Introduction to Financial Inclusion

in Southeast Asia

July 2015

Global Views on Financial Inclusion

2

“It is critical that regulators create an open and level playing field for

mobile money services, as there is evidence that regulatory barriers

can slow down both market uptake.”

Simone de Castri, Director of Advocacy & Regulation of GSMA

“Financial inclusion can help individuals cope better with poverty, especially

the challenges of irregular income and occasional large bills.”

Joseph Torbey, Chairman of the World Union of Arab bankers

“For so many people living in poverty, lacking access to finance and not

having the means to be productive is a significant hindrance to improving

their standard of living.”

Ann Miles, Director of Financial Inclusion of The MasterCard Foundation

“Financial inclusion also coincides with greater local economic activity

and decreased economic inequality at the macroeconomic level.”

Robert Cull, Lead Economist of the World Bank

Defining Financial Inclusion

“The provision of accessible, affordable and relevant financial

products and services to individuals, households or

groups.”

3

Other Definitions to note:

Unbanked – Situation where an individual (>15 years old) does not have their own bank account.

Underbanked – Situation where consumers have limited to no access to any financial services,

which are normally offered by banks.

Scope of Financial Inclusion

Bank Accounts Immediate Credit Savings Products

Remittances and

Payments Services

Insurance

Mortgage

Financial

Advisory Services

Entrepreneurial Credit

Types of Financial Services Offered by Banks in Developing Countries

4

Lack of Financial Infrastructure

• Weak Laws & Regulations to allow banks to

share information or set up public credit

registries.

Lack of Personal Documents

• Without much personal documentation, no

proof of credit worthiness of borrower.

Restrictive Regulations

• Fear of exploitation of the poor while

requiring financial institutions to stick to good

credit, limits banks’ incentives to seek

business with the poor.

Unsuitable Financial Products

• Banks fail to tailor their products accordingly

to the needs of the poor. Hence, with lack of

knowledge and understanding, the poor are

reluctant to adopt such products.Logistic and Delivery Challenges

• Due to the remote areas the poor live in, it

makes the financial services costly as banks

factor in the expense of travelling.

5

5%

13%

19%

20%

23%

25%

30%

0 5 10 15 20 25 30 35

Religious reasons

Lack of trust

Lack of documentation

Too far away

Too expensive

Family member already has an account

Not enough money

Adults without a bank account (%)

Barriers to Financial Inclusion

Other Cited Reasons by Survey Reports (2014)

Source: Global Financial Inclusion, Standard Chartered Research 2014.

Reasons for Being Unbanked or Underbanked

Though more have been financially included, there is much room for improvement in less developed countries

such as Myanmar and Cambodia.

Possible Areas of Improvement:

1. Need for affordable and financially viable financial products, which are country relevant.

2. Strengthen regulatory environment to support financial inclusion.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Singapore Malaysia Thailand Indonesia Philippines Vietnam Cambodia Myanmar

Southeast Asia Banked Population% of Banked Population in SEA (2011 & 2014)

6

2011

2014

Source: (Global Findex) Database, World Bank 2014.

'10 '11 '12 '13 '14

Sub-Saharan Africa

North America

Middle East and North Africa

Latin America

Europe

Commonwealth of Independent States

Asia Pacific

2,7983,013

3,2103,463

3,636

Mobile Phones Penetration

Mobile Penetration in the SEA region has enabled provision of Financial Services to the unbanked & underbanked.

Southeast Asia Mobile Penetration & Penetration Growth Rate (YoY, 2014)

Source: The Mobile Economy 2015, GSMA & Digital, Social, And Mobile In APAC 2015, We Are Social & IAB.

Unique Subscribers by Region (Millions, 2014)

7

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

20

40

60

80

100

120

140

160

Singapore Thailand Vietnam Cambodia Malaysia Brunei indonesia Philippines Laos Myanmar

Pe

ne

trati

on

Rate

(2

01

4)

Pe

ne

tra

tio

n G

row

th R

ate

(Y

oY

)Penetration Rate (2014)

Penetration Growth Rate (YoY)

Mobile Money Mobile Insurance Mobile Savings Mobile Credit

8

Allows transferring of

money and making

payments via feature

phones.

Provides micro-

insurance services

through feature phones.

Allows consumers to

save by using their

feature phones.

Provides credit

services via feature

phones.

Mobile Financial Services

Insurance

Investments/ Long-Term Savings

Borrowing

Electronic payments starting with everyday needs like P2P payments and bill payments

Secure transactional account that is used to receive and store funds (eg., salaries, remittances, benefits)

Pathway to Full Financial

Inclusion

More complex needs, order

may vary by market

Basic money management –

foundational for all markets

Hierarchy of Consumer Financial Needs

Source: A Progressive Approach to Financial Inclusion, MasterCard, MasterCard Advisors Analysis 2014.

Big Data & Data Analytics

Mobile transactions in financial

services such as payments

and repayments are recorded.

Predictive analytics on the

data collected, can improve

providers’ insights about

customers’ needs leading to

more suitable products for the

unbanked.

Big Data

A person’s mobile airtime and

mobile money is used as part

of a decision process to decide

the creditworthiness of the

individual.

Better screening and

predictive analytics produces

relevant financial products,

which reduces risk of lender

and reduce premiums charged

to clients. Operational

efficiency translates to cost

savings for both service

provider and customer.

Mobile data serves as a strong

source of data capture for

emerging markets. The

diffusion and adoption of

mobile phones has created

billions of data-generating

devices across emerging

markets.

High penetration of mobile phones in the unbanked and underbanked regions helps to support

financial services and the collection of data.

Data Collection

Solution to Financial Inclusion Data Analytics

Credit Risk Assessment

9

GDP PC

$6,728

72.7m

256m 36.1%

121%

INDONESIA

GDP PC

$3,383

44.2m

31.3%101m

113%

PHILIPPINES

GDP PC

$64,584

5.4m 96.4%

4.45m152%

SINGAPORE

GDP PC

$17,748

30.5m 80.7%

20.1m137%

MALAYSIA

35m

64.9m 78.1%

150%

GDP PC

$7,907

THAILAND

GDP PC

$2,589

41.0m

31.0%90.7m

141%

VIETNAM

2.6m

51.4m 22.8%

26.0%

GDP PC

$1,040

MYANMAR

GDP PC

$1,818

3.8m

22.2%15.4m

157%

CAMBODIA

GDP PC

$2,054

0.85m

- %6.8m

103%

LAOS

53.1%1.27b

75%

INDIA

243m

GDP PC

$2,653

98.9%23.8m

126%

AUSTRALIA

21.2m

GDP PC

$67,035

99.5%4.57m

125%

NEW ZEALAND

GDP PC

$31,999

4.16m

Total Population (m)

Mobile Penetration

Rate (%)

Population with a bank

account (%)

Total Internet Users

(millions)

GDP Per Capita (PC)

($US)

*As of Q4, 2014

10

Market Potential

https://www.facebook.com/FinTechSG

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Singapore, 089490

Singapore Fintech @ One-north

Ayer Rajah Blk 79

Singapore, 139995

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