How rising financial inclusion became one of the biggest investment opportunities in emerging markets

Hardeep  Tawakley
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How rising financial inclusion became one of the biggest investment opportunities in emerging markets

Partner Insight: The rising penetration of financial products and services will forge dramatic change in developing regions of the world, driven by technological innovation and strong demographic characteristics. Jupiter's Ross Teverson analyses the best way to access these long-term trends in emerging markets

In much of the world, financial inclusion - the process of individuals gaining access to basic financial products and services in order to meet their needs - plays a key role in reducing poverty levels and boosting prosperity. Such is its importance, the World Bank notes that since 2010 more than 55 countries have made commitments to financial inclusion, and more than 60 have either launched or are developing a national strategy. However, there is still a long way to go.

This may not be the case for much longer, however. Rapidly developing technology is creating opportunities for emerging economies to leapfrog their developed counterparts, in many cases bypassing physical accounts altogether and going straight for mobile-based systems.

This is just one of the reasons why financial inclusion, and indeed the broader formalisation of many emerging market economies, is a key theme delivering positive change for Ross Teverson, Head of Strategy, Emerging Markets, and manager of the Jupiter Global Emerging Markets Fund.

He explains: "Gradually increasing penetration of financial products, combined with remarkable demographics, should create a backdrop that, for well-placed financial institutions operating throughout the developing world, should prove conducive to strong and sustained earnings growth for a long time to come.

Across emerging and frontier markets, we see a number of attractive long-term investment opportunities stemming from rising financial inclusion, as well as improved infrastructure, communications and technology."

According to Teverson, financial business models should benefit from prevailing, long-term global trends such as the transition from cash to digital payments, increasing mobile payments and rising financial inclusion. The opportunity is all the more ripe given the fact that in countries such as Brazil, which is one of the largest emerging economies, these trends are still in nascent stages. Only 32% of Brazilians over the age of 15 had a credit card in 2015 vs 60% in the UK. Cash still accounts for nearly half (48% of all consumer payments while the UK the figure is much lower (27%).

Teverson's process on the Jupiter Global Emerging Markets Fund begins from a bottom-up, fundamentalperspective, seeking companies where change is underappreciated by the market. This process aims to generate long-term capital appreciation by investing in under-researched and underappreciated companies, says Teverson.

"We believe there are many well-managed companies throughout the developing world which could benefit from the theme of financial inclusion. Over the past year, stocks exposed to this theme have added value to our portfolio and we continue to have conviction in their upside potential."

Click here to read the full article from the exclusive Guide to Emerging Markets, Asia and Japan from Jupiter Asset Management, and gain insight into the key portfolio holdings that are leading the way in terms of financial inclusion

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