Half of the World is 'Unbanked' - New Global Estimate Reveals 2.5 Billion Adults Worldwide Lack Savings or Credit Account

November 2, 2009

NEW YORK, Nov. 2 /PRNewswire-USNewswire/ -- The Financial Access Initiative (FAI), a research consortium based at New York University, has identified that 2.5 billion adults worldwide do not have a savings or credit account with either a traditional (regulated bank) or alternative financial institution (such as a microfinance institution). Nearly 90% of the financially un-served live in Asia, Africa, the Middle East and Latin America. FAI published the findings in a new paper, "Half the World is Unbanked," available at www.financialaccess.org.

"Until now, the margin of error when considering the world's unbanked was about plus or minus a billion -- unacceptable in any other field," said Jonathan Morduch, professor of economics and policy at New York University, managing director of the Financial Access Initiative, and author of Portfolios of the Poor, a new book examining the surprisingly sophisticated financial lives of the world's poor. "These findings are a real step ahead, and they show how better data can help policymakers truly target and serve poor populations with appropriate financial services."

The analysis also revealed new insights; for example, that India, a country with low per capita income and a large rural population, demonstrates much greater use of financial services than many relatively richer and more urban countries. The global data indicate that countries can improve levels of financial inclusion by creating effective policy and regulatory environments and enabling the actions of individual financial service providers. More than 800 million of those using financial services live on less than $5 per day, so it is possible to provide these services to very low-income communities -- but there are still nearly 2 billion to reach.

The Financial Access Initiative determined the count of unbanked adults worldwide by aggregating existing cross-country data sources on financial access, with a focus on evidence from household surveys. The approach yields an improved estimate of the size and nature of the global population that does and does not use formal financial services.

"This new estimate of the global unbanked population provides an important touchstone for policymakers, academics and practitioners," said Her Royal Highness Princess Maxima of the Netherlands, United Nations Secretary-General's Special Advocate for Inclusive Finance for Development. "Without reliable numbers, it is impossible to substantiate and identify the right policies on inclusive finance or to track progress. It is my hope that this effort will help many people around the world lead better lives."

The Social Sector Office of McKinsey & Company, a global management consulting firm with deep expertise in economic development and financial inclusion, provided research and analytical support for the effort.

About the Financial Access Initiative

The Financial Access Initiative (FAI) is a consortium of leading development economists focused on substantially expanding access to quality financial services for low-income individuals, offering the next generation of thinking about microfinance. FAI is housed at the Wagner Graduate School of Public Service at New York University and led by managing director Jonathan Morduch and directors Dean Karlan (Yale University) and Sendhil Mullainathan (Harvard University). FAI focuses on basic research and measurement tools that reveal the most effective means of implementing microfinance initiatives. FAI studies the value of microfinance by identifying the demand for financial services; the impact of financial access on incomes, businesses, and broader aspects of well-being; and mechanisms that can increase impact and scale of microfinance. For more information please visit www.financialaccess.org and follow us on Twitter at @financialaccess.

SOURCE Financial Access Initiative