A global issue
We have never lived in a more interconnected society. We can communicate with friends and colleagues on the other side of the planet in the blink of an eye, and have more access to more information than ever before. In 2017 alone, more data was captured than in the previous 5,000 years of history¹. Yet more than two billion people worldwide do not have access to basic banking services². Principally, the « unbanked » are concentrated in a handful of countries. Indeed, just 25 countries represent 73% of the total, with India and China together accounting for 32%³.
However, make no mistake, this is a global issue. The United Kingdom has more than a million unbanked people (http://www.financialinclusioncommission.org.uk/facts). In the United States, one in 13 households has no access to a checking or savings account (Financial Exclusion: Why it is more expensive to be poor (2017)).
It is for these reasons that the UN Sustainable Development Goals (SDGs) not only specifically refer to financial inclusion in developing markets, but include a global target to « encourage and expand access to banking, insurance and financial services for all » (SDG 8, Decent Work & Economic Growth).
A personal and economic problem
Governments and supranationals are coming together to set specific targets to address financial exclusion. At a high level, the UN Sustainable Development Goals have a number of targets focused at the global level – as in SDG 8, Decent Work & Economic Growth, mentioned above. But targets are also being set pertinent to particular groups underserved by virtue of social economic status or gender: hence the inclusion of access to finance considerations within SDG 1, No Poverty; SDG 5, Gender Equality; and SDG 10, Reduced Inequalities.
The role of investors
Social and sustainability bonds provide a key mechanism for directing capital towards efforts to improve financial inclusion, for example, the Social Bond issued by the International Finance Corporation (IFC). Recipients of funding must either specifically target increased participation of those on low-incomes within their business models, or be small/medium-sized enterprises in emerging markets owned and run by women. Improving financial access for women in particular represents an enormous opportunity: McKinsey estimates that achieving gender parity in the workforce internationally could add as much as $12 trillion to global GDP by 2025.6
The triple opportunity
We believe that tackling financial exclusion around the world is not just the right thing to do, it is something that will benefit economies and boost financial markets. More people entering the financial system will not only start up more businesses but also boost tax receipts.
As asset managers focused on long-term financial performance, companies and noncorporate issuers actively seeking to address financial exclusion present us and our clients with a compelling trio of opportunities: the opportunity for financial reward; the opportunity to contribute to delivery of the UN Sustainable Development Goals; and the opportunity to play a role in creating a more inclusive and enriched global economy.