FIW Recap: Women’s Financial Inclusion Remains Key Global Focus

As each year comes to a close, it’s natural to reflect on the key moments and events that shaped the year. Beyond the political and economic events and trends – the war in Ukraine, the rise in inflation globally, the floods in Pakistan, and COP27 – the field of inclusive finance itself is reshaping its contours to meet the moment. We saw this very visibly in this year’s <a href="https://financialinclusionweek.org/">Financial Inclusion Week (FIW)</a>, the largest event we have hosted to date – with virtual participants from 2,000 organizations across 146 countries. The topics covered reflect the priorities of global actors in inclusive finance, pointing to the direction the field is going.

<img class="wp-image-45545 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/Screenshot-2022-12-12-at-11.27.19-AM.png" alt="" width="967" height="429" />

To me, the scale of this year’s FIW and the coming together of the minds of stakeholders worldwide during this difficult time signals an urgent need and momentum to accelerate our understanding of how inclusive finance must evolve to address global challenges. With over <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">50 hours of live content and 70 on-demand sessions</a>, FIW has something for everyone. While it would be amazing to watch the hours of rich live and on-demand content oneself, we know few people have this luxury. We have been reflecting on this at CFI and will launch a blog series that highlights takeaways on key topics covered during FIW 2022.

<img class="wp-image-45546 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/4_Closing_Plenary-2-1.jpg" alt="" width="960" height="761" />

FIW 2022 left me with several reflections on the state of the inclusive finance sector and what needs to be prioritized. While FIW covered many sub-topics, the overall theme for the week was “Inclusive Growth in a Digital Era,” exploring how our community can harness digital innovation to expand inclusive financial services and contribute to inclusive economic growth.

In hindsight, as I reflect on the content, I would revise the theme and say that this year’s FIW was really about: “How we can create shared prosperity in our digital era.” Many of the sessions at FIW highlighted that, despite digital financial services’ promise to create inclusive solutions, there are serious shortfalls in how the digital economy is evolving, and new risks and gaps are emerging. We learned that while access and usage continue to rise, indicators linked to resilience have worsened. Even more concerningly, numerous examples of fraud and online harassment were spotlighted during the sessions indicating that the digital economy has yet to pan out as the equalizer that we thought it would be.

Some key messages I took away from FIW 2022 include:
<h3>The future of micro and small enterprises (MSE) on digital platforms needs attention.</h3>
In a joint <a href="https://www.youtube.com/watch?v=0FCpTM0TAac" target="_blank" rel="noopener noreferrer">session</a> hosted by CFI and Mastercard Center for Inclusive Growth, panelists discussed the status quo – where platforms retain substantial bargaining power and most MSEs lack the skills or power to benefit fully from the economies of scale offered through platforms. While alternative business models, such as platform cooperatives or open networks, may be options worth exploring, integrating elements of these emerging models into today’s established business models is likely to produce the greatest benefits to MSEs and platforms alike. Sessions by CGAP on <a href="https://www.youtube.com/watch?v=8VlU8U3DOdI" target="_blank" rel="noopener noreferrer">digital platforms</a> and <a href="https://www.youtube.com/watch?v=iGzlBKRK-PU" target="_blank" rel="noopener noreferrer">fintechs</a> surfaced regulatory fragmentation, payment rails, and e-KYC norms as pressing issues limiting workers and MSEs from fully benefitting from the digital economy. Regulators, donors, investors, and other industry stakeholders should invest more explicitly to enable a rebalancing of power to favor MSEs.
<h3>Trust needs to be earned; regulators, providers, and consumer organizations each have a role in making that happen.</h3>
A <a href="https://www.youtube.com/watch?v=yXw-r70lLXc" target="_blank" rel="noopener noreferrer">session by Consumers International</a> shared evidence on both existing and emerging consumer risks. These included significant increases in consumer complaints in Fiji and major issues around trust in digital finance in India, where 60 percent of digital finance users surveyed stated that they stopped usage because of trust issues. While several digital financial services users sought redressal through customer care channels, 20 percent of respondents in India never had their issue resolved.

