Gloria Grandolini

Blog Post

&gt; Posted by Gloria Grandolini, Senior Director, Finance and Markets Global Practice, the World Bank Group

<a href="http://www.fi2020week.org/">FI2020 Week</a><a href="http://www.fi2020week.org/"><img class="alignright wp-image-19409" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/09/fi2020-week-logo.png" alt="" width="350" height="141" /></a> is a global conversation on the key actions needed to advance financial inclusion, grounded in the findings of the recently launched FI2020 Progress Report. From November 2-6, 2015, stakeholders around the world are participating in more than 30 events and sharing their voices over social media, with #FI2020.

Despite <a href="http://www.worldbank.org/en/programs/globalfindex">significant progress</a> and the increased technical and financial resources devoted to financial inclusion, 2 billion people worldwide still lack access to regulated financial services.

As I read the <a href="http://www.fi2020progressreport.org/">FI2020 Progress Report</a> and cast my vote on how the world is doing on the five aspects of financial inclusion the FI2020 report covers, I’m reminded of the recent <a href="http://www.afi-global.org/global-policy-forum/2015">Global Policy Forum of the Alliance for Financial Inclusion</a> (AFI), where I had rich discussions with AFI members regarding how to meet challenges to expanding access to financial services.

The successes and obstacles which AFI members shared echo many of the points identified in the FI2020 Progress report as shaping the future of financial inclusion.

These hurdles can be distilled into five main challenges:

Financial literacy and capability. Countries must develop financial capability programs to ensure people can make sound financial decisions, select financial products which best fit their needs, and know how to use related channels, such as ATMs or mobile banking. Recent World Bank Group Financial Capability Surveys in <a href="http://documents.worldbank.org/curated/en/2014/12/23974005/enhancing-financial-capability-inclusion-morocco-demand-side-assessment">Morocco</a> and <a href="http://documents.worldbank.org/curated/en/2014/08/20151823/enhancing-financial-capability-inclusion-mozambique-demand-side-assessment">Mozambique</a>, and studies on remittance services among migrants in France and Italy, show that a lack of awareness prevents people from using suitable financial products and services. Behavioral insights are leading to more effective – and lower cost – financial literacy efforts, which can improve uptake of new accounts and increase savings, including through tailored SMS texts.

Valid identification documents. Providing people with a valid ID is essential to enabling access to financial services. Without valid and accessible IDs, it’s not possible to shift large payment flows like social benefit transfers and wages into transaction accounts. The process to obtain a valid proof of ID and to open an account needs to be streamlined. In countries where ID documents are not sufficiently robust and easy to authenticate as required by Know-Our-Customer requirements, financial inclusion efforts haven’t made as many inroads.

Financial consumer protection and regulation. For mobile money and other e-money products to safely expand financial access, strengthened regulatory frameworks and oversight are needed. <a href="http://documents.worldbank.org/curated/en/2014/06/20272197/digital-identity-toolkit-guide-stakeholders-africa">Secure and reliable platforms</a> to protect data privacy and funds can promote confidence in using electronic payments. It’s also important to treat new customers fairly, adequately disclose key product information, and establish safety and reliability standards to allow customers to make informed choices about products they select.

<a href="https://www.flickr.com/photos/10816734@N03/2689582039/"><img class="alignright wp-image-19913" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/11/2689582039_fcfd86ab5f_z.jpg" alt="" width="350" height="224" /></a>Women and the rural poor. <a href="http://www.worldbank.org/en/programs/globalfindex">Women in developing countries are 20 percent less</a> likely than men to have an account and 17 percent less likely to have borrowed from a formal financial institution in the past year. Financial institutions need to adapt financial products to suit <a href="http://www.theguardian.com/visa-partner-zone/2015/jun/11/world-bank-group-unbanked-women-global-findex">women’s needs</a>. This effort can range from providing women with valid proof of ID and enabling them to independently open an account, to enhancing their ability to make basic financial decisions. The <a href="http://documents.worldbank.org/curated/en/2014/12/23974005/enhancing-financial-capability-inclusion-morocco-demand-side-assessment">2014 World Bank Group Financial Capability Survey in Morocco</a> showed that women and people living in rural areas score significantly lower on various financial capability metrics (budgeting, coping with unforeseen events, etc.) compared to men and the urban population. Overall, they tend to be less educated or less likely to be formally employed.

