The term "unbanked" refers to individuals or households that do not have access to traditional banking services, such as a bank account, credit cards, or other financial products offered by regulated financial institutions. The unbanked population is typically underserved by the formal banking sector and may face challenges in accessing financial services and participating fully in the formal economy.
The unbanked may have limited access to traditional banking services for various factors, including a lack of identification documents, insufficient income, remote geographic locations, distrust of formal financial institutions, or perceived barriers to entry. They often rely on alternative financial products and services to meet their financial needs, including cash transactions, money orders, prepaid cards, mobile money accounts, and informal savings mechanisms like community-based savings groups. While these alternatives provide some level of financial inclusion, they may come with higher fees, limited functionality, and less protection compared to regulated banking services.
Without access to formal banking services, the unbanked may encounter difficulties in managing their finances, securely storing money, building credit history, saving for the future, and accessing affordable credit. The lack of financial inclusion can impede economic growth, limit opportunities for upward mobility, and exacerbate income inequality.
The unbanked population often includes individuals from low-income households, marginalized communities, and underserved regions. The lack of access to banking services can contribute to a cycle of poverty, making it harder for individuals to save, invest, build assets, and access financial tools for economic empowerment.
According to various reports and studies, a significant proportion of the global population remains unbanked, particularly in developing countries and marginalized communities. Efforts are being made to bridge this gap through innovative financial technologies, policy interventions, and collaborations between governments, financial institutions, and non-profits.