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Financial inclusion low in many parts of Asia: MAS's Ravi Menon
THE prospects for Asian banks are good chiefly because the prospects for Asian economies are good, said Ravi Menon, Monetary Authority of Singapore managing director.
At the same time, financial inclusion remains low in many part of the region, he said on Monday at the Symposium on Asian Banking and Finance. The symposium is jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore.
The region is expected to continue registering relatively high growth rates in the medium term - about 6 per cent on average over the next five years, compared to the global average of 3.7 per cent,
"Higher Asian incomes will drive demand for financial services, leading to more opportunities in banking. At the same time, financial inclusion remains low in many parts of Asia," said Mr Menon.
A 2015 World Bank study found that of the two billion adults on the planet with no bank accounts, more than half were in East and South Asia, he said.
Global banks will continue to play an important role in the region, especially in wholesale banking and the intermediation of US dollar flows, he said.
"But the onus largely falls on Asian banks to expand financial inclusion, especially at the retail and small business level. Using innovative fintech (financial technology) solutions, they can mobilise untapped savings and provide access to credit for under-banked individuals and businesses," said Mr Menon.
Asia is fertile ground for digital innovation in banking, he noted.
In Indonesia and Vietnam, only around a third of the population is formally banked. Yet, their mobile phone penetration rates are above 100 per cent - that is more than one phone per person on average, he noted.
This - coupled with a young and tech-savvy population - makes for a ripe environment for mobile banking, he said.
The road to financial inclusion is neither short nor easy. But it is an important one, said Mr Menon.
"Broadening access to financial services will offer Asian banks - and fintechs - the opportunity to grow their business while serving a social purpose," he said. Financial inclusion will be a key priority in the economic cooperation agenda when Singapore assumes the chairmanship of Asean next year, he added.