Usefulness. Opening a transaction account is the first step, not the end goal. Transaction accounts must be useful and serve as a gateway to other financial products such as savings, credit, and insurance. Some <a href="http://www.worldbank.org/en/programs/globalfindex">355 million adults</a> in developing countries who report having an account still remit money in cash or over-the-counter. Governments and the private sector can play a key role in accelerating usage by depositing wages into accounts versus paying cash. For example, India’s <a href="http://www.pmjdy.gov.in/">Pradhan Mantri Jan-Dhan Yojana</a> (PMJDY) initiative is shifting benefits, including for the LGP-fuel subsidies, into transaction accounts on a large scale, and has reportedly opened more than 180 million accounts.

In the last two years, the World Bank Group has committed more than <a href="http://www.worldbank.org/en/news/infographic/2015/09/03/getting-to-universal-financial-access-2020">$8 billion in financial support</a> for expanding financial access and inclusion, and for developing enabling regulatory frameworks and financial infrastructure.

This past spring, the <a href="http://www.worldbank.org/en/topic/financialinclusion/brief/ufa2020-building-coalition-of-partners">World Bank Group and a number of public and private-sector stakeholders</a> committed to reaching the remaining unbanked people in the next five years through the <a href="http://www.worldbank.org/en/topic/financialinclusion/brief/achieving-universal-financial-access-by-2020">Universal Financial Access 2020 (UFA2020) initiative.</a> The World Bank Group support alone is projected to enable 1 billion adults to gain access to a transaction account. The UFA2020 initiative focuses on 25 countries where 73 percent of the world’s unbanked population lives. However, we are eager to work with all countries where we can add value as a technical partner or provide critical financial support.

At the global level, the World Bank Group and the <a href="https://www.bis.org/cpmi/">Committee of Payments and Market Infrastructures</a> (CPMI) of the Bank for International Settlements (BIS) have analyzed these challenges in the <a href="https://consultations.worldbank.org/consultation/payment-aspects-financial-inclusion">consultative report on Payment Aspects of Financial Inclusion</a>, which is open for comments until December 7, 2015.

The report examines what elements of retail payments are critical to financial inclusion and how improving the payments infrastructure and services could accelerate access to and use of transaction accounts.

Once finalized, the report will suggest key actions countries should take to advance access to transaction accounts.

These actions will be crucial to making financial inclusion a reality.

<a href="http://www.worldbank.org/en/about/people/gloria-m-grandolini">Gloria Grandolini</a> is senior director of the Finance and Markets Global Practice at the World Bank Group. Follow @WBG_Finance on Twitter and use #FinAccess2020 to read about the World Bank Group’s work on <a href="http://www.worldbank.org/en/topic/financialinclusion">Financial Inclusion</a>.

Image credit: <a href="https://www.flickr.com/photos/10816734@N03/2689582039/">Curt Carnemark / World Bank</a>

Have you read?

<a href="http://cfi-blog.org/2015/10/01/rating-progress-toward-financial-inclusion-on-a-scale-of-1-to-10/">Rating Progress toward Financial Inclusion on a Scale of 1 to 10</a>

<a href="http://cfi-blog.org/2015/10/08/why-we-gave-consumer-protection-a-5/">Why We Gave Consumer Protection a 5</a>

<a href="http://cfi-blog.org/2015/10/07/addressing-customer-needs-off-to-the-data-mines/">Addressing Customer Needs? Off to the Data Mines</a>

Tackling Five Challenges to Accelerate Financial Inclusion

<a href="http://www.fi2020week.org/"><img class="alignright wp-image-19861" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/10/piggy-bank-970340_1920.jpg" alt="" width="265" height="173" />FI2020 Week</a> is a global conversation on the key actions needed to advance financial inclusion. From November 2-6, 2015, stakeholders around the world will participate in more than 30 events and share their voices over social media, with #FI2020. In recognition of the importance of savings to financial inclusion, and with the happy coincidence that <a href="http://www.wsbi-esbg.org/press/latest-news/Pages/World-Savings-Day-A-global-celebration.aspx">World Savings Day</a> is on October 31, we invited Chris de Noose, Managing Director of the <a href="http://www.wsbi-esbg.org/">World Savings and Retail Banking Institute</a> (WSBI) to help launch FI2020 Week with this post.

