> Posted by Anita Gardeva
To solve financial exclusion you have to think big. This is what Mr. Bhagwan Chowdhry, Professor of Finance at UCLA Anderson School, is doing with the Financial Access@ Birth (FAB) initiative. FAB aims to convince governments and financial institutions to provide every child born with a savings account. Behind the simplicity of this big idea lays a powerful rationale and a comprehensive strategy.
Chowdhry, along with a team of experts, plans to bring together governments, multilateral development agencies, banks, technology providers, and non-profits to launch this initiative.
The concept of FAB is to link the birth registration process with the opening of a savings account that has an initial deposit of US $100, provided by government of other philanthropic sources. This account would in effect, give every newborn a financial identity. If FAB takes off-successfully, it can generate a wealth of benefits, including:
- Increase access to formal financial services
- Promote national identification by incentivizing official birth registration
- Facilitate assistance payments (such as government benefits, remittances, or international aid transfers)
- Encourage savings from an early age
The FAB team estimates that it will cost around US $10 billion a year to fund the accounts. They propose that each country pay one-fiftieth of one percent of its total GDP towards a fund which will be redistributed so that all newly-born can receive deposits. Another stipulation insists that participating financial intermediaries forgo transaction fees on behalf of corporate social responsibility.
Although FAB is not a silver bullet for achieving financial inclusion it is a radical and creative new idea that could dramatically change how we think about financial inclusion. Access to a savings account greatly facilitates access to credit, payments, and insurance. The prerequisites for implementing FAB also underpin progress towards financial inclusion: banks take on a central role in expanding access; diverse stakeholders work together; technology enables increases in affordability and quality of services; all population segments are reached.
FAB idea envisions a world in which every child is born with a foot in the door to opportunity. To learn more about the FAB Campaign, click here >
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