Unlocking Financial Inclusion with CBDCs

This article was first published on Insights – Ripple

The global pandemic exposed many existing government distribution channels for financial aid as inadequate. With roughly one quarter of the world’s population unbanked, a number of stimulus programs faltered and rolled out too slowly and unevenly – including in developed countries – because of a reliance on traditional bank accounts for payments. 

Central Bank Digital Currencies (CBDC) can help governments overcome this shortcoming in the future and significantly boost financial inclusion efforts overall. Instead of relying solely on bank accounts or mobile money platforms, CBDCs have the potential to enable Central Banks to directly distribute funds to their citizens, augmenting their ability to receive aid, make payments, and engage in commerce.

For many countries, this change could be transformational, improving access to government and financial services that help advance financial access, participation and equity, and overall well-being. 

Mobile Access as Key

Of the people who do have bank accounts, many remain underserved and unable to access the full range of basic financial services, such as savings, loans, mortgages and other forms of credit. In the United States, for example, about 14 million people are unbanked, and 50 million are underbanked. Two-thirds of those unbanked adults also own a mobile phone, an important prerequisite for an effective CBDC rollout. 

Success in using mobile money accounts to expand financial inclusion in Sub-Saharan Africa has shown promise for accelerating adoption of CBDCs and improved financial well-being for traditionally underserved communities. According to the most recent Global Findex Database, despite concerted efforts to expand the number of people in the region with an account at a financial institution, accounts rose just 4% between 2014 and 2017 while the share of people using a mobile money account grew roughly twice as fast during that same period. The same is true ...

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