Financing in Emerging Markets: How to Increase Access to Finance in Emerging Countries

Countless studies show that increasing access to financing can profoundly improve the economic prospects of a community. Access to financial markets, known as financial inclusion, provides economic stability, promotes economic growth, and makes communities less susceptible to economic shock.

New technologies in the financial world have helped emerging markets make great strides toward financial inclusion.

In the last 10 years, the number of adults with bank accounts has jumped 30% in developing countries.

There is still a lot of work to be done, however. Luckily, governments, financial institutions, and communities can increase access to finance and improve the economic futures of those living in emerging countries thanks to the benefits of financial inclusion.

Let’s explore how.

Quick Summary

  • Increasing access to financing is key to economic growth and the alleviation of poverty, particularly in emerging countries.

  • New technologies, such as cryptocurrency, mobile banking, and payment-processing apps have driven a new era of financial inclusion for developing countries and will continue to drive future access to financing.

  • In emerging markets, financial inclusion requires investment in infrastructure, access to smartphones, and a greater commitment from banks to expand into communities they’ve previously excluded.

The following steps are key to achieving universal, global financial inclusion:

1. Embrace Cryptocurrency.

We’ve only begun to see the true impact that cryptocurrency will have on the global financial system. Digital currencies promise to revolutionize all markets, but the greatest potential may be in emerging markets.

Cryptocurrencies exist in a world beyond governments and financial institutions, which means they are exempt from the biases that these institutions hold or have traditionally held. In communities that justifiably distrust those institutions, crypto could become a viable currency for making transactions and storing wealth without institutional intrusion.

Emerging market countries are also far more likely to be dependent on remittances, or payments sent from relatives who are working abroad. According to the most recent report from the World Bank, the average cost of receiving these remittances is above 6%.

Banks charge nearly double that.

In sum, billions of dollars are going to transaction costs rather than to the intended recipients. Crypto, however, has no exchange rates and no such associated costs.

The World Bank estimates that a 5% reduction in remittance costs would save $16 billion. What if those costs went to zero thanks to the adoption of crypto? That would mean billions of dollars would be back in the hands of the intended recipients, ripe for investment and savings.

As we’ll discuss below, another limitation on access to financial markets is that some don’t have the necessary identity documents to open bank accounts and otherwise participate in the formal financial system. With crypto, it is still possible to use a non-custodial wallet to store wealth without providing identity verification.

2. Expand Fintech.

Beyond crypto, other technological advancements have enhanced access to financial markets. For communities without direct access to a physical bank, digital financial services are the only gateway to the financial sector.

Data from the Global Findex Database shows that financial inclusion has grown more than 50% worldwide over the past decade. Seventy-one percent of adults in developing nations now have a formal financial account. Most of this growth in financial inclusion can be attributed to the rise of various forms of fintech.

Fintech, short for financial technologies, includes banking apps, digital payment processors, online financial literacy sites, and much more. Users of these digital financial services typically pay far less in transaction fees, are more likely to open bank accounts and develop savings, and have a far easier time applying for loans.

Clients who once had to physically enter a bank or other financial institution to get financial access can now open an account on their phone. They can make and receive digital payments, apply for loans, store wealth, even buy and sell securities, all within the palm of their hand.

Any advances to make these processes even more accessible will increase access to financial markets even further.

3. Increase the Affordability and Availability of Smartphones.

According to the Global System for Mobile Communications Association (GSMA), 4.6 billion people in the world use mobile internet. Mobile internet use is critical for financial inclusion because access to the internet means access to a host of mobile banking and payment apps.

Nearly five billion mobile internet users is certainly a lot, but that still means 43% of the world’s population does not have mobile internet access. The majority of these people live within areas of internet coverage but still don’t connect. This is known as the “usage gap.”

In emerging markets, the usage gap is significantly higher. In sub-Saharan Africa, for example, only 25% of the population is connected. Fifty-nine percent of the population lives within areas of broadband coverage but cannot access the internet.

The latest report from GSMA (pdf download) concluded that “affordability of devices and data continues to disproportionately impact the underserved.” In the poorest countries in the world, an entry-level device with mobile internet costs around 55% of average monthly income, which is clearly unsustainable.

Fintech developments mean very little without affordable devices on which to use them, so it’s imperative to bridge the usage gap. Making smartphones more affordable is the most direct approach to doing so.

The GSMA recommends tax incentives, government subsidies, fair financing, and other policy changes to help achieve this important goal.

