Leora Klapper is a Lead Economist in the Development Research Group at the World Bank. She is a founder of the Global Findex database, co-editor of the World Bank Economic Review, and was Director of the 2022 World Development Report Finance for an Equitable Recovery. She has published widely in refereed journals on corporate and household finance, fintech, banking, and entrepreneurship. Her current research studies the impact of digital financial services, especially for women. Previously, she worked at the Board of Governors of the Federal Reserve System and Salomon Smith Barney. She holds a Ph.D. in financial economics from New York University Stern School of Business.

Lead Economist, Development Economics, World Bank

Leora Klapper

Peter McConaghy

Peer Stein

Research shows a positive correlation between financial inclusion and financial resilience. While we cannot prevent climate-related events from happening, this guest blog post focuses on the potential within our reach to help people prepare for the next disaster.

Blog Post

Climate events have <a href="https://www.preventionweb.net/files/74124_humancostofdisasters20002019reportu.pdf?_gl=1*1u385s5*_ga*MTg2MTc5OTQ5MC4xNjczNDYxMzMw*_ga_D8G5WXP6YM*MTY3MzQ2MTMzMC4xLjEuMTY3MzQ2MTM2NS4wLjAuMA.." target="_blank" rel="noopener noreferrer">surged</a> in the past decade, and low-income people often feel the <a href="https://link.springer.com/content/pdf/10.1007/s41885-020-00060-5.pdf?pdf=button%20sticky" target="_blank" rel="noopener noreferrer">brunt of the impact</a>. There are three primary reasons for this: their higher exposure to hazards, greater vulnerability to negative impacts from that exposure, and fewer resources to rebuild and recover losses quickly.

Unfortunately, people who are poor often face higher exposure to <a href="https://www.sciencedirect.com/science/article/abs/pii/S092180090900322X" target="_blank" rel="noopener noreferrer">climate-related natural hazards</a> because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health. They also tend to rely on agriculture as their primary source of income, creating a <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800913003182?via%3Dihub" target="_blank" rel="noopener noreferrer">double hit</a> of loss of assets and loss of labor productivity and income when a natural disaster strikes.

While we cannot prevent climate-related events from happening -- and poverty itself increases vulnerability -- financial inclusion is a tool that can help people experiencing poverty build resilience to climate shocks.
<blockquote>People often face higher exposure to climate-related natural hazards because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health.</blockquote>
Comparing <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> data on financial inclusion with <a href="https://gain.nd.edu/our-work/country-index/" target="_blank" rel="noopener noreferrer">data on climate vulnerability</a> reveals that over 1 billion unbanked adults, more than 80 percent of the world’s unbanked population, reside in the most climate-vulnerable economies.

<a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">Financial resilience</a>, defined by the Global Findex 2021 as the ability to access additional funds of up to 5 percent of GDP per capita within 30 days during emergencies, is also an issue related to financial account access. In climate-vulnerable economies, 58 percent of adults lack financial resilience, compared to 25 percent in less climate-vulnerable countries.

Lack of financial resilience is an issue even when controlling for GDP per capita—wealthier yet climate-vulnerable economies have a higher-than-average share of adults who lack resilience. Adults in climate-vulnerable countries are less likely to depend on social networks for emergency money since many members of the same family or community might lose jobs or income simultaneously, making it difficult to help friends or relatives.
<h1>Two Pathways Toward Resilience</h1>
Research has found a positive correlation between financial inclusion and financial resilience, indicating that increasing access to financial services can benefit people affected by climate change.

There are two primary opportunities to leverage financial inclusion for greater financial resilience:
<h3>1. Increase account ownership among unbanked adults in climate-vulnerable economies.</h3>
According to Global Findex data, adults with bank accounts are likely to make and receive digital payments, save money, access formal credit, and store their money securely. These services can help individuals invest in preventative infrastructure (e.g., better housing), diversify their income sources, and access savings and remittances to recover from disaster-related losses. The COVID-19 pandemic offers many examples of <a href="https://www.gpfi.org/sites/gpfi/files/sites/default/files/5_WB%20Report_The%20impact%20of%20COVID-19%20on%20digital%20financial%20inclusion.pdf" target="_blank" rel="noopener noreferrer">how governments</a> were able to quickly and safely provide relief payments to individuals with bank accounts.
<h3>2. Encourage savings among individuals who already have bank accounts.</h3>
The Global Findex 2021 data consistently shows that individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources, such as friends and family, jobs, or selling personal assets. This finding holds true across all regions.

