adminHaving an ID is almost always a requirement for opening an account. Within sub-Saharan Africa, 83 percent of commercial banks require a government-issued ID to open an account and regionally, a quarter of adults who have no account at a financial institution say a lack of documentation is one reason why they are unbanked. Half of the unbanked in Madagascar and Zimbabwe cite documentation as a barrier, as do about a third or more in economies such as Guinea, Lesotho, Niger, and Zambia.
Widespread ID ownership can also provide a foundation for successful financial inclusion strategies. In India, the government equipped a billion residents with biometric identification and then used that ID to increase financial inclusion, causing account ownership to go from 35 percent in 2011 to 80 percent in 2017, according to the Global Findex.
India’s experiment was far from perfect — but it did show that ID access and financial inclusion are related. Sometimes, having an ID is insufficient for meeting documentation requirements necessary for opening an account.
Among ID holders in sub-Saharan Africa, 1 in 5 report that they still cannot get an account due to documentation requirements. The share is about 40 percent in Benin, Togo and Zimbabwe and nearly 50 percent in Madagascar.
Know Your Customer requirements in these economies might also demand other types of identification — such as a utility bill with a local address — which can be hard to acquire.
Sub-Saharan Africa has opportunities to increase account ownership by drawing on ID. Across the region, 56 percent of unbanked adults — about 180 million unbanked adults — have ID. With the right combination of regulatory reforms, these unbanked adults could potentially use their national ID to get an account and enjoy better economic prospects as a result.
Consider the so-called “last mile” economies, where account ownership is high and relatively few adults are unbanked. It can be difficult to serve these unbanked adults because they tend to be poor and have low educational attainment and weak workforce participation. Kenya, Namibia, and South Africa have small unbanked populations, and the vast majority of unbanked adults in these economies have ID.
Universal financial inclusion could be within reach if governments overhauled Know Your Customer requirements and banks offered simplified accounts to adults who have national, government-issued ID but lack other types of documentation. There are also opportunities in economies where there are more unbanked adults.
In Ethiopia, half of unbanked adults have ID, as do two-thirds in Burkina Faso, Uganda, and Zimbabwe and 85 percent in Rwanda.
ID ownership is only one aspect of financial inclusion. The Global Findex database shows that even if adults have national identification, they can still face multiple barriers to getting an account — including costs, distance to financial institutions, lack of trust in banks, and religious concerns.
Policymakers must address all these barriers if they want to boost financial inclusion. IDs improve access to mobile phones, financial services, and government services. It’s important to improve ID ownership even though doing so might be insufficient — by itself — to ramp up financial inclusion.
Having an ID makes it easier for people to access important public and private services, such as financial tools, mobile phones and mobile services, and government and social programs.
It is often illegal to provide such services to people without identification, which is why improving ID ownership is part of the global development agenda. The survey asks ID holders how they use their IDs. Respondents can give more than one answer.
In sub-Saharan Africa, the most popular use for ID is buying a SIM card or mobile phone service — such as a mobile money account. The next most common uses are for financial services, to apply for a government service, and to receive government financial support (Figure 9).
In Kenya, the global mobile money leader, 84 percent of adults — or 92 percent of ID holders — use their identification for SIM cards or a mobile phone service. The proportion is similar in Botswana, and it is also high in economies such as Burkina Faso, Chad, Cote d’Ivoire, and Niger.
Use of ID for mobile phones is relatively less common in Ethiopia and Madagascar.
Regionally, most adults who report using ID to get mobile phones also say that they do have their own mobile phone — suggesting that ID might help boost access to this crucial technology.
Another important use of ID is to establish eligibility for financial services and government social benefits payments. In Kenya, where about 15 percent of adults receive public pension payments or government safety net benefits, more than two-thirds of adults use their ID for those purposes.
In Namibia, nearly a quarter of adults receive government payments, and two thirds of adults use ID to do so. The share is also high in South Africa, where one in three adults receive such payments and more than half of all adults use their ID for that reason.
Most adults who receive public safety net payments or pension payments have ID.
In Botswana, Kenya, Namibia and South Africa, more than 90 percent of adults in this category have ID. About two-thirds of recipients have ID in Gabon, Mozambique, and Senegal, as do roughly three-quarters in Burkina Faso and Mali. These numbers suggest that official identification can be at least somewhat effective in verifying eligibility for social benefits. The fact that ID ownership is not universal among government payment beneficiaries might indicate that certain programmes accept alternative identification methods to verify eligibility.
Ensuring that all adults have national, government-issued ID — instead of relying on fragmented and non-interoperable systems to deliver different services — could help lower costs and improve governance.
Across sub-Saharan Africa, 9 million adults receive payments for government social benefits or pensions despite having no ID. Equipping these adults with ID could open opportunities to receive government payments digitally into an account or through a mobile phone.
Research in Niger found that the overall travel and wait time for disbursing mobile transfers was only a quarter as large as that of cash transfers. The same study found that mobile transfers of government safety net payments reduced administrative costs by a fifth compared to cash distribution.
In Mexico, the government has reduced administrative costs by more than 3 percent annually since shifting to digital payments in 1997.
Demands for bribes fell and the number of fake benefits recipients dropped in India when social security pension payments were made through smart cards instead of being handed out in cash.
Developing a national ID system is not easy. For example, many countries struggle to register births and therefore lack civil records that can be used as a foundation of a national ID program. Others keep their records on paper and have yet to adopt digital data management. ID systems also create opportunities for misuse of data and raise privacy concerns.
Roughly half of developing economies have data privacy laws that meet international standards — and these rules are not always enforced even when they do exist.
But having an ID makes it easier for people to participate in the economy and public life. For governments, identification can increase the transparency and effectiveness of public policies. Making IDs more accessible is a worthy goal for policymakers who want to improve financial inclusion and development more broadly. — World Bank Report.
Bongani Ndlovu