Regulators can play a critical role in shaping market conduct. Another <a href="https://www.youtube.com/watch?v=CJ9_P7bGOvA" target="_blank" rel="noopener noreferrer">session hosted by SPTF</a> provided compelling evidence of fraud and abuse in markets like Kenya and discussed what provider practices could help mitigate these risks. Fair Finance’s session brought up an example of how a regulator can step in to enable greater trust in the financial system for low-income consumers and businesses: they mentioned the Central Bank of Rwanda's approach, where they are working to build trust via a consumer protection law, retaining oversight of financial consumer protection, creating tools to compare providers, and establishing instant complaints systems that allow consumers to submit complaints through email and social media.

These sessions reinforced the need for rigorous research, progressive regulation, and market conduct supervision that incentivize providers to be responsible and strong consumer organizations who can advocate on behalf of the silent majority in most developing markets. Donors and investors working to support market development must ensure that these fundamental guardrails are in place before they scale innovations.
<h3>Regulation and regulators are important in addressing gender inequity and creating trust.</h3>
Gender inequity is perhaps the gap that received the greatest attention during FIW 2022. Toronto Centre’s panel on <a href="https://www.youtube.com/watch?v=ISoRGWNdaQQ&amp;list=PL30fMMRd3G_7IGUKLWAQm_Z3zDVIu6LCB&amp;index=28" target="_blank" rel="noopener noreferrer">Advancing Cybersecurity and Financial Inclusion</a> highlighted the large gender gaps – such as access to technology – and the greater vulnerability, whether harassment, gender-based violence, or outright discrimination, and looked at what regulators are doing to counterbalance the system that is stacked against women.

<a href="https://www.youtube.com/watch?v=FFIFIvuVo0U" target="_blank" rel="noopener noreferrer">CFI’s Edoardo Totolo</a> delivered one of the four keynotes and highlighted both the opportunities and the risks posed by new embedded finance players. He emphasized the increasingly important role unregulated non-financial actors play in the design and delivery of financial services and the regulatory ambiguity around who is responsible for what. His keynote ends with a cautionary note to regulators and policymakers to clearly define the regulatory perimeters, articulate the role of third-party actors, promote interoperability and open architecture, and above all, create a level playing field.
<h3>One-size fits all solutions are insufficient; segmentation is necessary.</h3>
Several panelists emphasized that low-income customers are not a monolith and recognized that low-income consumers occupy different societal groups, each with its unique strengths, challenges, and starting points. A key takeaway from these sessions is that when we design without understanding the specific segment we are trying to reach, we will de facto design products and services for men. Instead, we must be intentional and create solutions that address specific consumer needs.

<a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">AXA’s session</a> on developed markets, including Japan, the US, and France, provided a unique look at excluded segments and approaches providers were taking to be inclusive in these highly competitive and highly regulated markets. For example, French provider <a href="https://nickel.eu/fr" target="_blank" rel="noopener noreferrer">Nickel</a> noted their rapid trajectory of delivering a simple product with very clear and fair terms and relying on distribution systems that leverage existing points of sale used by low-income consumers. In another <a href="https://www.youtube.com/watch?v=jC2AmET0HXI" target="_blank" rel="noopener noreferrer">session by Mastercard Strive</a>, a panelist from <a href="https://www.withboost.co/" target="_blank" rel="noopener noreferrer">Boost</a> Nigeria noted that women-owned small businesses are not a homogenous retail segment. Recognizing that women business owners had varying levels of digital and financial capabilities, Boost adopted a range of strategies that tried to meet women where they were in their journeys. A <a href="https://www.youtube.com/watch?v=Yp5yhELqTqI&amp;t=12s" target="_blank" rel="noopener noreferrer">session hosted by the Kashf Foundation</a> noted that despite the progress prompted by the pandemic, the digital divide is a nuanced issue that merits attention. Affordability to broadband is perhaps the next frontier, particularly when women don’t always have full control of household income or phone ownership.
<h3>We need to focus on climate adaptation; prioritizing mitigation is not enough.</h3>
In his keynote, USAID’s <a href="https://www.youtube.com/watch?v=_hUipQztGXs" target="_blank" rel="noopener noreferrer">Songabae Lee</a> provided a realistic and sobering view of the limitations of development finance, noting that mobilizing capital is the current priority at the global level. Recognizing that private sector capital is best geared toward mitigation, while adaptation still requires grant funding, Lee urges the audience to take advantage of what’s currently open rather than beating on a closed door. The open door is to start by leveraging capital for mitigation and then work to advocate for and shift attention to adaptation.