For some individuals, having a bank account can provide a secure location to store their money and increase their savings. However, incorporating design features that incentivize savings can provide an additional benefit that helps to boost savings balances and create a personally financed emergency fund, even before disaster strikes. These funds can be used for investments such as disaster-resistant housing and stress-resistant seeds or to diversify income streams. Individuals with readily available funds <a href="https://www.jstor.org/stable/24029292#metadata_info_tab_contents" target="_blank" rel="noopener noreferrer">may also be more willing to migrate</a> to less risky environments.
<blockquote class="pullquote--left">Individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources.</blockquote>
Increased access to credit through formal accounts could also benefit adults in climate-vulnerable economies, though only about 15 percent of adults in low- and middle-income countries use formal credit, on average.

While access to financial services cannot prevent climate-related events nor fully eliminate the factors that make poor adults more vulnerable to the negative impacts of climate change, it can enable them to better anticipate and respond to natural hazards. By coupling access to finance with programs that promote financial resilience, low-income individuals can reduce their exposure to the financial burdens of natural disasters.

The Office of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), under the leadership of H.M. Queen Máxima of the Netherlands, recently convened a working group on inclusive green finance consisting of members from the Alliance for Financial Inclusion, the Center for Financial Inclusion, and the Sustainable Banking and Finance Network. The group produced a <a id="LPNoLPOWALinkPreview" title="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">policy and advocacy note</a> on inclusive green finance, along with an accompanying two-page <a id="LPNoLPOWALinkPreview_1" title="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">summary report</a>, which are available in the publications section at <a href="https://www.unsgsa.org/" target="_blank" rel="noopener noreferrer">www.unsgsa.org</a> and will be presented at the <a href="https://globalrff.org/" target="_blank" rel="noopener noreferrer">Responsible Finance Forum 2023</a> on July 5-7 in Bengaluru, India.

Climate Vulnerability and Financial Exclusion Go Hand in Hand – What Can Be Done?

Pia  Roman Tayag

The Global Findex 2021 shows global gains in account ownership and usage, but more can be done to improve the financial resilience and well-being of adults in developing economies.

The recent results from the <a href="https://worldbankgroup-my.sharepoint.com/personal/sansar1_worldbank_org/Documents/Findex%20report%202021/Dissemination/globalfindex.worldbank.org" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> show global gains in account ownership and in account usage in 2017—good news given the widespread financial impact of the pandemic. Today, 71 percent of adults in developing economies have a financial account. Yet the findings on financial well-being show that there is more work to do. 
<blockquote class="pullquote--left">71% of adults in developing economies have a financial account, yet the findings on financial well-being show that there is more work to do. </blockquote>
As the type of risks facing low-income consumers evolve, including rising food and fuel prices, and climate shocks increasing in frequency and intensity, we need an expanded definition of responsible finance in which all stakeholders – providers, policymakers, investors, donors, and more – are not just reacting to client protection risks but also anticipate and proactively work to build resilience, mitigate risks, and improve the financial well-being of consumers for the long term. 

Improving how we measure consumer outcomes is critical for an expanded definition of responsible finance. A sway of new research – recently discussed in the <a href="https://globalrff.org/events/june-2022" target="_blank" rel="noopener noreferrer">Responsible Finance Forum</a> – has shown that while access to finance is growing globally, financial health and well-being are stagnating or even declining.   

