Lotte Schou-Zibell is the Chief of Finance Sector Group, Sustainable Development and Climate Change Department at the Asian Development Bank. She also serves as a member of Women’s World Banking’s Southeast Asia Advisory Council. This post was originally published on the Asian Development Blog.

In Asia and the Pacific 9 out of 10 poor households have no access to financial services. Banks and other financial institutions consider them to be high risk and low-profit customers. As a result, millions of people in the region cannot access the credit needed to buy a home or build assets, or buy insurance to protect them from catastrophic loss, or even maintain a simple savings account.

Despite this, most poor, disadvantaged and unbanked people are financially active. However, this financial engagement is often limited to risky and expensive “recycling” of money from one informal source to another. For example, a family might borrow from a high-interest informal lender – or loan shark – while awaiting a remittance from a relative working overseas using a high-fee money broker system. The family is hurt by the high fees and greater risk, while society overall loses the positive economic impacts of having the money coursed through the legal system.

If Asia and the Pacific—home to more than half of the 1.7 billion unbanked adults globally—is to unlock its full economic potential and improve the lives of poorest and most vulnerable, it is crucial to connect these marginalized populations with the broader economy.

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