Many use alternatives to banks such as credit associations or savings clubs
While it is easier to open a bank account in developed countries, a potential client still has to meet some basic requirements, some of which include anti-money laundering and Know Your Customer regulations, as well as anti-terrorism financing rules. They are simply not interested in the client; they are interested in their credentials.
According to the World Bank, “Three quarters of the world’s poor don’t have a bank account, not only because of poverty, but the cost, travel distance, and amount of paper work involved in opening an account.” Imagine the huge implications of these unnecessary restrictions. One of the grave consequences is the unconventional saving techniques adopted by such individuals. Someone without a bank account in the developing countries may resort to some risky measures that may have dire consequences, such as using alternatives like piggy banks or keeping money under the mattress. Such practices make it difficult, if not impossible, for an individual to build up reserves, and as such they also cannot have access to insurance, credit, or other financial services.
All this clearly shows that the financial services sector is missing out on a good opportunity to provide much-needed, affordable, and safe financial services to billions of the unbanked. Many use alternatives to banks, such as credit associations or savings clubs. Each week, each member of such associations contributes according to their financial limits a stipulated amount of money that is then handed over to a predetermined member to take care of his or her financial needs.
