Measuring Financial Inclusion: The “Basic Set” Solution

The G20’s Global Partnership for Financial Inclusion (GPFI) has just unveiled a “Basic Set” of indicators that help to solve the problem of how to measure financial inclusion. Their associated data portal will soon be available, too. This indicators release is timely—it corresponds to a massive increase in the amount of data that we have on financial inclusion, and it fills a need in the industry to define what we mean when we say “level of financial inclusion” in a measurable way.

The release also coincides with our own internal discussions here at the Center. Around the coffee pot, after meetings, and in blog posts, we have been wondering how to objectively measure and track financial inclusion. Beth Rhyne discusses the inadequacies of just using account penetration in her blog post “What’s Wrong with ‘Banking the Unbanked’?.”  Ignacio Mas posits “Mobile Money as a (Payment) Planning Tool,” a use that is not tracked in the headline indicators of available data. Leora Klapper’s “We Bring You… DATA!” underlines how critical demand-side data is to complement supply-side data-gathering efforts.

While the Global Partnership for Financial Inclusion does not solve every measurement problem, it certainly is a great start. The “Basic Set” covers five indicators, each measured in multiple ways: individual accounts, individual credit, small and medium enterprise accounts, small and medium enterprise credit, and branch penetration.

This amalgamated dataset recognizes a few critical challenges in the exercise of measuring financial inclusion:

  • The measurement of financial inclusion must take into account both supply side and the demand side of finance. Accordingly, the “Basic Set” of indicators pulls from demand-side sources (the Global Findex and the World Bank Group Enterprise Surveys) and pairs them with supply-side sources (the IMF Financial Access Survey) within the same categories (see the “Indicators” column above).
  • Financial inclusion is more than access to accounts. While the GPFI “Basic Set” does not include all indicators (mobile phones, for instance), it does include individual credit, SME credit, and SME accounts.
  • In addition to use, financial inclusion measures should include availability of services. As a measure of penetration of points of service, the GPFI uses the number of branches per 100,000 adults from the IMF Financial Access Survey.
  • People access financial services for both business and personal use. The “Basic Set” consists of both individual and small and medium enterprise use of formal financial services in addition to tracking both the supply and the demand side.

For more information, head over to the Global Partnerships for Financial Inclusion’s website, which will soon include the “Basic Set” of indicators data portal, complete with visualizations of the different datasets. We look forward to continuing to watch how the industry asks the question of how to measure and track financial inclusion.

Image credit: GPFI

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