A <a href="https://www.youtube.com/watch?v=IyUlwUPPY40" target="_blank" rel="noopener noreferrer">session hosted by BFA Global</a> on the business case for climate resilience adopts a more optimistic lens, where investors start recognizing the need to move faster toward adaptation. The session delved into the experiences of multilateral development banks (MDBs) in financing climate initiatives that can be leveraged for earlier-stage ventures, highlighted the creation of the <a href="https://gca.org/news/collaborating-to-accelerate-investment-in-climate-adaptation-and-resilience/" target="_blank" rel="noopener noreferrer">adaptation and resilience collaboration</a> with 18 organizations, and the importance of data and measurement to help move this agenda forward. The urgency of scaling climate adaptation finance was also highlighted in a <a href="https://www.youtube.com/watch?v=2qENaGgm_4k&amp;t=1s" target="_blank" rel="noopener noreferrer">session</a> organized by CFI, where panelists from SEWA, FSD Mozambique, and UNHCR unequivocally emphasized the threats and income shocks low-income communities and refugees were exposed to in the absence of solutions tailored to support adaptation and resilience building at the community level.

My colleagues will go deeper into some of these messages in the blogs to follow in this series. If you are interested in revisiting the recordings, all sessions from FIW 2022 are available online. Check out the full playlist <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">here</a>.

For curated session lists by topic, please see the links below for the playlists we’ve developed thus far.
<ul>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_7YYIjKT10xi4v5vjOKbuLl" target="_blank" rel="noopener noreferrer">Women’s financial inclusion</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY" target="_blank" rel="noopener noreferrer">Consumer protection</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_434ImijU6wxmZro4JHG7vu" target="_blank" rel="noopener noreferrer">Climate and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5l8T1UH24TIm7H-EM7gydP" target="_blank" rel="noopener noreferrer">Micro and small enterprises</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5Mn-Gm3O2hgxyaSo9ajB7a" target="_blank" rel="noopener noreferrer">Digital assets and digital currencies</a></li>
 	<li><a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">Developed markets and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4yq2Ugx050YBIt4wwN5rMs" target="_blank" rel="noopener noreferrer">Impact measurement</a></li>
</ul>

End-of-Year Reflections

A woman's world changes when payments are designed to suit her needs, digitized, and directed into her own account. During the pandemic, however, women were often excluded from receiving humanitarian cash transfers because of a lack of access to basic identification documents. Humanitarian organizations have become key advocates to allow functional IDS – ration cards, refugee ID cards, cards provided by cash transfer programs from organizations like World Food Programme (WFP) – to be recognized as proof of identity. The ability to register a bank or mobile money account has enabled access to humanitarian payments for millions.

This report highlights the benefits of having an ID, the barriers for women in obtaining an ID, and how we can leverage cash transfers to facilitate women's access.

&nbsp;

This resource was developed in partnership with the World Food Programme (WFP) and the Bill &amp; Melinda Gates Foundation.

