“In two or
three years [2018-2019],
there might be a tipping point
where the
majority of the world’s population, for the
fi rst time ever, live
in middle-
class or rich households.”
looking to the customer as to what the demand is for fi nancial services [and letting] that drive strategy, more than what the company would like to make of the environment – I think that’s a constructive development.”
Another area of focus highlighted during the discussion, articulated by Bill Schlich, Global Banking & Capital Markets Leader at EY, was emerging markets. “Every fi nancial services institution I speak to is investing a huge amount in emerging markets,” he said, singling out the likes of China, India and Brazil.
What does this mean for Africa and other emerging markets?
Since the days of ancient Babylon, when, writes Grossman, “palace and temple offi cials loaned their own funds and, in time, deposits that were entrusted to them”, or in medieval Italy and Spain, where “institutions were established for the purpose of funnelling private savings toward public use, in particular to fund government debt”, the precursors to the modern bank have fi lled a vital role in the development of economies and societies. This is certainly the case in emerging markets, hungry for the fi nancial inclusion which banks bring about.
This enabling role, which is the focus of the Centre for Financial Inclusion and the subject of a 2016 paper entitled The Business of Financial Inclusion: Insights From Banks in Emerging Markets, is increasingly being put into stark relief by statistics such as: “Of the 3.2 billion people in the world with fi nancial transaction accounts, 97% hold an account at a fi nancial institution” and: “According to the World Bank’s Global Findex database, over 90% of the 721 million new accounts opened between 2011 and 2014 were opened at fi nancial institutions – the vast majority banks, but also credit unions, co-operatives, microfi nance institutions and postal banks.”
The paper’s lead author, Susy Cheston, conducted a series of interviews with executives from 24 banks in locations as diverse as Colombia, South Africa, Indonesia, Pakistan, Brazil, China, Turkey and Bangladesh. The conclusion? The story of fi nancial inclusion in these emerging markets is digital. “The banks in this study that are successfully reaching the unbanked/underbanked segments are the ones which are exploring a myriad of digital channels to create convenient customer service points, while also re-thinking their operations to take advantage of cost reductions and effi ciencies in technology,” wrote Piyush Gupta, CEO of the Development Bank of Singapore, in the foreword to the paper.
Digital takes the lead
What studies like these tell us is that digital interventions are not nice-to-haves, but essential tools for driving fi nancial inclusion around the world. This was a hot topic for discussion during the 2018 World Economic Forum (WEF) meeting in Davos in January, with BlackRock CEO Larry Fink among those calling for a more socially responsible global banking system. “The question isn’t the fi nancial system, but the inclusiveness of the fi nancial system,” he said during a CNBC panel discussion. “And we don’t talk about that at all.”
While the world has seen sustained, synchronised GDP growth in recent years – and with equities thumbing their nose at projections of lower yields – the likes of Fink question the sustainability of such returns, which have been hugely profi table for some, but “not so impactful for many people”. Only by fostering more socially responsible business practices that make a positive contribution to society, and working to educate people about fi nancial instruments and the workings of the system, can the fear and anger regarding current inequalities be tackled, said Fink.
In this respect, Gupta believes that banks play an important role in enabling growth and progress globally: “At the heart of it all, banks must do real things for real people and work to fuel inclusive economies from the centre, thereby enriching lives and transforming societies.”
26 An Absa Investment publication
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76
