According to the World Bank, being financially excluded is linked to income level. The richest 20% of adults in developing countries are more than twice as likely to have a formal bank account as the poorest 20%.
Yet the benefit of financial services among poorer people may be even greater than that of the wealthy. For instance, access to savings products can have important benefits beyond simply increasing one’s amount of savings. It can help empower women, increase productive investment and consumption, raise productivity and incomes, and increase health related expenditure.
Though financial exclusion is not endemic in the UAE, it is an issue that affects the Middle East more than anywhere else in the world. Here in the UAE it is seen to be linked to financial literacy, and the government regards both as areas that need to be improved in tandem. Of course, they are directly connected because with the right knowledge to use money properly comes with the ability to do so.
In the UAE, it is more difficult to be financially excluded than in many other parts of the world. One reason for that is that it is hard if not impossible to be “invisible” here, which means that everyone living in the UAE has to be legally approved and registered. In some other countries, it is more difficult for governments to keep track of who is resident, and why, due to their geographic location, the efficiency of their borders or the way they are governed.
Also, the UAE has a disproportionate number of banks and branches compared to other countries in the region, so the network for allowing people to access financial services is comparatively denser than in many other places.
If we look at some of the statistics for financial inclusion around the world, and then compare that with the Middle East, we see a number of interesting findings. Almost 40% of the world’s adult population, or around two billion people, do not use formal financial services. That is not by choice; they tend to be people at the poorer end of the spectrum, have no bank accounts to manage their money because of cost, travel distances or the sometimes onerous requirements to open a bank account.
That said, around 62% of the world’s adult population do have a bank account of some sort, and between 2011 and 2014 their number grew by 700 million.
As mentioned earlier the Middle East lags behind many parts of the world. Regionally inclusion is under 20%, whereas in Europe and Central Asia it is about 50%, and in East Asia and the Pacific it is just short of 70%. The higher income OECD countries are even higher, at over 95%. With just over 11 branches per 100,000 adults, the UAE is well ahead of its regional neighbours, but only a third of France’s branch density. In terms of deposit accounts, we have roughly the same as our immediate neighbours, but only half those in Malaysia.
At our last two conferences, the UAE Banks Federation focused on the challenges and benefits of digitisation and innovation. In many parts of the world these are together causing a good deal of banking services to go in two new directions – one via online banking sites and apps and the other into the hands of non-bank financial services providers. Here there is still a strong sense of affinity with branches, but the demand for some banking services to be delivered digitally is increasing exponentially.
Our conclusion from all of this is that the UAE must keep up with global trends in finance. In terms of financial inclusion in particular, we are working hard to launch the mobile wallet platform to allow those without bank accounts to store and transfer money digitally.
But more than that, the Federation is particularly keen to encourage a higher level of financial literacy to ensure that members of the public have a good understanding about the right options for them and how they can best manage their financial affairs. In this respect, we are encouraging all member banks to provide as much guidance and support as they can to enable their customers to make the right choices.
Written by His Excellency AbdulAziz Al Ghurair, Chairman of the UAE Banks Federation
