Global Movement into the Vulnerable Class, and What it Means for Financial Inclusion

Financial management will likely shift to more formal services as people gradually “outgrow” their informal mechanisms

The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

This post is based on research from the Mapping the Invisible Market project published in the paper Growing Income, Growing Inclusion by Sonja E. Kelly and Elisabeth Rhyne. The paper was released today, and can be downloaded at

The World Bank, UN, and The Economist are all talking about it: growing income around the world. The UN’s goal to halve the number of people living in poverty by 2015 has already been achieved, and the media frequently spotlights growth in emerging markets contrasted with reports of malaise in the EU and US economies. In low and middle-income economies, it isn’t just the wealthy or the well-connected who benefit from this growth. Real incomes are rising among the poor, moving hundreds of millions of people from extreme levels of poverty into levels at which they begin to have more income flexibility.

Over the course of this decade, the bottom two quintiles in many of the world’s most populous countries will see movement into and even beyond the “vulnerable class,” defined as having an income of $4 to $10 per day.

In 2010, the bottom 40 percent of the populations, in low and middle-income economies constituted a market of $3 trillion. By the end of the decade, the real spending power of this market will nearly double, to $5.8 trillion.

Last year, the World Bank’s Global Findex reported that the number one reason that people did not have a bank account was that they did not have enough money. We also see a moderately strong statistical connection between income and account use in the bottom 40 percent.

With higher personal income, financial management will likely shift to more formal services as people gradually “outgrow” their informal mechanisms. The time it takes a person to make this shift depends on a number of factors, including the level, source, and volatility of an individual’s income as well as the availability of suitable services.

Understanding this transition is essential as policymakers and providers seek to prepare for it. If providers can offer appropriately tooled products, higher incomes at the base of the pyramid will translate into greater financial inclusion. If policymakers can encourage growth while safeguarding it, they will be able to anticipate challenges to client protection for customers using formal financial services for the first time.

Offering appropriately tooled products and anticipating client protection challenges, of course, are not limited to places that will see high growth over this decade. Much of Africa’s bottom 40 percent, for example, will continue to be under the $4 to $10 per day range, and in these places, creative application of technology and mission-driven organizations will play a key role in increasing financial inclusion.

For more on the connection between income and inclusion, head on over to the Mapping the Invisible Market website at

For more information on Financial Inclusion 2020, sign up for campaign updates.

Figures’ source: Authors’ calculations based on World Economic Outlook and UNU-Wider database on inequality 

Have you read?

Adventurers, Unite: Voyaging Through Data in Our Mapping the Invisible Market Website

First Report from FI2020’s Mapping the Invisible Market Highlights Implications for Financial Inclusion as World’s Demography Changes

Financial Inclusion and the World’s “Unbanked” Population

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