Accelerating Financial Inclusion in South-East Asia

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN
March 22, 2017
Industry Trends
Asia-Pacific

Abstract

Promoting the use of formal financial services continues to be a challenge, and the depth of engagement varies with different financial products: Only 18% of adults use a bank account to receive wages or pay utility bills, and only 11% borrow from formal sources.

Oliver Wyman was engaged by Asian Development Bank, along with MicroSave to conduct a study on the role digital finance can play in accelerating financial inclusion, focusing on four Southeast Asian markets — Indonesia, the Philippines, Cambodia, and Myanmar. The study, informed by more than 80 stakeholder interviews across the four markets, extensive secondary research, and economic analysis, is an endeavour to better understand and quantify the nature of this impact.

Oliver Wyman’s research finds that digital financial solutions could address about 40% of the volume of unmet demand for payments services and 20% of the unmet credit needs in the base of pyramid (BoP) and micro, small, and medium enterprises (MSMEs) segments. Digital solutions will have the most significant positive impact on financial inclusion in five key areas:

  1. Enable fast, low-cost, convenient identification and verification processes
  2. Alter economics of the supply side distribution and servicing issues with mobile phones and POS devices
  3. Create initial momentum for electronic payments to support supply-side business cases
  4. Access to credit information by alternative sources of data for improved customer profiling, credit risk assessment and fraud detection
  5. Mobilizing micro-saving via lower cost digital origination and servicing channel

Digital finance alone cannot entirely close the gaps in financial inclusion, but the cumulative effect of digitally driven acceleration in financial inclusion could boost GDP by 2% to 3% in markets like Indonesia and the Philippines, and 6% in Cambodia. For the population earning less than $2 a day, that would translate to a 10% increase in income in Indonesia and the Philippines, and an increase of around 50% in Cambodia.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Preface

3

Executive Summary

4

1. Introduction

7

2. Current Situation and Opportunity

9

3. Framework to Identify Barriers to Financial Inclusion

11

4. Impact of Digital Finance

18

5. Quantifying the Impact of Digital in Financial Inclusion

41

6. Segment-Specific Insights

43

7. Country-Specific Insights

50

8. Concluding Remarks

65

9. Appendix

67

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