The first report from the Mapping the Invisible Market project, Looking Through the Demographic Window, shows how profound demographic shifts in the developing world have important implications for financial inclusion.
Demographic change is one of the most powerful forces shaping the world’s future, and has implications for financial inclusion in every country over the next decade. At this moment, demographic transition is opening a unique window of opportunity for countries in development. As life expectancy increases and fertility rates fall, the working-age population grows faster than the young dependent population. In the developed world this demographic dividend boosted economic growth for several decades, but rapid aging and an expanding elderly population have now turned demographics into a headwind. Yet, as the window closes in the developed world, it is just opening in the developing world.
Population Change 1950-2050
Click the arrow keys under the image to see demographic change in different country groups over time. Younger population age groups are at the bottom of each pyramid, older age groups are at the top. Data and Projections: United Nations.
Demographic transition is an urgent challenge to policy and service provision. It calls on policymakers to enable the large generation of workers to maximize their opportunities. Action to support the transition is needed soon. The demographic window in the developing world will only stay open for a few decades.
The demographic window is open for less developed countries, providing exciting opportunities for economic growth. It is still decades away for the least developed countries which will remain focused on burgeoning youth populations.
Financial inclusion is an essential component of enabling the developing world to maximize its demographic dividends. In many countries the majority of households lack access to basic financial services and many more are only partly included or have poor-quality services. Micro-, small, and medium enterprises are also often excluded from the financial system. Empirical evidence suggests that financial inclusion is pro-growth and pro-poor, helping to reduce income inequality and poverty.
An analysis of the connections between demographic changes and financial services can illuminate market segments where new and growing demands for financial services will arise. Demographic considerations not only suggest that financial inclusion is broadly important, they also point toward specific aspects of financial inclusion to prioritize, such as long-term savings.
Scroll through and download Looking Through the Demographic Window: Implications for Financial Inclusion, by Peter Kasprowicz and Beth Rhyne:
FI2020's Mapping the Invisible Market is generously supported by MasterCard Worldwide.