Reviewed by Jan 29, 2021| Updated on
Unbanked persons also generally do not have a subscription to other investment products, such as insurance, pensions, or any other type of professional financial services. Unbanked individuals have the advantage of alternative financial services, such as check-cashing and payday lending if such services are available to them.
In the developing economies, there are many there are a lot of unbanked adults, such as in Indonesia, Malaysia, and so on.
Governments of various developing countries and financial/other organizations have initiated several programs to 'bank' the unbanked, such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) programme initiated by the Government of India.
As per the GOI’s data, as of 13 February 2019, about 34.43 crore accounts have been opened under the PMJDY. In percentage terms, about 80 per cent of the adults in India have a bank account now.
Underbanked is a related term that refers to a section of the public that prefers to manage their finances through cash transactions instead of accessing financial services through a bank account, such as savings accounts, current accounts, credit cards, and loans.
Access to banking and financial services are essential for the development of a nation. Households in the lower-income group display lack of financial and banking knowledge. They have inadequate means to lead their financial lives as well as saving for their future.
Banking the unbanked category also helps in strengthening the formal economy. Formal banking reduces the cash flow in the economy and brings transparency in the transactions. It also helps in reducing the flow of unaccounted money in the economy.