Size of the prize: Financial inclusion and the $380 billion revenue opportunity for banks

by 02nd Mar 2016
An illustration from the Within Reach report An illustration from the Within Reach report

A recent research report from Accenture has highlighted the enormous revenue opportunity for banks which financial inclusion represents.

CARE and Accenture have recently jointly published Within Reach – research on how banks in emerging economies can grow profitably by being more inclusive. While the report mainly looks in detail at six key insights on how banks should approach inclusive and responsible banking, it also highlights the large revenue opportunity claim which Accenture has calculated. Therefore this blog sets out some more details on that opportunity.

The real details of the opportunity and some suggestions as to how best to pursue it are set out by Accenture in Billion Reasons to Bank Inclusively. With an estimated two billion adults lacking access to basic financial services, according to the World Bank, and some 160 million unbanked small and micro businesses, and yet a further 160 million under-banked small and micro businesses, the opportunity is huge.

In fact, Accenture estimates that banks could generate nearly $380 billion in annual revenues by 2020 within emerging markets by:

  • Closing the small business credit gap at average lending spreads, which according to conservative estimates of fee-based services could generate $270 billion.
  • Including unbanked adults into the formal financial system and raising their financial services spending levels on average to that of lower middle income countries to generate another $110 billion.

With regards to personal banking, Accenture point out that “many of the emerging market economies are forecast to grow at a rate faster than advanced economies which should boost demand for new financial services from individuals and businesses”. Furthermore, “…increased policy action combined with economic growth is lifting hundreds of millions of people out of extreme poverty into the low-income brackets where commercial financial services are more relevant.”

On the small business side, Accenture point to International Finance Corporation estimates that the number of unbanked and under-banked micro and small and medium businesses represents a credit gap in developing economies of $2.1 trillion to $2.6 trillion.

We have used these figures in our joint report to grab the attention of a banking sector that has arguably been slow to respond to the financial inclusion opportunity, and while Accenture’s estimates in Billion Reasons to Bank Inclusively highlight the numbers of people emerging from poverty, Within Reach also shows the importance of banks reaching all the way down the pyramid and how that can be done.

Gerry Boyle

I lead CARE International UK’s policy analysis and advocacy around value chains and dignified work. I originally joined CARE as the Senior Policy Adviser on Private Sector Engagement. With the advent of our new Global Programme Strategy which put a particular emphasis on women’s economic empowerment, my focus changed a little, although I still work extensively with issues in the private sector and with CARE’s corporate partners.

Until recently I spent a lot of my time on financial inclusion, now looked after by my colleague Fiona Jarden. I also co-chair the Bond Private Sector Working Group.  Immediately before I joined CARE I worked for Oxfam as Head of Business Relations for about three years, but the vast majority of my career was spent as a management consultant including being a consulting Partner at Deloitte, where for a time I led Deloitte UK’s Consumer Business consulting practice, serving many major multinationals. My original degree was in Law from Oxford University, and in 2008 when I left Deloitte I did an MSc in Philosophy and Public Policy at LSE.

One good thing I've read

Amartya Sen’s Development as Freedom. It provides a framework for many people’s modern understanding of what is development, based on a profoundly human-centred approach rather than anything instrumental. And to check whether one personally is doing enough to fight poverty, I recommend Peter Singer’s The life you can save: Acting now to end world poverty – it’s very clear and easy to read but very challenging! Finally, Ha-Joon Chang’s Bad Samaritans: Rich nations, poor policies, and the threat to the developing world is a very readable guide to economic development which argues strongly against many of the prevailing orthodoxies.

Email: boyle@careinternational.org

Twitter: @gerryboyle10