It’s been nearly two and a half years since Mohamed Bouazizi’s act of self-immolation ignited protests in Tunisia and marked the beginning of the Arab Spring movements. Since then, the Middle East and North Africa (MENA) region has undergone considerable changes, including the overthrow of governments in Tunisia, Egypt, Yemen and Libya, as well as the enactment of reforms across a number of other countries.

The motives behind the uprisings and protests varied across the region, but what was relatively ubiquitous was the demand for a more equitable and inclusive society. It is still too early to render a verdict on whether the Arab Awakening was a success, as the region continues to face significant challenges. However, among a host of social, political and economic issues, it is clear that achieving financial inclusion is one area that will be critical for the future of the MENA region.

For individuals and families, access to financial services is important for improving household welfare, mitigating unforeseen risks, and accumulating savings to cover expenses such as healthcare and education. Despite its importance, financial inclusion is limited for the majority of people in MENA. The region has the lowest account penetration, with only 17.7% of adults reporting a formal account. In addition, only 5.1% of adults received loans from a financial institution over the past year, placing the region ahead of only Sub-Saharan Africa in this category. Of the eight MENA countries covered in the World Economic Forum’s annual Financial Development Report, Egypt, Jordan, Morocco and Saudi Arabia all rank in the bottom quartile in terms of retail access to financial services.

Small and medium enterprises (SMEs) in the region are also hindered by an inability to access financial services. According to the World Bank’s World Enterprise Survey, only 20% of SMEs in MENA have a loan or line of credit, and lending to SMEs only represents 8% of total loans. Because SMEs play a vital role in creating jobs and facilitating economic growth, it will be crucial for the region to address this financing gap.

One of the primary requisites for achieving financial inclusion in the region is to create an adequate enabling environment. This means that policy-makers across MENA will need to be proactive in their effort to improve financial infrastructure and the legal and regulatory mechanisms necessary to promote access to financial services. Designating or creating an appropriate supervisory authority, removing interest rate caps, implementing consumer protection legislation and investing in technology, such as point-of-sale devices and mobile banking, are just a few areas that would help make financial inclusion in the region become a reality.

The challenges ahead for MENA are difficult, but not insurmountable. New laws, governance structures and technology take time to craft and implement. However, creating a more financially inclusive society should be a priority for the region as it will help raise incomes, reduce unemployment and poverty, and help with the general long-term competitiveness of the region.

Author: Todd Glass is a Project Associate on the Financial Services Industries Team at the World Economic Forum USA and co-author of the Financial Development Report

Image: A dealer is seen in fron of an electronic board in the Amman Stock Exchange REUTERS/Ali Jarekji