Day 4 at Davos – Banking the Unbanked

As Davos 2007 heads into the final straight, there are fresh issues popping up every minute that are provoking fierce debates.  Yesterday, I attended a session on ‘banking the unbanked’ which generated some interesting discussions about the huge population out there who are currently unbanked - not just in the developing world but in regions where we’d never expect this to be a problem.

Reasons for the lack of credit available in the less developed part of the world are pretty self explanatory.  Poorer people represent a higher risk and lower return on investment for banks and financial institutions and as a result they’re reluctant to get involved in these regions.  Different regions are responding in different ways however many are reliant on non-government organisations to help with funding.

What amazed me, however, was to hear that some fifty million people in the United States are also unbanked.  This is a startling fact for a country with such a developed economy however it boils down to the same reason – some individuals just represent too high a credit risk.

A number of financial executives I spoke to agreed that technology could be a great enabler in giving banks a return on their investment and making it a risk worth taking.  An effective use of technology can reduce the cost of transactions and there is a great opportunity for large financial institutions to participate in the development of these financial economies creating a tailored range of products and services.  Time will tell as to what degree this opportunity is embraced.

Today’s discussions, however, have turned to the main concerns of business leaders in Asia.  Contrary to expectation, the top two worries among Asian business executives were water availability and energy availability…and the impact of these factors on individual’s quality of life.

This is clearly a reflection of how rapidly these economies are developing, perhaps too rapidly.  Indian and Chinese businesses and US companies with operations in these countries are all faced with the fact that the environment cannot keep up with their amazing growth and development creating a situation where climate change is becoming a huge issue.  And it’s the globe, not just their local environment, which is impacted.

After another frantic day at Davos, it was great to relax at the McKinsey ‘Nite-cap’ party last night.  The music, company and general ambience made it the standout cocktail reception of the World Economic Forum so far.

Sadly, Davos for this year is drawing to a close but there have been a fascinating range of topics covered in the conversations I’ve had with other delegates.  With the Infosys cocktail reception this evening and tomorrows Addressing Global Risks session, I’ve no doubt that there’s plenty more to come.

Ashok Vemuri, SVP and head - Banking and Capital Markets business, Infosys Technologies

Comments

[Lydia Clare]

Anti-globalisation (and anti-wef) propaganda is and has been concerned about how global economic growth leaves out a lot of people, and of course it does. Now, as China and India are emerging and being celebrated (yes, and celebrating themselves a bit) as nations that HAVE managed to develop more and take part in globalisation, all of a sudden there are the same concerns towards them as well, eg in terms of environmental issues or infrastructure issues. What amazes me (economically a complete lay person) a bit is that
a) the 'traditional' developed world bases its wealth on an industrial revolution that didn't care about environmental or social issues or distribution of wealth until after the wealth wa established; and
b) how are 'developing' countries supposed to invest in environmental issues and social issues and infrastructure problems before they have generated the funds through developing? Of course I agree that these are issues that need to be taken into account, but I also think there is a point of saying: hey, they are doing really well, congratulations. Is it really helpful to say: "you may be getting more developed, but you stil have problems so it doesn't really count"? Actually, most of the Indians that I have seen interviewed (which is most likely the minority)sounded proud of their achievement, and at the same time concerned about all the issues mentioned. And they all seem to be bursting with self-confidence. Of course it remains to be seen how much of that is actually propaganda, but then isn't that the case in any government? Nobody doubts that the people who own the money determine the make-up of a government, or at least how it will be run...in spite of laws (and, may I add, most likely in the case of India money still makes the wheels of government bureaucracy turn more quickly, hana?)