Financial inclusion has become a subject of great importance as an indispensable component in driving inclusive growth and supporting the overall economic development of the Middle East and the wider MENA region. Over the past decade, technological advances and innovation have allowed banks to create synergies and make substantial progress towards widespread financial inclusion.

What is financial inclusion and why is it important? Financial inclusion means expanding the number of people that are served by banks by facilitating access to an increasing number of users to the financial services they offer, including opening a bank account, transferring money, receiving wages, applying for credit, and obtaining insurance in a reliable and sustainable way. Having a bank account makes it easier, safer, and cheaper to receive wage payments from employers, send remittances to family members, and pay for goods and services. Overall, the societal and economic benefits of financial inclusion are apparent. For individuals, access to banking services is empowering and makes life easier, and at an aggregate level, higher levels of financial inclusion directly correlate to higher levels of economic growth.

Against the backdrop of a financial services umbrella which is poised to keep expanding rapidly as global leaders seek to establish ways to maintain sustainable economic growth with equity and inclusion at the forefront of state-wide development, financial inclusion becomes a top priority.

Financial Inclusion and the MENA region

In 2017, close to one-third of adults worldwide – or 1.7 billion people – were still unbanked, a World Banks study found . About half of the unbanked individuals were women, members of rural households of limited means, and workers outside the formal economy. More than half of the world’s unbanked adults live in seven economies, including Pakistan and Egypt. According to a World Bank study, account ownership in Pakistan is as low as 21%, where over 115 million adults do not have access to basic financial services. These figures indicate the stark inequality within our societies and point to the importance for banks and governments to focus on driving financial inclusion in the upcoming years.

In an effort to secure a more equitable future, the UAE Central Bank has put financial inclusion as one of its key areas of focus, launching its latest initiative on 13 February 2023. The new program is aimed at accelerating digital transformation of the financial services sector with the goal to make key financial products more accessible to the UAE residents.

Financial inclusion as a policy objective is also driven by the Central Bank of Egypt (CBE), which announced its latest inclusion strategy in 2022, aiming to achieve economic growth by extending financial services to the previously unbanked . As a member of the international Alliance for Financial Inclusion, it remains heavily involved in formulating and implementing impactful policy changes to bring millions of people into the financial system.

Identifying underserved Demographics

While banks seek to increase access to financial products, identifying key demographics is crucial in ensuring that initiatives aimed at fostering equity are effective. Extending services to groups that are historically unbanked or underbanked including youths aged 16-21, women, and the self-employed remains a key factor in building on the progress in the region. Another important aspect to consider is that banks in the region should focus on simplifying the process for opening a bank account for customers across the board by streamlining the Know Your Customer due diligence. These practices are key to ensure that anyone can use their National ID as the sole identification requirement.

In truth, maintaining momentum on this front creates progress and focusing on financial inclusion in financial services can create great long-term benefits to banks. By helping more families and businesses plan for everything from long-term goals to unexpected emergencies, banks can gain loyal customers. Once a newcomer initiates a touchpoint with a bank, that person is more likely to use other financial services like credit and insurance, and that will subsequently help in other aspects like simplifying the process for starting a business, investing in education, managing risk, and weathering financial shocks etc. The process has a snowball effect – and the benefits are tangible.

Joint effort can bring significant results

When it comes to extending financial services to socially and economically marginalized individuals, banks have the resources, infrastructure, and expertise to drive the change. In Pakistan alone, a World Bank study has found that further digitalization of personal banking services could bring over 20 million unbanked adults into the formal financial system. To provide consumer loans to low-income households within the country, especially young people and women entrepreneurs, Mashreq is launching a suite of digital banking products. It’s crucial that other financial institutions follow suit. In Egypt, , the joint efforts by the CBE and private sector institutions, financial inclusion rates soared from 33% in 2017 to over 56% by the end of 2021, the Central Banks reported . The technological revolution that had already disrupted so many sectors was further accelerated by the COVID-19 pandemic, transforming access to finance by quickening the inevitable adoption of digital solutions. Where previously people had to physically access an ATM or enter a bank branch, now consumers can access an array of financial services via mobile apps. Worldwide account ownership has grown by 50% in the past decade, World Bank research found . According to the World Bank’s Global Findex Database 2021 report, whereas a mere 42% of adults in developing economies possessed a bank account in 2011, the percentage surged to 71% ten years later .

Nevertheless, women, poor adults, the less educated, and those outside the labor market continue to be underserved. The region’s sharp focus on enhancing personal banking services and implementing digital solutions creates a big opportunity for banks and financial institutions to reach the overlooked groups by leveraging technology applied by pioneers in the industry. The important element in building on the positive momentum in the field is emphasising that financial inclusion is one of the elements of building stronger, more robust economies and can become a centerpiece to ensuring sustainable growth with equity for countries in the region.