Bridging the Gap: How Humanitarian Cash Transfers Can Facilitate Women’s Access to IDs

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

Global Findex 2021: Growth, Stagnation, and (Relative) Decline in Global Financial Inclusion

Nearly two billion people across the globe lack access to formal financial services and approximately 90 percent of these people live in developing countries. They are excluded mainly due to four predominant barriers preventing accessibility:
<ul>
 	<li>Living in rural areas</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Reduced access to digital technology </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Distrust in banks </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Lack of financial and digital literacy.
</li>
</ul>
Over the last four years, Comic Relief and Jersey Overseas Aid have been working together to tackle financial exclusion to make sure no one gets left behind. In 2017, Comic Relief and Jersey Overseas Aid launched a joint program, <a href="https://www.joa.je/branching-out-with-comic-relief/" target="_blank" rel="noopener noreferrer">Branching Out: Financial Inclusion at the Margins</a>, that supports eight organizations through 19 different grants working towards financial inclusion in Zambia, Rwanda, and Sierra Leone. Since the launch of the program, hundreds of savings groups have been created, helping more than 124,000 people gain practical tools to better plan for the future, achieve long-term goals, and prepare for emergencies. Things were looking up.

Then the unexpected occurred in early 2020. COVID-19 presented – and still presents – a real danger to those who were already at the margins of society. 
<blockquote>The challenges created by COVID-19 had a catalytic effect on accelerating FSPs' shift to digital delivery of financial services.</blockquote>
In light of the pandemic, the Branching Out program commissioned a study, <a href="https://res.torontocentre.org/guidedocs/Resilient%20and%20Inclusive%20Financial%20Services%20Delivery%20During%20COVID-19.pdf" target="_blank" rel="noopener noreferrer">Resilient and Inclusive Financial Services Delivery During COVID-19,</a> through the Toronto Centre. The study examines crucial lessons learned in responding to the pandemic in 2020-21. The program interviewed organizations striving to support vulnerable people to gain access to financial services during this trying time to prevent vital progress from being undone.

The study revealed two major findings:
<ul>
 	<li>Digitalization is key for resilience.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="11" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">Providing practical tools and guidance to financial services is needed now more than ever.</li>
</ul>
The report also shows that the challenges created by COVID-19 had a catalytic effect on accelerating financial service providers’ (FSPs) shift to digital delivery of financial services. When face-to-face service delivery was significantly reduced due to COVID-19 health protocols, resilient FSPs and countries (those experiencing little to no contraction in business) were those that were able to implement new measures to reduce in-person contact.

The table below illustrates the changes in delivery channels used by FSPs. The y-axis indicates the percentage of FSPs surveyed (the total respondents also included a smaller number of supervisors and associations). Respondents are based in Zambia, Rwanda, and Sierra Leone.
<h4 style="text-align: center;"><span class="NormalTextRun SCXW151714652 BCX0" data-ccp-charstyle="normaltextrun" data-ccp-charstyle-defn="{&quot;ObjectId&quot;:&quot;e1c145c7-e2cb-47f2-9ba6-6c688a134605|117&quot;,&quot;ClassId&quot;:1073872969,&quot;Properties&quot;:[134233614,&quot;true&quot;,201340122,&quot;1&quot;,469775450,&quot;normaltextrun&quot;,469778129,&quot;normaltextrun&quot;,469778324,&quot;Default Paragraph Font&quot;]}">Percentage of FSP Respondents Using the Delivery Channel Type<span class="EOP SCXW151714652 BCX0" data-ccp-props="{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:2,&quot;335551620&quot;:2,&quot;335559740&quot;:240}"> </h4>
<img class="wp-image-43599 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/12/Screen-Shot-2021-12-07-at-2.04.01-PM.png" alt="" width="965" height="480" />
(Credit: Toronto Centre)
The uptake of digitalization in each of the countries we surveyed was slow before the pandemic. This could be due to the barriers individuals face, such as:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Limited access to the technology needed for digital access, especially for women and those in rural areas</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">The level of digital literacy, low before COVID-19 in all three countries, presented a barrier for some groups, especially for women and rural populations</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Issues of trust and concerns around data privacy and transparency were hindrances to quick adoption of digital delivery channels.</li>
</ul>
<blockquote class="pullquote--right">Progress of digitalization and infrastructure at the country level seemed to influence which delivery channels were emphasized during the pandemic.</blockquote>
During the pandemic, progress of digitalization and infrastructure at the country level seemed to influence which delivery channels were emphasized. For example, FSPs in Zambia saw a rise in usage of mobile banking services from 26 percent pre-pandemic to 36 percent during the pandemic. In addition to this, Zambia FSPs used agents more to navigate the social distancing restrictions and to reach localized communities – as it was deemed more effective than bank branches.