4. Improve Access to Reliable Internet Services.

While the usage gap is eight times higher than the coverage gap, there are still areas without adequate internet access. If fintech is the way we're going to increase access to global financial markets, then we need to expand internet access to all.

Only around 5% of the world’s population is completely without internet access. However, the quality and reliability of that access is very different in established economies than it is in emerging economies.

According to the International Telecommunication Union (ITU), a UN agency dedicated to studying communication technologies, 5G mobile network coverage is available to 40% of the world’s population but is far more prevalent in developed nations. Many emerging countries have only 3G. That’s simply not “sufficient to access the full benefits of digital technology,” according to the ITU.

The UN, through the ITU, is working hard to fix this problem and set 2023 as a target for having “universal and meaningful digital connectivity.” Analysts questioned the obtainability of this target, and we’ve yet to see how successful it was, but any progress is a boon to financial inclusion.

5. Make Identity Documents Easier to Get.

It is often overlooked, but a significant obstacle to those in developing countries who hope to join the ranks of the banked is a lack of adequate identification. Banks are required to verify the identity of anyone opening an account, but what happens if your government doesn’t do a good job providing the required documents?

Most banks are saddled with KYC (Know Your Client) obligations. KYC protocols are meant to prevent money laundering, but they require identity verification measures. They can be as simple as providing a driver’s license and a bill with your current address, but in some places those documents simply don’t exist.

Nigeria struggled with this issue for decades. It was a particular problem for those living in rural communities where birth certificates and other formal documents were rare. Without those documents, many Nigerians were completely locked out of the financial system.

Help is on the way, however. As part of Nigeria’s program to increase financial inclusion, they have begun issuing digital IDs. These IDs can be issued from anywhere, will also serve as payment cards, and can be used to access other financial services.

The advent of digital IDs could be a game changer for many in emerging economies, and many countries are following Nigeria’s example.

Of course, the success of digital IDs still depends on reliable internet service and a phone, tablet, or computer, which underscores the importance of #3 and #4 on my list.

6. Develop More Brick-and-Mortar Banks.

There are certain underbanked communities in emerging market economies that would still benefit from physical banks, even though we are in the midst of a digital banking revolution.

The main reason more physical banks are needed is that many emerging economies are still heavily dependent on cash.

That’s because a large percentage of laborers — up to 70% according to the World Bank — in these countries are still involved in the “informal economy.” The informal economy is defined as unregistered economic activities and typically uses much more cash than the formal economic sector.

In order to provide banking services for cash-dependent businesses, banks need physical offices to accept that cash.

Experts at renowned financial-consulting firm Ernst & Young also cite another reason for more brick-and-mortar banks. They found that there could be significant opportunities for global banks to increase financial inclusion in emerging economies — opportunities both to benefit society and increase the banks’ bottom line.

But accomplishing this, they felt, was best done via a “bricks-and-clicks” model. A physical presence in underbanked communities would go the furthest toward increasing access and restoring trust in the banking sector in these communities.

And finally, for some people the digital banking revolution is a revolution too far. Elderly clients in particular are far less likely to open an account online and still need a physical location to join the formal financial sector.

7. Support Community-Owned Banks.

Who owns these banks is also crucial to restoring trust. Decades of receiving discriminatory treatment or being outright ignored by banks has had a significant effect on underbanked communities in both emerging and established economies.

In the US, Black and Hispanic households are 400% more likely to be underbanked than Whites in the same income brackets, according to a survey by the FDIC. That percentage is no doubt even higher in many emerging market countries.

That same survey asked unbanked individuals why they didn’t have a bank account, and the second most common answer, given by 13% of respondents, was a lack of trust in banks. The third most common answer was also about trust, with more than 8% saying they felt banks invaded their privacy.

Emerging markets like South Africa have similar trust issues among the underbanked population, particularly BIPOC, and have made increasing trust in the financial sector a key part of their program to increase financial inclusion.

One way to increase trust is for banks to be owned by those within the community.

In South Africa, Sibongiseni Mbatha, president of the Association of Black Securities and Investment Professionals, put it most succinctly in a round table discussion about financial inclusion among South African Blacks: 

Not only is there a need for Black banks but there is now a greater need for more Black banks. Black banks will have close relationships with Black customers, and cater for their banking needs.” 

8. Expand VSLAs and Other Community Savings Initiatives.

In some emerging market communities, especially rural ones, it is simply not practical for financial institutions to open branches. If internet coverage is also sparse and the price of cell phones is prohibitive, these communities could be completely locked out of the financial sector.