For more than 90 years, the World Savings and Retail Banking Institute – WSBI – and its members have spearheaded annually a day dedicated to promoting the virtue of people saving money.

Called World Savings Day, it was the first initiative of WSBI, which represents the interests of savings and retail banks in 80 countries. Celebrated at the end of October, the day remains relevant for members, who engage actively in celebrating it in their local areas. World Savings Day is etched in the minds of Europeans, including those from Germany, Austria, Spain, and Italy. It also is celebrated beyond Europe, in places like Brazil, India, Mexico, Sri Lanka, Tanzania, and Thailand, for instance.

For Brussels-based WSBI and its members, World Savings Day places focus on the stabilising role played by savings and retail banking in the overall financial system. It evokes some of the ethos of local banks: responsible partners in communities; close to the customer; serving households, small and medium-sized firms (SMEs), and local authorities.

Why saving is important

Savings are important on many levels. First, savings are important for households. People save to create a nest egg, a rainy day fund – a way to financially “smooth out” some of the uncertainty in an often uncertain world. Second, and on a macro-economic level, it provides funding to banks in the form of deposits. Those savings then can be converted into loans. Loans for SMEs, for example, when they expand or retool. Savings are also important for social entrepreneurship, finance that brings to life start ups, for example.

Low interest rates

Today savers face a low interest rate environment that chips away at financial asset values, most of which are held by households in the form of bank deposits and government securities. Low-interest rates also drag down deposits levels – a core source of funding by many of our members – by swaying people to save less. Perhaps it is time to stop trying to solve the problems arising from the financial crisis on the backs of savers.

The Roots of Savings and Retail Banks

The savings bank is different from other types of banks. The concept is European with ideological roots that date back to the Enlightenment, when the “principle of self-help” made its breakthrough during the 18th century. The “Enlightened” believed in self-help and spread the deeply middle-class virtue of thrift to lower classes.

The savings bank movement blossomed in the early 19th century when the first savings banks, which were private,  were set up – often through unconnected movements across Europe. We like to mark the starting point with the Ruthwell Savings Bank in Scotland. It was founded by the Reverend Henry Duncan and took hold in 1810. The seed was planted, and after that savings banks began to spread throughout Europe.

​Next came industrialisation and the social problems that arise from it. The challenges of industrialization breathed life into the“morality” of work, thrift, and virtue. Saving could help stabilise the social order. That’s when governments began to show interest.

Today, the world’s savings banks are diverse, but are rooted in self-help and local ties, especially with people earning lower incomes, SMEs, and regional and local authorities.

The red thread: change

For more than 200 years, savings and retail banks have nurtured trust with people. Close to the customer, we strive for a bond that is solid and trusted. The “New Normal” created by digitalisation is the next opportunity to bring more people into the financial mainstream. Our job at WSBI is to play an enabling role to help this happen.

WSBI brings together savings and retail banks from around 80 countries, representing the interests of approximately 6,000 banks in all continents. As a worldwide organisation, WSBI focuses on issues of global importance affecting the retail banking industry. Learn more about WSBI at <a href="http://www.wsbi-esbg.org">http://www.wsbi-esbg.org</a>.

Have you read?

<a href="http://cfi-blog.org/2015/01/05/five-lessons-for-building-savings-in-latin-american-microfinance/">Five Lessons for Building Savings in Latin American Microfinance</a>

<a href="http://cfi-blog.org/2015/06/05/tackling-low-retirement-savings-in-mexico/">Tackling Low Retirement Savings in Mexico</a>

<a href="http://cfi-blog.org/2015/06/24/to-develop-savings-skills-start-em-young/">To Develop Savings Skills, Start 'Em Young!</a>

Gloria Grandolini

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