The Global Findex 2021 introduced a new set of metrics on <a href="https://www.worldbank.org/en/publication/globalfindex/brief/the-global-findex-database-2021-chapter-3-financial-resilience" target="_blank" rel="noopener noreferrer">financial well-being</a>. The data measures three dimensions of financial well-being: (a) managing unexpected financial events (financial resilience); (b) experiencing limited financial stress; and (c) having the confidence and capability to independently use financial products. The data suggests that while there have been gains in account ownership and in account usage since 2017, there is a need for more emphasis on all three components.  
<h1 aria-level="2">55 Percent of Adults in Developing Economies Are Resilient to Financial Shocks </h1>
The Global Findex survey measures “resilience” as the ability to access money equal to 5 percent of gross national income—or about $3500 in the US and 350 Rupees in India-- within 30 days without much difficulty when faced with an unexpected expense. In developing economies, only 55 percent of adults could do so. For comparison, that share is 79 percent in high-income economies. Resilience is an increasingly important dimension of responsible finance as extreme natural disasters are estimated to <a href="https://www.worldbank.org/en/news/press-release/2016/11/14/natural-disasters-force-26-million-people-into-poverty-and-cost-520bn-in-losses-every-year-new-world-bank-analysis-finds" target="_blank" rel="noopener noreferrer">push 26 million people into poverty</a> each year, and the financial sector industry has a role to play in promoting <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks">adaptation, resilience,  mitigation, and transition</a> of livelihoods affected by climate change.  
<blockquote class="pullquote--right">Women and the poor are less likely than men and richer individuals to be resilient.</blockquote>
Women and the poor are less likely than men and richer individuals to be resilient. One reason is that both women and adults living in poorer households are more likely to rely on family/friends as their front-line source of emergency money. Yet friends and family are among the least reliable sources of money in every developing economy region. There are a number of reasons for this. One is that family and friends may be confronting the same sources of financial stress at the same time, as is the case during the COVID-19 pandemic, or with a natural disaster such as a drought, flood, fire, or earthquake, or in a systemic economic downturn. In contrast, the Global Findex finds that <a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">personal savings</a> are the most reliable source of emergency money. 

&nbsp;
<h4>Adults in developing countries identifying the source of, and assessing how difficult it would be to access, emergency money (%), 2021</h4>
&nbsp;

<img class="size-full wp-image-45211 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/10/Findex-blog-pic1.png" alt="" width="744" height="396" /> 

&nbsp;
<h1 aria-level="2">The Majority of Adults in Developing Economies Worry About Finances </h1>
The objective reality of not having enough money—or not being able to obtain necessary funds in time to address emergencies—contributes to the more subjective sense of feeling financially worried. In developing economies, more than two-thirds of adults say they are very worried about one or more common sources of financial stress: living expenses for old age; medical costs from a serious illness/accident; monthly bills and expenses; and school or education fees. Twenty-two percent of developing economy adults are very worried about all four of the specified issues.  

In high-income economies, in contrast, only a fifth of adults say they are very worried about one of those four issues, and the share of adults who are very worried about all four is only 4 percent.  

Medical expenses were the biggest financial worry for both men and women in every world region. The financial impacts of COVID-19 likewise register as a significant source of worry, particularly in low- and low-middle-income economies. 
<h1 aria-level="2">Limited Financial Experience and Ability Can Expose Consumers to Financial Abuse </h1>
Beyond resilience and stress, low financial ability makes it difficult for adults to navigate the marketplace for retail financial services. Both account holders and the unbanked display low ability in certain markets. The Global Findex 2021 found, for example, that 31 percent of mobile money account owners in Sub-Saharan Africa couldn’t use their account without help from a family member or a mobile money agent. About two-thirds of unbanked adults similarly said that if they opened an account (excluding mobile money) at a financial institution, they could not use it without help. This lack of financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  
<blockquote>Low financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  </blockquote>
Financial service providers can exacerbate that challenge—sometimes unintentionally—when their fees or terms of service are unclear; when they use aggressive marketing; and when they have poor dispute resolution processes.  

One way in which low financial ability can affect account holders can be seen in the Global Findex 2021 finding that about 20 percent of wage recipients in developing economies paid higher fees than expected in order to receive wages directly into their account. In certain economies, that share is as high as 40 percent of wage recipients. We cannot know if the account holder simply didn’t understand the disclosed fee schedule, or if the fee terms were never disclosed. Either way, the fact that account holders are paying more than they expect to use services offers one example of how having an account and using it do not inevitably lead to well-being.  
<h1>Encouraging Responsible Finance and Improving Financial Well-being </h1>
Economies tend to put the burden of financial well-being on the consumers themselves. Making progress will require instead that policymakers and the financial sector industry treat consumer well-being as a shared responsibility. The policy environment also needs to prioritize both consumer protection and attention to the shifting nature of consumer risks. As the nature of these risks evolve, responsible finance has an important role to play in improving resilience and reducing financial stress. This includes, for example:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Encourage the design of high-quality products that help consumers build resilience and their capacity to prepare for, navigate through, and recover from financial shocks.  </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><a href="https://www.unsgsa.org/publications/measuring-financial-health-concepts-and-considerations" target="_blank" rel="noopener noreferrer">Measure</a> and evaluate how these solutions are resulting in changes in well-being. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Ensure financial service providers clearly disclose product features and fees so that consumers understand what products are most suited for their needs, how to responsibly use these products, and when and how much they will be charged. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Inform consumers about the risks of predatory financial practices and what they look like, in plain language and in a format that users can easily understand.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Incentivize financial institutions to incorporate <a href="https://www.poverty-action.org/program-area/financial-inclusion/consumer-protection-initiative" target="_blank" rel="noopener noreferrer">behavioral insights</a> and design research into their products and services. For example, product design features that help people act on pre-established intentions (like building savings for an emergency or for a specific goal) </li>
</ul>
The vast progress of the past decade on increasing account ownership should be lauded. But these gains also mean that the remaining unbanked consumers are among the hardest to reach and the most vulnerable to financial exploitation. Taking steps now to reduce the barriers to financial well-being can improve the financial lives of existing account holders and prepare the financial ecosystem to benefit some of the most vulnerable in our economies.

