The MENA region has a fundamental issue.
Financial literacy in the MENA region is significantly lower than in other parts of the world. With the highest financial literacy rates being UAE at 46%, followed by Kuwait at 44 % and lowest being Libya and Yemen at below 10%. Given that European countries such as Norway and Sweden have a financial literacy rate of 71%, this shows we have a serious issue to address. Research indicates that financial literacy has got a direct and significant impact on financial inclusion, with the contribution of financial literacy towards inclusion being 32%.
So why does this matter? Well for starters, research has proven that financial inclusion could improve GDP by up to 14% in more rural, developing economies like India and 30% in frontier markets like Kenya (Source EY).
But what does that really mean for the region? Not only is financial inclusion important from a philanthropic perspective, but it is also extremely beneficial to improving our region’s economy. Open Banking can help build economies through increasing competition and driving innovation within the financial services sector. The benefits however can extend way beyond the financial sector by giving the unbanked the opportunity to access affordable products and services. For that matter, research suggests that it is estimated that banks could generate over $380 billion by tapping into this huge opportunity given that 69% of adults remain unbanked in the region (World Bank Data).
How Open Banking can directly improve financial inclusion:
- Building a financial profile: Through enabling data sharing and utilizing payment information, an accurate financial profile can be formed- which will, in turn, help the unbanked population become eligible for more financial products and services.
- Supporting SMEs: Enabling an affordable option for SMEs to manage and plan their costs and assets.
- Help people make more informed decisions: Using data and algorithms to allow individuals to understand their financial position and make more informed decisions.
Through Open Banking technology we are taking a step in the right direction towards simplifying financial services through personalized offerings; hence allowing us to embrace a more inclusive financial culture. With a generation of tech-savvy millennials on the rise, possibilities are endless.