it comes to use of digital payments, and in emerging
economies, most wage earners are still paid in cash. About 7 million unbanked adults in
Mexico work in the private sector and get paid in cash, and in Brazil, that number hits 8
million. About 440 million unbanked farmers, including roughly 85 million in China, are
compensated in cash. In addition to being more convenient, wringing these payments
directly into an account might build food security by helping farmers invest in their crops.
East Africa shows that digital payments can be made to farmers: Over 10% of adults in
Kenya, Tanzania, and Uganda receive a payment for the sale of agricultural products directly
into an account.

4) Stop using cash to distribute social benefits and pay government employees. Digitizing
government payments is a proven way to expand financial access. As shown in the chart
below, at least half of account holders in Brazil, Mexico, the Russian Federation and South
Africa use their account to receive public sector wages or safety net transfers (the blue bars).
Furthermore, around 15% of banked adults in these countries opened their first account in
order to receive this payment (the dotted blue bar). But loads of unbanked adults still collect
government wages or benefits in cash. Moving those payments into accounts could help an
additional 160 million unbanked adults get an account, including about 28 million in China,
and almost 7 million in the Russian Federation. As an added bonus, digitizing payments has
been shown to slash costs and cut corruption.

Adults who opened their first account to collect government wages or social Image: Global Findex
benefits, 2014. The height of the bar is the total percentage of adults with an database;
account. The blue bars show adults receiving government wage or transfer https://www.worldbank.org/globalfindex
payments directly into an account; the dotted blue bar is adults receiving this
payment into their first account.

5) Treat customers fairly and tailor products to their specific needs. Poor people won't
benefit from financial access unless accounts are cheaper and easier to use than the
alternatives. Shoddy products, allegations of fraud, and bad infrastructure have left some
recipients of digital government payments nostalgic for cash. Keeping services affordable
and quickly dealing with customer complaints will shore up trust and help draw new people
into the formal financial system. Businesses also should understand that not everyone's
financial needs are alike. Women's concerns are distinct from those of men, and the lack of
products designed with women in mind is one reason so many remain unbanked. One size
fits all approaches won't do much to help increase usage of digital finance - no matter how
you measure it.

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our
Terms of Use.

Written by

Leora Klapper, Lead Economist, Development Research Group, World Bank

Jake Hess, , World Bank

The views expressed in this article are those of the author alone and not the World Economic Forum.

The World Economic Forum COVID Action Platform

Learn more

Explore context

Digital Economy and New Value Creation

Explore the latest strategic trends, research and analysis

Subscribe for updates

A weekly update of what’s on the Global Agenda

Email Subscribe

© 2020 World Economic ForumPrivacy Policy & Terms of Service