How a universal basic income can end financial exclusion
The main argument for a universal basic income (UBI) is that it would reduce poverty and income inequality. Yet UBI advocates often overlook a range of other potential benefits. Digital UBI payments can bring people into the financial system and build their financial capability, unlocking a range of development benefits for citizens and governments alike. Take Mongolia for example. In 2014, 92 percent of adults had a bank account—by far the highest share in the developing world. (By comparison, only 43 percent of adults are banked in similar lower-middle income countries.) Young adults, a population often financially disenfranchised, see some of the most impressive usage of financial services; account ownership among Mongolians aged 15-24 years old is 93 percent. Smart policies, digital payments, and greater inclusion of traditionally marginalised groups all helped Mongolia achieve nearly universal account ownership. The Mongolian Human Development Fund (HDF) distributes revenues from the mineral and mining sectors with the objective of redistributing wealth. A flagship program funded by the HDF is the Child Money Program (CMP), launched in 2012. As part of CMP, the government makes monthly electronic deposits into savings accounts opened in children’s names, helping to ensure that all Mongolians will eventually be banked. The program pays about $10 a month to all children aged 0 to 17, thus ensuring that the parents of every new born open an account in their child’s name. Alongside South Africa, Mongolia has one of the developing world’s largest shares of adults receiving government transfers—35 percent—with two-thirds of these payments made directly into bank accounts. Seventy percent of account owners in Mongolia make or receive any payment through their account, while in East Asia and the Pacific the share is 50 percent. These accounts aren’t only passively utilized to receive payments—they are also actively used for monthly cash management and longer-term savings. […]