Responsible Finance and its Role in Improving Financial Resilience and Well-Being

We must identify underlying causes of gendered financial exclusion to improve financial services for women.

This post originally appeared on our sister website, <a href="https://www.accion.org/want-to-fix-the-financial-inclusion-gender-gap-ask-better-questions">Accion</a>.

As I worked on the latest update to the World Bank’s <a href="https://globalfindex.worldbank.org/">Global Findex database</a>, I was pleased to see some significant progress in account ownership and digital finance. However, I was disheartened — if not surprised ­— to find that we’re still stuck in 2011 when it comes to the stubborn gender gap in financial services.

Closing the gender gap remains the grand prize for financial inclusion advocates — a truly inclusive financial system should break down barriers and bring opportunities to all people. But women in developing countries are still 9 percentage points less likely than men to have an account. That gap has not improved since the Findex began in 2011, and it’s just an average — scores are even worse in some countries. For instance, in Pakistan, men are five times as likely as women to have an account.

Why are women left out to a greater degree than men? One reason is there’s also a persistent digital divide when it comes to access to technology. According to the Gallup World Poll survey, Men are 10 percentage points more likely than women to report owning a phone. In Egypt, Ethiopia, and India, men are 20 percentage points more likely than women to have their own phone.

We need to better identify the underlying causes of digital exclusion, such as social norms. For example, it may not be acceptable for women to give their phone numbers to male bank agents — meaning women are missing out on the opportunities of mobile money accounts.

But it’s not just technology — we need more data on how women experience financial inclusion broadly, and how social norms may keep women excluded from the financial system. We’d be in a better position to close the gender gap if we had more data. I’d like to see more research exploring how and if the gender of agents influences financial inclusion. Would more female mobile and merchant agents mean more financial access and activity? It would be good to know one way or the other.
<blockquote>Would more female mobile and merchant agents mean more financial access and activity?</blockquote>
I’m also interested in whether we can establish a link between electronic wage payments and higher productivity. This relationship could affect the financial inclusion gender gap: the World Bank is starting new work with tea pluckers in Sri Lanka. In the past, many of these women’s husbands might have claimed their salaries. I’d like to know if a woman receives payments into her own account, and if she gets the full pay-off for her labor, will she work harder? Will she be more productive? Will job retention at her employer increase? These questions represent an exciting new road of research to motivate the private sector to expand financial inclusion and digital payments, particularly for women.

We need more information. We know that inclusive financial services can help women gain more autonomy; moreover, by supporting women, we might also catalyze social and economic progress. But we need to know more about how and why women use or are prevented from accessing financial services to shape our efforts going forward. I hope we begin asking these questions and pursuing real answers soon.

Want to Fix the Financial Inclusion Gender Gap? Ask Better Questions

&gt; Posted by Leora Klapper, Lead Economist, Development Research Group, the World Bank

[youtube https://www.youtube.com/watch?v=Oy9N-6IBaUA&amp;w=560&amp;h=315]

Eroll Asuncion runs a grocery store on the remote Philippine island of Rapu-Rapu. It’s a three-hour boat ride to the nearest bank. Fortunately, that’s no longer a problem – thanks to the mobile phone revolution and new regulations that make it easier for people to open and use an account.

Eroll’s customers now pay bills and send and receive remittances through a mobile money account they access via mobile phones. Eroll’s SuperStore has become something of a bank for islanders using these mobile accounts, allowing them to send and receive cash at the store.

“My husband sends (me) money twice a month, on the 15th and 30th,” Yolanda, a customer, explains.

