Financial Nomad. What’s that? It’s 2.5 billion stories of low-income people living mostly in rural areas. Bank branches, far away. People in developing and developed countries from India to the Philippines, Tanzania to the U.S. People who don’t have access to financial services. Billions of people–day in, day out, week after week, month to month–without savings accounts and no borrowed money. People who live on cash or a barter-based economic environment.
Industrialized Countries Not Immune
The United States, a progressive nation with a stable currency and lots of financial services providers, couldn’t possibly harbor a financial nomad. Right?
Wrong, Financial exclusion is everywhere, sometimes as low as eight percent, but still present in high-income, industrialized countries. Antiquated financial services systems tend to serve “low risk” consumers with consistent cash flow and established credit.
Consumers can easily find themselves in a cash-based life, revealing the harsh reality of managing money at the bottom of the financial pyramid. Strip away the systems of those lucky enough to have affordable banking services and you might taste the life of a financial nomad.
Financial Nomad for a Month
In 2010, Candice Choi, a reporter for the Associated Press, chose to become a financial nomad in New York City for one month. She put away her credit and debit cards and stopped direct deposit in lieu of paper paychecks. She went about her daily business using cash and other financial services like money orders.
During that month, Candice paid ninety-three dollars in fees. At that rate, she’d pay over $1100 a year managing her money, converting paper checks to cash to money orders.
She also felt like a member of the underclass, a financial nomad like other people in developing countries. She spent time at crummy storefronts, waiting in line to cash her check for the next rent payment. Feelings of inadequacy filled each experience.
Now imagine Candice’s story told 2.5 billion times. People with incomes barely a fraction of the United States’ federal minimum wage ($7.25 per hour). People who need to send money to families in other countries. Candice and 2.5 billion people all exist at the bottom of the pyramid.
Future Hope for Financial Inclusion
Can people feel empowered in their financial lives? Is financial inclusion possible. The answer is a strong “yes.”
Communications technology innovations and growing popularity of social entrepreneurship are generating innovative financial services products. Over time, the financial nomad of yesterday will rise higher on the pyramid.
Adapted from Financial Inclusion at the Bottom of the Pyramid by Carol Realini and Karl Mehta.
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