Technology Can Boost Financial Inclusion In The UAE

Financial inclusion, a practice that aims to provide banking services to the poor, can be facilitated through technology and collaboration between financial stakeholders, experts said.

The Center For Financial Inclusion defines full financial inclusion as a situation in which “everyone who can use them has access to a full suite of quality financial services, provided at affordable prices, in a convenient manner, with respect and dignity. Financial services are delivered by a range of providers, in a stable, competitive market to financially capable clients.”

Osama Al Rahma, CEO, Al Fardan Exchange, said that a common understanding was required among banks, regulators, governors, agents, technology providers and other stakeholders to achieve financial inclusion in the UAE.

“New technology means that we can now reach many more people and close gaps in financial services provision in remote rural communities,” he said.

“But we need to ensure that we do not ‘impose’ solutions on customers, but ensure we find out what they need and provide solutions that add real value for them.”

Al Rahma emphasised that the costs involved with creating the right infrastructure to provide financial services to the unbanked must be shared among the stakeholders.

Globally, about 50 per cent of adults do not have a bank account or access to financial services. These are the ‘financially excluded’ in society, experts said.

In the Middle East, experts say that the financial sector will benefit greatly by reaching out to the ‘financially excluded’ people, especially with regards to the remittances industry in the region.

Experts say annual remittances by expats in the GCC countries are estimated to reach about $120 billion, with more than $48 billion leaving Saudi Arabia in 2012.

Moreover, this is expected to increase by 20 per cent in 2013. Beneficiaries are largely spread across Asia and Africa. In Pakistan, for example, 60 per cent of the remittances received come from the Middle East region.

Experts said that costs could be an issue for poor people when transferring money.

“Payments can act as the ‘connective tissue’ to get customers onboard, but unfortunately the poor pay a huge price for access to these and other financial services,” said Rodger Voorhies, director, financial services for the poor at Bill & Melinda Gates Foundation.

Voorhies said that a study by the foundation and McKinsey had looked at what would it take to reduce the cost of such payments for the unbanked.

“The study concluded that a willingness to look at different business models is the biggest driver of cost reduction. For example, simply by changing payment delivery from cash to digital, 90 per cent of the cost is removed,” he said.