Global Microscope 2016: The Enabling Environment for Financial Inclusion

2016 Global Microscope Highlights Gains in Financial Inclusion and Digitization of Financial Services

Latin America and the Caribbean (LAC) and East and South Asia have the most conducive environments for financial inclusion. India stands out for the most progress in the last three years and is now ranked third globally.

Financial inclusion is now on the global agenda and is understood to be a critical foundation in the improvement of livelihoods, according to The Economist Intelligence Unit’s (EIU) 2016 Global Microscope on Financial Inclusion. More than half of the 55 countries studied improved their enabling environment for financial inclusion in all areas in the past year. This year, India joins longtime leaders Peru, Colombia, and the Philippines at the top of the international country rankings.

The Microscope, a project of the EIU with technical support and oversight from the Center for Financial Inclusion at Accion, the Multilateral Investment Fund at the Inter-American Development Bank, and the MetLife Foundation, is intended to benchmark national progress on financial inclusion and catalyze reform. The Global Microscope 2016 assesses the regulatory ecosystem for financial inclusion by evaluating 12 indicators across a range of developing economies in East and South Asia, Eastern Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and Sub-Saharan Africa. Now in its tenth edition, the Microscope has evolved from covering microfinance in Latin America and the Caribbean to a global study of the broader financial inclusion ecosystem. It is also one of the few benchmarking tools spanning this significant length of time.

The index results show steady but modest improvements compared to last year. The average score for the 55 countries has increased (from 48 points to 49 points, where 100 is best) and once again only one country in 2016 has a score that is 25 points or lower. However, for the first time in seven years, Peru does not occupy the top spot alone: it has been joined by Colombia, last year’s number two country. While these two leaders continue to perform highly and in Colombia’s case to strengthen certain areas, the more substantial shift and interesting story is about India. India is now firmly among the leaders, having tied the Philippines for third position overall. India, Costa Rica, Honduras and Egypt have made the biggest gains over the last three editions of the Microscope and have policies in place to continue this success.

Consistent with the overall performance of the past two years, Latin America and the Caribbean (LAC) and East and South Asia tie for the highest overall scores regionally, with LAC countries capturing four of the top ten spots by rank. Eastern Europe and Central Asia and Sub-Saharan Africa also tie for second place in the regional rankings this year. The Middle East and North Africa (MENA) region posted the lowest overall score in the index.

In addition to long-term commitment to broad financial inclusion strategy and policy, digitization of financial services holds great promise for improving access to finance. Overall, for the indicator on electronic payments, the average of countries’ scores rose by a total of 14 points, or by 32%, between 2014 and 2016. This suggests widespread, positive action to create a regulatory environment more conducive to digital economic activity. Governments are also doing more to embed digitization by using it in their transfer payment programs. 

There continue to be challenges facing the financial inclusion environment. Much work remains to be done, particularly in the areas of government support for financial inclusion, de-risking and client protection. Insurance for low income populations continues to be a persistent challenge, and stakeholders need to focus on usage of financial services, now that access is well underway.




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