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.
