Billion benefit from bank accounts

18 June 2007

Press Release

An action plan on how to get one billion of the poorest people in the world to open their own bank account for the first time will be launched at a finance conference in London on Tuesday (19th June).

Speakers at the conference will include two UK Ministers, Princess Maxima of the Netherlands, representatives from commercial banks, African and Asian Governments and anti-poverty campaigners.

At present two billion people, many of them living on less than $1 a day, do not have access to basic financial services taken for granted in rich countries, such as bank accounts, insurance, pension schemes or loans. That means it is harder, if not impossible, for them to save for the future or invest in their own business.

Gareth Thomas, UK Minister for International Development, will say:

“Helping poor people to open their own bank accounts is important if we are to reduce global poverty. Having a bank account or being able to take out a loan allows the benefits of economic growth to be shared more widely. People have the funds they need to pay for their children’s schooling, cope with emergencies, such as family illnesses, or set up small businesses.

“There is an increasing interest in the immense impact that private equity can play in making a difference. The potential is there and we should work together to harness it. With the backing of governments, banks and campaigners I am convinced we can give poor people the power to take charge of their finances.”

Ed Balls, UK Economic Secretary, will say:

“Fair access to micro-credit and banking services are a ladder to development and poverty reduction the world over. Access to a bank account gives an individual greater control and security over their money, and a loan from a micro credit organisation can be vital in promoting enterprise.

“This conference is an opportunity for us to learn from innovations around the world - from micro finance projects to mobile phone banking - and to create workable solutions to financial exclusion.”

There is an untapped market for commercial banks to provide financial services aimed at the poor and for governments to have policies that attract banks while protecting consumers. A study funded by the UK found that only 1 million out of 17 million adult Kenyans have a bank account. Most of those who do not are women. In Zambia less than 15% of the population have access to bank accounts.

The UK Government through the Department for International Development (DFID) is already helping the poor with basic financial services.

• In Afghanistan DFID has committed £10 million to help provide funding and advice to microfinance institutions, that lend money to small businesses. This has led to over 300,000 Afghans (70% of whom are women) accessing small loans.
• In Tanzania DFID is contributing £7 million to a $45 million fund between 2005-2010 that aims to help banks develop new financial products that address the needs of poor households and offers grants so banks can hire and train staff sensitive to the needs of low income groups.
• In 2006 DFID committed to fund the Kashf Foundation in Pakistan to expand microfinance (small loans) from 75,000 to 300,000 low income women in the next five years.
• In Bangladesh DFID has a new finance/microfinance of up to £40 million led by the Bangladesh central bank. The programme’s aims are to increase access to financial services for 20% of those in the target groups (extreme poor people, small enterprises and farmers), to improve incomes for 10 million people and to provide protection of savings for 15 million poor households through new regulation. Along with other development partners, a total of £72.6 million will be invested in the programme.

At the conference it is expected the private sector will support ambitious targets for poor people opening new accounts. In return national governments are expected to agree country actions which will include giving the public more information about the benefits of financial access.

Participants at the conference will report progress against these and other commitments at international finance meetings scheduled later this year and in 2008.

Facts

• The UK funded research into banking in Botswana, Kenya, Namibia, South Africa, Tanzania Uganda and Zambia.
• These seven have a total population of 162 million (a fifth of the population of Africa) and a total adult population of 92 million.
• Overall, only 27 million or 29% out of the 92 million adults have a bank account.
• 49% of adults in the seven countries use no financial products at all, not even informal products.
• There are 21 million people in the seven countries who don't have bank accounts but who do have access to, or own, a mobile phone - about a third of the unbanked population.