Biometrics and financial inclusion

The World Bank (2017) estimates that the lives of 1.1 billion people who live without proof of identity could be improved by if they gain access to digital identity. Identity can help vulnerable people to gain access to critical services, such as health services, governments grants, education and financial services such as bank accounts. Lack of legal means of identification is a problem across SSA, with varying degrees of severity. In Nigeria, 78% of the population (149 million) do not have a legal means to prove their identity, while in South Africa 12 million individuals (22%) are excluded from the formal identity system of the country (World Bank, 2017). This translates to 454 million individuals (48% of the population) across the entire SSA.

Lack of identity is a barrier to accessing a multitude of important services, particularly financial services. In response to Anti- money-laundering initiatives spearheaded by the Financial Action Task Force (FATF) (specifically Recommendation 10 on customer due diligence [CDD]), banks are required to have strong proof of identity of their customers in order to do business with them. This varies but generally includes identity documents and Proof of Address (PoA). Without such documents, consumers are excluded from accessing formal financial services. In Angola, 41% of individuals cited a lack of documents as the reason for being financially excluded, while in South Africa and Nigeria this figure was 14% and 12% respectively. Lack of identity documentation varies in its severity as a barrier to exclusion depending on the country, but overall indicates a significant problem (Findex, 2014).

Biometrics pose a possible solution to the identity problem in SSA and especially financial exclusion due to lack of identity.