Enter Village Savings and Loan Associations (VSLAs) and other community-run organizations.

Introduced in Niger in the early 1990s by the nonprofit CARE, these community groups form their own banks by saving what they can and then issuing their own loans with low-interest payments from the pool of savings they’ve collected. They can also provide financial education to the greater community and issue insurance.

VSLAs have been wildly successful. They provide financial stability, promote new small businesses, and boost overall economic prospects with little to no private sector financing

or foreign direct investment. CARE currently counts nearly three million participants in 26 African countries, and similar versions can be found worldwide.

9. Improve Financial Literacy.

Standard & Poor’s conducted a financial literacy survey and found that respondents in established economies were far more likely to be financially literate than those in emerging markets. They found only 28% of adults in emerging markets were financially literate, compared to 55% in “advanced economies.”

That’s a considerable difference, and we know that people who are financially literate are far more likely to seek out financial services than those who aren’t.

According to an article published by Cambridge University Press, “Financial literacy is essential for the promotion of financial inclusion, as people need knowledge and skills to effectively use financial instruments, even the most basic ones, such as bank accounts.”

Not only do people need to know how to utilize financial instruments, they also need to know why they should use financial instruments. Some segments of the underbanked in developing economies actually have the instruments at their disposal, they just don’t see the use.

The onset of digital financial services has created a further layer of necessary education — technical education. Although many finance apps seem very user friendly to those accustomed to life with their smartphone, for others the technology can be daunting.

For those who are less tech savvy, it’s also necessary to learn about secure internet usage. When someone begins banking or conducting any sort of financial transactions online, the risk of fraud and theft increases. The Global Anti-Scam Alliance estimated that scams and identity theft cost more than $1.02 trillion in 2023. That’s a tremendous amount of money, most of it taken from less aware internet users.

Any educational measures are very difficult to implement on a global scale, but the more underbanked individuals can learn financial and online basics, the better.

10. Hold Banks Accountable for Exclusionary Practices.

Racism, sexism, and exclusionary policies have been a direct barrier to certain communities seeking financial access. In many places these policies continue, and even if they don’t, the legacy of such discrimination has created a deep distrust that still acts as a significant deterrent.

In some countries, banks are being held accountable for these actions, both those in the past and those happening now. In the US, lawsuits have forced banks to reckon with their discriminatory practices. In one recent example, Philadelphia area bank ESSA Bank & Trust had to pay up for refusing to offer their credit services to BIPOC neighborhoods.

Such efforts in the US have inspired similar drives towards accountability in emerging countries. In Brazil, for example, the Bank of Brazil has been forced to deal with its racist past, going all the way back to its active participation in the slave trade.

In South Africa, the Conduct Standard for Banks has recently become law, aiming to guarantee that all clients are treated fairly. In the event clients are not treated with fairness, this law allows South African financial authorities the right to enact penalties.

The hope is that establishing consequences for redlining and other types of discrimination will push financial institutions toward more inclusionary practices.

11. Increase Government Initiatives.

Governments in emerging countries worldwide have introduced financial inclusion programs in the past 15 to 20 years, and some are starting to see favorable results.

A good case study is Mexico, which has historically lagged well behind much of the world in terms of financial inclusion. Mexico made a commitment to improving access to finance, and it first developed a National Financial Inclusion Policy in 2016, with a renewed commitment to increasing financial access in 2020.

These initiatives included programs designed to streamline KYC policies, issue digital IDs, encourage the development of digital financial services, establish a government-backed digital payment system, and increase the emphasis on financial literacy in schools. Mexico was also one of the first countries in the world to introduce fintech laws to govern and encourage the adoption of new financial technologies.

The results of these initiatives have been positive but unbalanced, with a troubling gender gap remaining. The latest data from FINDEX, the data arm of the World Bank, shows a 10% increase in financial inclusion among men from 2015 to 2021, but only a 1% increase for women.

Mexico has prioritized closing the gender gap, and that should be a prime concern for any government instituting new policies, but it remains clear that government initiatives can increase access to financial markets in emerging countries.

On a global level, organizations like the International Monetary Fund and the UN Economic and Social Council are backed by their member governments and help lead efforts towards increasing access to financing. 


Financial inclusion is critical to combating poverty in emerging countries. It can be done, but there is no magic bullet. A comprehensive approach featuring the ideas listed above would certainly be a significant step in the right direction.

There are certainly other ways to increase financial access, so please leave a comment below with your own ideas.