Hundreds of millions of others like Yolanda are opening new accounts through their phone or at a bank or similar institution. It’s part of a financial revolution that’s sweeping the developing world. Since 2011, 245 million more people in East Asia and the Pacific have become part of the formal financial system by opening an account.

The World Bank has just released our much-anticipated second edition of the <a href="http://www.worldbank.org/globalfindex">Global Findex</a>, the world’s only comprehensive gauge of global progress on “financial inclusion”—how people save, borrow, make payments, and manage risk. The data give us insight into account ownership around the world, and how people are using – or not using – those accounts.

The Global Findex offers good news. As of 2014, 62 percent of adults around the world had access to a bank account. Put another way, the number of people who are “unbanked” has tumbled to 2.0 billion from 2.5 billion in 2011, when the Global Findex was first released.

The Global Findex offers insights into how we can continue this progress by giving more people access to financial services.

The private sector and governments can play a huge role. Some 400 million people, or 20 percent of the unbanked, currently receive wages as well as government transfers such as social benefits in cash.

During our research for the Global Findex, we visited a factory in Bangladesh that paid wages by pulling a giant, cash-filled truck up to the factory and distributing the cash to  workers. If wages from private companies were delivered electronically through an account, 280 million more people would have automatic access to accounts.

Similarly, 160 million people would gain a bank account if all government transfers now paid in cash were moved to electronic payments.

Other opportunities abound. Currently, about 270 million adults send and receive money in cash. An additional 100 million send money via over-the-counter transactions such as through Western Union.

Creating products that facilitate transfers between individuals without the insecurity of cash would connect these people to the formal financial system. Such electronic payments would be especially valuable in Sub-Saharan Africa, where 22 percent of people send or receive funds to family or friends living within the country (what we call "domestic remittances") in cash. Another 12 percent send or receive funds over-the-counter using a money transfer operator like Western Union—which must be withdrawn as cash and held in some other way. Sending domestic remittances through an account offers recipients a safe place to store money for day-to-day purchase or save for longer-term goals.

Of course, just providing access to accounts will not spur everyone to send and receive money through them. Financial service providers must respond to consumer needs. In developing economies, 355 million people with an account continue to send and receive domestic remittances through cash or over-the-counter transactions – even though many of them could use their accounts for this purpose. Existing accounts can be adjusted to lower the cost and increase the convenience of sending and receiving money.

In low- and middle-income economies, more than 1.3 billion account holders continue to pay their utility bills in cash, and more than 500 million account holders pay their children’s school fees in cash. Moving these payments to accounts would both increase convenience for customers and increase account use.

The data point to great opportunities for the financial inclusion community to increase both access and use of financial services. With these steps, the world can significantly accelerate progress toward financial inclusion.

Leora Klapper is a Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank. The Global Findex was developed by the Finance and Private Sector Development Team of the Development Research Group at the World Bank, collected by Gallup World Poll, and funded by the Bill and Melinda Gates Foundation.

Have you read?

<a href="http://cfi-blog.org/2015/04/22/financial-inclusion-by-2020-it-depends/">Financial Inclusion by 2020? It Depends</a>

<a href="http://cfi-blog.org/2012/11/16/measuring-financial-inclusion-the-basic-set-solution/">Measuring Financial Inclusion: The 'Basic Set' Solution</a>

<a href="http://cfi-blog.org/2012/12/14/announcing-the-launch-of-the-global-financial-inclusion-global-findex-microdata/">Announcing the Launch of the Global Financial Inclusion (Global Findex) Microdata</a>

