Technology can be harnessed to serve the unbanked in Asean

DIGITAL financial services can be crucial for overcoming the tyranny of geography in South-east Asia, where traditional financial institutions have found it difficult to build out their footprint in remote areas and across many islands. The expansion of digital financial services throughout Asean in recent years has been impressive. Consider the numbers. Between 2011 and 2014 alone, the share of adults in Asean with a bank account grew from 42 per cent to 50 per cent of the population.

While this should be celebrated, we still have a long way to go to achieve universal and deep financial inclusion in Asean. Only 36 per cent of adults in rural areas have a bank account. In addition, usage remains a key issue. Only 15 per cent of adults in Asean are actively using a debit card. Also, 39 million micro, small, and medium enterprises (MSMEs) have no or insufficient access to credit, with a total funding gap of US$175 billion. The size of the prize from increased financial inclusion is significant. McKinsey Global Institute (MGI) estimates that digital finance could raise the level of GDP of emerging economies by a total of 6 per cent by 2025.

AlphaBeta recently worked with the Bill and Melinda Gates Foundation (BMGF) to understand how to achieve universal and deep financial inclusion. Five of the lessons from this work are highly applicable to Asean.