In Rwanda, the uptake of mobile banking before the pandemic was similar to that of Zambia, though Rwandan usage was bolstered by government efforts towards creating a “cashless society,” which further promoted non-face-to-face services. Rwanda FSPs, therefore, focused their efforts on mobile and internet banking.

In Sierra Leone, internet banking rose from 7 percent to 17 percent during the pandemic – the largest increase seen in the report. However, because the country had faced similar challenges during the outbreak of Ebola, FSPs also managed to maintain a high level of face-to-face delivery, due to having the existing infrastructure to adhere to COVID-19 restrictions, such as social distancing and strict health and safety protocols. The experience that health authorities in Sierra Leone gained from the Ebola outbreak helped them prepare for COVID-19 even when little information was available.
<h2>What Does the Digitalization of Financial Services Mean for Those at Risk of Financial Exclusion?</h2>
The report found that in many cases the digitalization of financial services, accompanied by greater digital literacy and accessibility, has been a promising development in inclusive finance. Consumer associations revealed that one of the greatest impacts of this transition has been in access to repayment modalities which would otherwise have been impossible and could affect customer access to future credit as well as FSPs’ willingness to lend to affected groups.
<blockquote class="pullquote--left">There is a real danger that more people could be left behind if these barriers aren’t addressed.</blockquote>
However, while digitalization can be seen as a natural progression that has been bolstered by the conditions created by the pandemic, barriers persist, including a lack of internet access and low financial and digital literacy. There is a real danger that more people could be left behind if these aren’t addressed. 
<h2>Steps Needed for Continued Progress in Financial Inclusion</h2>
Comic Relief and Jersey Overseas Aid identified the following steps FSPs and regulatory bodies should take to continue making progress in financial inclusion:
<ul>
 	<li>Support the shift to increased digitalization to ensure it expands the reach of financial inclusion.  </li>
 	<li>Increase communication at the policy level and share risk assessments with FSPs to allow for proper planning and strategy.
</li>
 	<li>Set supervisory expectations for FSPs, through best practice guidelines, on the enhanced risk management measures that FSPs should take in ramping up non-face-to-face delivery. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="5" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Enhance information-gathering for effective supervision of these delivery channels as FSPs try out innovative approaches.  </li>
</ul>
Comic Relief and Jersey Overseas Aid’s aim has always been to ensure that those in the most rural communities don’t get left behind when it comes to accessing financial services. As a result of <a href="https://res.torontocentre.org/guidedocs/Resilient%20and%20Inclusive%20Financial%20Services%20Delivery%20During%20COVID-19.pdf" target="_blank" rel="noopener noreferrer">this report</a> and its findings, the Branching Out program will continue its vital work to support more people to understand and take control of their finances, get back on their feet, and plan for their future.

Furthering Digitalization’s Potential for Financial Inclusion: Insights from Sub-Saharan FSPs, Supervisors, and Associations

Discriminatory norms and practices are embedded in the financial system and, even when policies, regulations, and delivery channels are thought to be gender-neutral, it is difficult for women -- particularly low-income and marginalized populations -- to navigate available products and services. As a result, progress toward women’s economic empowerment has stagnated.