Global Findex Offers Next Steps for How to Give People Bank Accounts

&gt; Posted by Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank<img class="alignright size-full wp-image-6220" title="Global Findex" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/04/global-findex.png" alt="" width="181" height="109" />
Today the <a href="http://www.worldbank.org/" target="_blank" rel="noopener">World Bank</a>, in partnership with the <a href="http://www.gatesfoundation.org/Pages/home.aspx" target="_blank" rel="noopener">Bill and Melinda Gates Foundation</a>, unveils an important new source of information that can help advance the financial inclusion agenda. We call it the <a href="http://www.worldbank.org/globalfindex" target="_blank" rel="noopener">“Global Findex,”</a> short for the Global Financial Inclusion Database, and it is the first large-scale, comparable, demand-side financial inclusion data-collection exercise of its kind. Using the<a href="http://www.gallup.com/video/106357/introducing-gallup-world-poll.aspx" target="_blank" rel="noopener"> Gallup World Poll</a> survey, we measure how over 150,000 adults in 148 economies save, borrow, make payments, and manage risk. We also have the ability to disaggregate by gender, age, education, and income, allowing researchers to more precisely identify the unbanked. Eager to get your hands on the data? Click <a href="http://datatopics.worldbank.org/financialinclusion/" target="_blank" rel="noopener">here</a>.
For those that are still with me, let me share some of our initial findings:
<ul>
 	<li>We see regional, economic, and demographic differences in account penetration. We find that 50 percent of adults worldwide have a formal bank account, with large disparities in account penetration across regions, income groups, and individual characteristics.</li>
</ul>
<img class="aligncenter size-full wp-image-6217" title="Account penetration" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/04/account-penetration.png" alt="" width="500" height="240" />In high income economies account penetration is 89%, and in developing economies account penetration is only 41%. Among those living below $2 per day, only 23% have a formal account. In developing economies, if you are wealthy (within the highest quintile in your country), you are more than twice as likely to have an account than if you are poor (within the lowest quintile in your country), on average. Furthermore, 46% of men in developing economies have a formal bank account, compared to 37% of women.
<ul>
 	<li>We have data not only on account ownership but also usage. Globally, 23% of adults report having saved at a formal financial institution in 2011. 61% of account holders worldwide use their account to receive payments from an employer, the government, or family members living elsewhere.</li>
 	<li>We can identify why adults don’t have an account. While 65% of non-account holders report that they do not have enough money to use a formal account, there are also other reasons (multiple answers are permitted): for example, an account is too expensive (25%), or is too far away (20%). This is valuable information for policymakers—for instance, mobile technology might offer the opportunity to provide cheaper and more convenient accounts to rural residents. See the chart below for a full breakdown.<img class="aligncenter size-full wp-image-6218" title="Barriers to financial inclusion" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/04/barriers-to-financial-inclusion.png" alt="" width="500" height="334" /></li>
 	<li>Formal borrowing and formal insurance are rare. Globally, only 9% of adults originated a loan from a formal financial institution in the past year. However, 50% of adults in high-income economies report having a credit card which likely reduces the need for short-term loans. In developing economies, only 7% of adults have a credit card. In addition, only 17% of adults personally purchased health insurance in developing countries. Only 6% of adults in developing economies in the farming or fishing industries reported having personally purchased crop, rainfall, or life insurance.</li>
</ul>
The Global Findex can be used to benchmark how adults around the world manage their day-to-day finances and help policymakers develop evidence based financial inclusion strategies. Over time, we will be able to track trends, study the impact of policy reforms, and better understand the links between financial inclusion and development outcomes.
For additional information on the methodology and country results, please read the report for the Global Findex <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2012/04/19/000158349_20120419083611/Rendered/PDF/WPS6025.pdf" target="_blank" rel="noopener">here</a> or visit the Global Findex website <a href="http://www.worldbank.com/globalfindex" target="_blank" rel="noopener">here</a>.
Leora Klapper is a Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank. She holds a Ph.D. in Financial Economics from New York University Stern School of Business.
The citation for the Global Findex is: <a href="http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2012/04/19/000158349_20120419083611/Rendered/PDF/WPS6025.pdf" target="_blank" rel="noopener">Demirguc-Kunt, Asli and Leora Klapper, 2012, “Measuring Financial Inclusion: The Global Findex Database.” World Bank Policy Research Working Paper 6025.</a>
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.
Image credit: <a href="http://www.worldbank.org/globalfindex">Global Findex</a>
Have you read?
<a href="http://centerforfinancialinclusionblog.wordpress.com/2011/07/13/voices-of-financial-inclusion-its-the-clients-stupid/" target="_blank" rel="noopener">Voices of Financial Inclusion: ‘It’s the Clients, Stupid’</a>
<a title="Permanent link to Data with a Purpose: A Call for Creativity and Cooperation" href="http://centerforfinancialinclusionblog.wordpress.com/2012/04/04/data-with-a-purpose-a-call-for-creativity-and-cooperation/" target="_blank" rel="bookmark noopener">Data with a Purpose: A Call for Creativity and Cooperation</a>
<a title="Permanent link to Who is Your “Plus One”?" href="http://centerforfinancialinclusionblog.wordpress.com/2012/02/27/who-is-your-plus-one/" target="_blank" rel="bookmark noopener">Who is Your “Plus One”?</a>

Leora Klapper

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