This research was conducted by Caribou Space for the International Partnership Programme, a five-year, £30 million per year initiative run by the UK Space Agency. This report outlines why and how the space industry has a role to play in addressing challenges within the finance sector in developing countries. It is part of a series of five sector-focused reports, including disaster resilience, agriculture and forestry.
Globally, 1.7 billion adults remain unbanked and virtually all live in the developing world. About 5% of the adult population of Africa has insurance, and 9% of adults in developing countries have borrowed from a formal financial institution. Without access to financial services, the ability to smooth consumption and access opportunities to improve welfare is reduced.
There are many challenges to delivering accessible, affordable and appropriate financial products to customers in developing countries. These challenges include:
- Limited data on potential customers to assess credit and insurance risk profiles
- Low income customers are outside financial providers’ reach due to high operational cost of serving remote areas
- Constrained business models to operate in remote areas serving low income customers
However, the space sector is poised to contribute new types of information to form part of the solution to many of these challenges.
The report draws on examples of space solutions for finance supported by IPP and organisations outside of IPP. Finance products include payments, savings, credit and insurance. There are several organisations using space technology, in particular Earth Observation (EO) and Global Navigation Satellite System (GNSS), to enable greater access to financial services in developing countries.
The following use cases, mainly using EO and GNSS, are explored in the report, and includes profiles of organisations who are developing and implementing these solutions:
- Risk modelling to inform insurance policies
- Insurance and loan portfolio monitoring and risk mitigation
- Design of efficient index-based insurance products
- Remote decision making on verification of insurance claims
- Remote decision-making on credit risk profile
- Satellite communication enabling payments and transactions in remote areas
Through an analysis of these use cases, a number of themes around the use of space technology for financial services are discussed i.e. which sectors, types financial services and business models are dominant.
Lastly the report reflects on what is the impact on both business and financial service users, when space technology is used.
While using Space technology for financial services is comparatively new, it is clear that space technology offers advantages in areas where other sources of information are limited. The analysis presented in this report provide a perspective and a path forward to leveraging space technology in financial services. The future is bright for space technology in the finance sector, and now is the time to seize this opportunity.