Financial inclusion must intentionally understand women’s needs and constraints. Designing financial products and services without a thorough <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">examination of social norms</a> that impact women’s behaviors may in fact reinforce restrictive gender roles and permanently relegate women to the informal sector.

Although gender-aware financial products and services are increasingly available, they often stop at “workarounds” that, while meeting women’s immediate needs, still fail to provide holistic solutions to address and transform the norms that limit women’s broader economic livelihoods.
<h2>Gender Aware or Gender Siloed Services and Policies?</h2>
The microfinance sector – despite good intentions– often is designed to accommodate, rather than address, discriminatory norms.
<blockquote class="pullquote--left">The microfinance sector often is designed to accommodate, rather than address, discriminatory norms.</blockquote>
Women’s mobility is one discriminatory norm that the sector historically has accommodated and even perpetuated. Often, women face limited mobility due to unequal care responsibilities, such as caring for children or other family members, or the cultural expectation that she be accompanied by a male relative when leaving her home. Because of these expectations, it is difficult for women to engage in income-generating activities in public spaces, ultimately increasing the appeal for local microcredit or savings groups. Group lending was designed to account for women’s mobility and collateral constraints by building an accountability mechanism out of the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X04000750" target="_blank" rel="noopener noreferrer">social and community consequences of non-repayment</a>.

Furthermore, although many women have gained access to financial services through MFIs and savings groups, policies that restrict women’s ability to own property or accumulate assets <a href="https://wbl.worldbank.org/content/dam/sites/wbl/documents/2021/02/WBL2021_ENG_v2.pdf" target="_blank" rel="noopener noreferrer">remain intact</a> in many markets. MFIs and savings groups often operate in parallel to the formal economy with less or separate regulatory oversight and, as a result, women are not afforded the same legal protections.

Evaluations of the impact of microcredit have been mixed, many showing <a href="https://www.cgap.org/sites/default/files/publications/2019_07_FocusNote_Emerging_Evidence.pdf" target="_blank" rel="noopener noreferrer">inconclusive</a> impact on women’s economic empowerment <a href="https://econpapers.repec.org/article/eeewdevel/v_3a36_3ay_3a2008_3ai_3a12_3ap_3a2620-2642.htm" target="_blank" rel="noopener noreferrer">outcomes</a>. While many factors are at play, the lack of a norms-transformative approach undercuts empowerment gains. Creating parallel, informal systems for women’s financial activities can be an unintended consequence of gender-aware financial inclusion efforts that try to go around rather than address restrictive gender norms.
<h2>Cementing Digital Divides</h2>
Similarly, digital financial services (DFS) risk bypassing social norms and implementing workarounds in order to merely reach women, without focusing on the outcome of women’s economic empowerment in a digital era.

At first glance, DFS presents a remedy to women’s financial exclusion, making financial services <a href="https://www.icrw.org/wp-content/uploads/2017/11/Gender-and-digital-financial-inclusion.pdf" target="_blank" rel="noopener noreferrer">more accessible</a> by reducing the time and risk of traveling to a physical branch to make transfers or payments, and by enhancing the privacy of transactions. In Niger, women that received digital transfers <a href="https://sites.tufts.edu/jennyaker/files/2010/02/Zap_it_to_Me_26feb2012.pdf" target="_blank" rel="noopener noreferrer">increased their control over household resources</a> compared to those that received cash, since the digital transfer was less observable by their spouses and family members. And a recent study in Zambia revealed that women were willing to <a href="https://www.nottingham.ac.uk/cedex/news/papers/2020-06.aspx" target="_blank" rel="noopener noreferrer">give up household income to maintain privacy</a> over earnings from their husbands.

