Financial system can fight poverty. Davos leaders, pay attention.

In the rarefied Swiss alpine air of this year’s Davos gathering, where leaders from business, finance, technology and government are converging to “rebuild trust” in the international order, a stark reality demands their immediate attention.

Some 4 billion souls, more than half of the global population, hover just above the global poverty line. In many cases, they also remain invisible to the international financial system, without bank accounts, credit ratings or a voice at Davos, the World Economic Forum’s annual meeting. In an era marred by economic uncertainties, artificial intelligence dilemmas, a climate that is heating at a record rate and geopolitical strife, the pressing need for financial inclusion, and the hope of financial security, has never been more pronounced or achievable.

Two decades ago, a global movement to “Make Poverty History” captured the public imagination. But, these days, the mood has changed. Amid a pandemic, wars, widespread backlash against globalization, events such as Brexit and the rise of economic nationalism, the movement has lost momentum. Foreign aid spending has declined. Global priorities have shifted.

If the Davos crowd wants to rebuild trust, it’s time to ensure that trust is inclusive, reaching even those whom the current system overlooks.

Despite making real progress in addressing extreme poverty over the past decades, billions of people still live in conditions of severe economic precarity. Most of them live above the formal poverty line and in emerging markets and are not served primarily by aid or resources from nongovernmental organizations. They’re small-scale entrepreneurs or dedicated employees. They have upward mobility and occasionally even small amounts of discretionary income.

But their livelihoods are as uncertain as ever.

It’s true that extreme poverty has declined. But — for the global majority — insecurity has spiked.

If you’re one of the billions in this global majority, rising food inflation might mean no money for rent. A currency fluctuation might decimate the grocery budget. A crisis such as COVID-19 can spell ruin, as it did for many: The World Bank estimated 71 million more people were living in extreme poverty in 2020 than in 2019.

To attain basic financial security, people need to enter the formal economy. But the fact is that most in this global majority still can’t access even basic banking services. They rely mostly on cash. Financial institutions don’t recognize that there’s a sufficient basis to assess their creditworthiness.

Imagine being invisible to the financial system. It doesn’t just mean inconvenience and lack of opportunity. It means extreme vulnerability to economic headwinds.

Recent developments are compounding these challenges for the global majority. In Kenya, for example, where I’ve spent a good part of my career, there’s been laudable progress against poverty over recent decades. Yet, today, as Kenyan banks grapple with substantial bond valuation losses due to the government’s heightened domestic borrowing, the cost of acquiring loans is becoming prohibitively high for ordinary people — let alone for people without a credit score.

In a new age of economic precarity, we need to regain momentum in the fight against poverty. This means addressing the problem of invisibility. It means ensuring that the global majority can access the most basic building blocks of economic security — including banking, credit and a decent safety net.

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Technology can be an ally to this movement. Mobile penetration has been an extraordinary development around the world. Over more than a decade as founder and CEO of a global fintech company, I’ve seen firsthand how new technology-based tools can bring transformative change. Our smartphones provide a wealth of data that can be used to create financial identities that can form the basis for credit. This, in turn, can be used to provide access to financial tools, so that people can launch new businesses, support their families, respond to emergency needs and build prosperity. While AI presents tremendous uncertainties to humanity generally, exponential advances in computer learning could make it possible to expand financial inclusion in once-unimaginable ways.

To make poverty — and economic precarity — history, world leaders need to maintain a commitment to priorities such as debt relief and global health and education. Yet, just as importantly, financial firms need to stop regarding the global majority as an unknowable risk that’s best left ignored. Companies need to start recognizing that historically underestimated people are sources of dynamism, creativity, hard work and hope.

This isn’t just a moral requirement. Some estimates show that full financial inclusion could mean a $10 trillion boost to the global economy. Overcoming invisibility is one of the best ways to sustain growth and avoid a global recession.

To truly rebuild trust, leaders in Davos must extend their focus beyond the familiar and acknowledge the untapped potential within historically underestimated populations. It is time for financial institutions and world leaders to recognize that inclusion is not only the right thing to do but also the smart thing to do.

We can make real progress on financial inclusion by using the transformative power of technology, fostering innovation and ensuring that the global majority has access to the fundamental building blocks of economic security. Only then can we ensure that the movement to “make poverty (and economic precarity) history” becomes a reality in our time.

Shivani Siroya is founder and CEO of Tala, a digital financial technology company.

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