Fintech Solutions Can Enable More Widespread Financial Inclusion, Could Increase GDP of Emerging Markets by $3.7 Trillion: Report

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Critical gaps in the global banking system, especially in emerging markets, have restricted business growth and development. Consumer demand cannot be effectively addressed if banking platforms are not updated to meet the requirements of individuals and small business owners.

Billions of people across the globe are underbanked or unbanked, which means they do not have access to modern financial services such as a bank, savings or investment accounts, or other tools needed to conduct business.

However, businesses in China and other countries have achieved success by leveraging the latest Fintech solutions. Fintech has helped with advancing sustainable global development, which has led to greater financial inclusion. More people are being able to access payment platforms and vital services such as reliable credit, which is helping to reduce wealth inequality and poverty levels.

As mentioned in BNP Paribas’ investors’ corner blog:

“Substantial progress has been made over the past 20 years, lifting people globally to ‘banked’ status, one-third of all adults around the world have remained financially excluded. This indicates there is still much to do and much to be gained. Widespread inclusion could increase the GDP of all emerging economies by 6%, or $3.7 trillion, by 2025, and lead to the creation of 95 million jobs.” 

Many different initiatives have been launched throughout the world, in order to support individuals and business owners in developing economies.

SATYA MicroCapital Ltd, a fast-growing micro-lending firm based in India, has secured around $9.7 million in capital from Switzerland’s impact investor, BlueOrchard Finance Ltd. The funding has been received via the InsuResilience Investment Fund (IIF) and Japan ASEAN Women Empowerment Fund (JAWEF) – which is managed by BlueOrchard.

SATYA MicroCapital Ltd launched its operations in January 2017 and now has INR 1,000 crore worth of assets under management (AUM). The company has been focused on offering micro financial services to the unbanked or financially underserved population in India.

SATYA is also focused on helping women entrepreneurs residing in rural areas of India. The company wants them to be able to generate a consistent, reliable income so that they can be more independent and self-sufficient.

The Fintech revolution that is taking place will benefit all economies, boosting competition by challenging incumbents while delivering better services at a far lower cost. As emerging markets are home to approximately 85% of the population, it is vital they have access to capital.

As noted by BNP Paribas’ in their investors corner blog post:

“There are still 225 million Chinese [residents] who are financially excluded, accounting for 13% of the global total. With more than 40% of China’s population living in rural areas, the traditional financial services industry faced hurdles such as high costs to serve customers with low or irregular incomes, difficulty in reaching consumers in remote areas, and a lack of data preventing reliable and efficient assessments of a customer’s creditworthiness.”

The post added:

“The evolution of China’s digital payments platforms has helped users become more financially visible and more economically viable. Beijing appears to recognise the benefits and to endorse a secure and potentially growing role for the private sector as its financial services industry evolves.”

Fintech solutions in other Asian countries like Indonesia, Malaysia, the Philippines, Singapore, and Pakistan are helping with democratizing access to cost-effective basic services. According to BNP Paribas’ paper on emerging markets, these fundamental changes and improvements are “making this a pivotal moment for financial inclusion and full participation in the economy.”

The paper concludes:

“The ultimate beneficiaries are those previously underserved. They are finally getting a hand-up rather than a handout. The power of this feeding through to these economies and promoting further entrepreneurialism and innovation will be playing out for many years to come.”

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