The World Bank is just days from releasing the next version of its Global Financial Inclusion Index (Findex), the authoritative data source on global progress toward financial inclusion. The dataset, which tracks financial inclusion in 150 countries, is released once every three years, and we have been waiting eagerly to see how things have changed since 2014. We are confident that the numbers will show enormous progress on the World Bank’s goal of universal access to financial accounts. But we wonder whether the news will also indicate that people are actually using those accounts and whether financial services are helping them achieve financial health, gain resilience and pursue opportunity – the ultimate goals of financial inclusion.
After we high-five the World Bank team for a job well-done, here are a few things that we will be looking for when we examine the new Findex numbers:
Increased access in smaller and less prominent markets
We’re sure that the Findex will show dramatic gains on access, and we predict that these gains will be driven by the major advances we already know about in India, China and East Africa. The big success stories result from unique characteristics in each location – the leapfrogging potential of mobile money in East Africa, the political support for building inclusion infrastructure in India and the rise of technology super-platforms in China. But what about countries like Mexico, Ghana, or the Philippines? These countries have all been making significant efforts to implement digital financial services. We hope to see success stories emerging in some of these lower-profile markets. We are also eager to see what is happening in the smaller countries that are often ignored in the excitement over big players, and that do not offer the economies of scale that attract digital financial infrastructure providers. We hope the data does not show a growing big-country/small-country digital divide. We would also like to see regional imbalances closing. Accion works throughout Latin America, which is often forgotten in the financial inclusion story.
A shrinking access-usage gap
When we first saw the 2014 Findex data, we pointed out the huge numbers of accounts that sat unused or were used only as a pass-through – i.e., as a means to receive a payment and immediately cash out. This gap is a strong indicator of whether a financial service meets important client needs. This year, we hope to see progress in reducing that access-usage gap. We’ll be looking especially at India, where the government has aggressively pursued its goal of an account in every household, but where we have seen significant account dormancy. One driver of active use is the ecosystem of value-added products that build on simple account or payment mechanisms. Progress in this area will signal that financial services are addressing real life needs, and that more people are becoming comfortable using phones and other digital means for financial transactions – as we documented last year in research in Kenya. We’d like to see people in countries beyond Kenya showing greater willingness to transact digitally.
Greater resilience among families
Our favorite question in the 2014 Findex asked whether a family could come up with a substantial sum of money (1/20 GNI per capita) in case of an emergency. This question – the “resilience question” – is the single indicator that best shows whether families are improving their financial health. Of course, a natural product to mention in connection with resilience is insurance. CFI released a new report on inclusive insurance earlier this year. New ways of assessing and anticipating economic shocks—and covering them for lower income populations—might move the numbers on vulnerability. Soon we will have two data points on resilience (2014 and 2017) and this trend line will allow us to make our first statements about whether financial inclusion is actually increasing financial security for clients. This question will give us insight into whether all the work toward financial inclusion is paying off.
A smaller gender gap
One of our disappointments in the past ten years is that while overall access to financial services has increased, the gender gap has hardly budged. As of 2015, women were about 10 percentage points behind in access to an account, despite great funder and industry focus on women. While we do not have robust evidence yet, we hope to see progress here. We have done some thinking on gender equality and financial inclusion, as have many others. It is time that these collective industry efforts begin to result in a smaller gender gap!
Financial inclusion enabling the Sustainable Development Goals
We love it when we see financial inclusion acknowledged for the role it plays in creating positive change in economic and social development—including many of the Sustainable Development Goals. The Findex reports whether people have paid electronically for things like school fees or bills, and indicators like this provide some clues about what financial inclusion improvements can enable for people new to the formal financial system. Building on the recognition that financial services are fundamentally about supporting people to do more with their resources, we see the ultimate goal of financial inclusion as improving lives.
Commentary on the post-2020 future of financial inclusion
The World Bank has set the ambitious, but achievable, goal of reaching universal financial access by 2020. This goal and this date has been a rallying cry among a set of prominent stakeholders who are key to making the achievement a reality. Now that 2020 is rapidly approaching, we want to know what comes next—and we have a strong view that access to an account is only the first step. If financial inclusion is to be more than a buzzword, we must continue to work until the newly “included” can use a full suite of quality services to make lasting improvements in their financial lives.
Join us in waiting eagerly, clicking the “refresh” button on our browser windows over the next few weeks as we await the answers to these questions. Whatever the data show, we are eager to engage in conversation and action with the financial inclusion community to continue charting a path toward meaningful financial inclusion.
Image credits: Accion
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