Approximately 22.8 per cent of Jamaicans up to the end of last year were found to be operating outside of the formal financial system, having no account with any of the island’s main financial institutions.

The findings contained in the 2023 issue of the Bank of Jamaica’s (BOJ) National Financial Inclusion report, which categorised these persons among the ‘unbanked,’ said they were mainly made up of individuals from the lower socio-economic groups and coming mainly from the rural areas.

These persons, the study said, were, “without an account at a formal financial institution and used cash for all their transactions.”

“Financial inclusion, measured through banked status, was found to vary significantly among socio-economic groups and urban-rural locations. Overall, financial inclusion was found to decrease with decreasing socio-economic status. As such, upper (95.6 per cent) and middle-income (92 per cent) respondents were significantly more likely to be banked than those in the working class (79.8 per cent) and lower income (59.6 per cent) socio-economic groups,” the findings highlighted.

Citing some of the reasons for their lack of inclusion or non-inclusion, the study pointed to barriers including the negative perceptions about access to banking services among its key findings. These perceptions, which continue to taint national financial inclusion efforts, also fed into the growing security and other fraud-related concerns held by a number of respondents as it pertains to the use of some forms of digital platforms.

The study found that while increasing access for more of the population to own bank accounts may not significantly impact the national financial inclusion strategy, which seeks to increase access to financial services, particularly banking services, and digital payments, improved awareness and perception could seriously help to increase public trust — ultimately bringing more players to the formal banking system and resulting in higher rates of consumer engagement.

“Among those who had never opened an account, the main reasons were the perception of it being ‘too much hassle to open an account’ (18 per cent), having insufficient funds to open or maintain an account (16 per cent), a lack of trust of financial institutions (16 per cent) as well as not having the required documents (12 per cent),” details from the survey indicated.

With cash continuing to remain as the dominant mode for payment, the other 77.2 per cent of persons making up the formal financial system were spread across the banked and underbanked categories at 70.9 per cent and 6.3 per cent, respectively.

The term ‘unbanked’ as per the definition of a World Bank report refers to those persons who do not use or have access to any traditional financial services, including savings accounts, credit cards or any other electronic retail payment services. This is in stark contrast to those referred to as ‘banked’ or having access to financial services with at least one active (used at least once within the past 12 months) savings account with a licensed deposit-taking institution or credit union. Those categorised as ‘under banked’, however, included individuals or families who have at least one bank account but have not used it within a year.

According to the survey findings, most of the banked respondents or about 92 per cent of those polled owned savings accounts at mainly a commercial bank with more than 50 per cent of them having just one. Another 17 per cent held their accounts at credit unions and 12.5 per cent with building societies. At either of these institutions, it was, however, less than 20 per cent or approximately 18.9 per cent of them that held three or more accounts — a large cross section of which falls within the upper-income bracket.

The primary reason given for their decision to open accounts with the various types of financial institutions, the respondents said, was influenced by their ability to use them as a medium to save money, seconded by the option of using them as an avenue to receive wages from employers as well as remittances from loved ones overseas. Among some of the other reasons mentioned were those purposed around loan processing and bill payment options and online shopping.

The study, which canvassed the responses of approximately 1,000 persons, was conducted by research consultancy firm Hope Caribbean. It aimed to measure financial access and usage of digital payment products (including electronic retail payment services) by the adult population in Jamaica.