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» World Economic Forum
Publication Date : 01-06-2012
Emerging markets could drive growth in consumer financial services, SME financing and corporate bonds through innovations aimed at unbanked groups like the poor and SMEs, according to a World Economic Forum report.
Despite emerging markets growing faster than industrialised ones, "a large number of people in Asia remain unbanked without access to credit", Rajat Nag, managing director-general of the Asian Development Bank, told the World Economic Forum on East Asia yesterday.
About 15-20 per cent of the world's population is unbanked and the financial inclusion of this massive number could further drive economic growth. Financial inclusion of the poor will benefit emerging countries and innovation of financial products and services becomes one of the keys to success, the report pointed out.
Successful innovation for consumer financial services in the emerging markets for unmet demand include sales and distribution partnerships between financial providers and non-financial organisations including utility providers, retailers and community organisations.
The report, in collaboration with Boston Consulting Group, focuses on redefining the emerging market opportunity and driving growth through financial services innovation. It comprises expert interviews and discussions among global and emerging market financial institutions, regulators, multilateral organisations and academics.
Financial institutions also need to overcome infrastructure limits and a lack of sufficient credit information to tap business opportunities in emerging markets, said Kanu Dayal, senior partner and managing director of Boston Consulting Group.
"The poor are very bankable and poor women are very bankable and commercially attractive for consumer financial services," Nag said.
SMEs are vital to emerging markets and need to be financed. SMEs account for over 30 per cent of the emerging markets' gross domestic product and employ nearly half of the workforce.
Many SMEs have access to banks but may not be able to access loans and low-cost financing for expansion and growth.
Corporate bonds mostly serve large enterprises, however, they could be extended to SMEs needing to have access to credit, Dayal said.