BANKING THE UNBANKED
Financial inclusion, the ability to own a bank account, has been improving since 2011, when the number of people worldwide with access to a bank account stood at 51%. Since that time, that number has risen to a global adult population of 62% who now hold accounts. Statistics offered in 2014 note that many of the ‘unbanked’ people around the world receive their wages in the local currency in the form of cash, who then pay their local bills and living costs in cash. If they need additional funds for short-term loans, they rely on a network of family and friends to provide that financial support. Gender equality is not a fact of life in many of these affected countries and over half of those who are classified as ‘unbanked’ are women.
When examining account ownership levels and noting that the age of 15 is considered to be an adult in many parts of the world, the information published by the World Bank states that those over the age of 15 who own a bank account are broken down geographically as follows:
- 14% Middle East
- 34% Sub-Saharan Africa
- 46% South Asia
- 51% Europe
- 51% Central Asia
- 51% Latin America and Carribean
- 69% East Asia and Pacific
- 94% High OECD (Members countries of the Organisation of Economic Co-operation and Development with high levels of economic stability and income)
Inadequate Banking Infrastructure
One of the causes of the individuals lacking access to traditional banking services is the inadequate banking infrastructure. Individuals in such communities simply do not have even a banking branch available to store value or local currencies. In other communities, national currencies are practically non-existent. The reasons for the lack of banking infrastructure is directly correlated with the profitability of servicing clients in a particular region, the political risk, the surrounding infrastructure (buildings, electricity, computers, educated staff, stable government, etc) and the safety of the area.
National Currency Instability
Another major hurdle is the stability of the national currencies issued by local governments. In most areas where unbanked statistics are high, there is a lack of confidence in local currencies. Here, due to political corruption, the over inflation of such currencies render the units of account unusable by the citizens. Therefore members resort to storing wealth in commodities or other forms of value in attempt to retain their monetary purpose.
The onset of mobile communication and the digitisation of currencies brings about a change in traditional economics. Here, cryptocurrencies can directly substitute local currencies and be used as a means of value transfer. To mitigate cryptocurrency volatility, stablecoins may be a more favourable unit of account pegged to a currency (such as the US dollar) in which citizens are more confident in its valuation. The SDR provides a unique variant to standard stablecoins due to the nature of its constituents being a reserve asset. Here members can utilise the additional stability and have the full confidence and flexibility that their token is based on the most successful fiat currencies in the world.
SDR As Proxy For Micro-Economies
Having a blockchain reserve asset unit of account, the SDR can be used amongst small communities as a means of proxy settlement on a mobile device. This can foster micro-economics between communities in which goods and services can be traded for SDR units. Working individuals, paid in SDR tokens, can freely exchange these tokens for the underlying real fiat constituents. The SDR can serve as a tool for building economies in areas which banking has been unable to reach.