However, while these are promising mechanisms, there are several assumptions at play. One assumption is that women users wholly own and operate their phones. For digital transactions to enhance control through privacy, women must have access to their own phone or a phone that is not monitored or controlled by other family members. In developing economies, women are still eight percent less likely than men to own a phone (the gap is even larger for smartphone ownership) and <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">20 percent less likely to use mobile internet</a> than men. Sharing phones is also common for many low-income women, and gendered expectations can <a href="http://epod.cid.harvard.edu/sites/default/files/2018-10/A_Tough_Call.pdf" target="_blank" rel="noopener noreferrer">constrain the duration and purpose of women’s phone use</a>.

Additionally, enabling factors such as <a href="https://www.centerforfinancialinclusion.org/building-womens-financial-capability-a-path-toward-transformation">digital capability</a>, confidence in using digital financial services or platforms, and trust in technology also have significant gender gaps. Few providers are designing appropriate digital onramps that account for specific skill levels and the different needs of women.
<blockquote class="pullquote--right">Digital platforms must consider how gender norms are baked into the design of these systems.</blockquote>
Digital platforms – whether social, e-commerce, or gig work -- also must consider how gender norms can act as barriers to entry or are baked into the design of these systems. An examination of <a href="https://theswaddle.com/apps-like-uber-ola-make-driving-a-flexible-profession-why-cant-more-women-tap-into-it/" target="_blank" rel="noopener noreferrer">ride-hailing services in India</a> shows that women are unable to meet the incentives set by the platform and earn less for not being able to drive at peak times or complete longer journeys or airport pickups, often due to care responsibilities or safety concerns.

In examining the nuances of broader digital inclusion for women, we see yet again that social norms are at play. Lack of education or gender roles that limit women to caretakers rather than earners or entrepreneurs can limit women’s use of mobile internet even if they have access to a phone in their household. Neither DFS nor <a href="https://www.cgap.org/blog/forging-her-own-path-women-and-informal-online-commerce" target="_blank" rel="noopener noreferrer">platforms and social or e-commerce</a> can successfully include women without first addressing norms.
<h2>Opportunities to Shift Directions</h2>
The same challenges women face in accessing and using traditional financial services are equally present for digital financial inclusion. Rather than build a system that accommodates the barriers and constraints faced by women, we have an opportunity to make DFS catalyze women’s financial inclusion and economic empowerment.
<blockquote class="pullquote--left">We have an opportunity to make DFS catalyze women’s financial inclusion and economic empowerment.</blockquote>
Donors have the opportunity to invest in innovative research and test solutions that build women’s financial and digital capability or <a href="https://www.careevaluations.org/evaluation/digital-subwallets-and-household-dialogues/" target="_blank" rel="noopener noreferrer">build solutions specifically for women</a>. Governments can guide financial service providers and offer technical support and research capabilities to improve products and services for women. Market facilitators, including international non-governmental organizations like CARE and FSD Africa, can broker partnerships between community-based organizations and providers to create better informed and equitable systems and processes.

We can do more than create gender-aware financial products and services. By embedding women’s needs and understanding their constraints, particularly discriminatory gender norms, we can advance women’s inclusion by creating a financial system that works for them by design.

Workarounds Don’t Work: Gender-Aware Financial Services Must Help Address Discriminatory Norms

The Economist Intelligence Unit’s <a href="https://centerforfinancialinclusion.org/global-microscope-2019/">Global Microscope</a> is a robust data set that offers a deep dive into the policies and regulations that are considered important for financial inclusion in 55 countries. The indicators are derived from an expert-based consultation process to identify the most likely policy and regulatory conditions under which financial access and usage is likely to thrive.

The Microscope’s approach is to bundle the indicators into an index so that performance across countries can be compared easily. It also allows the EIU to simplify a set of complex conditions in which no one indicator can sufficiently signal a country’s environment for financial inclusion. Using an index approach to aggregate the indicators has both positive and negative implications. On the positive side, it simplifies a complex set of variables into a score than can easily be understood: a low score is bad and a high score is good. An index also creates a certain level of competition among countries that are covered in the index. Like with other indices that use this approach, such as <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf">Doing Business</a>, many countries put resources behind improving their score year in and year out. The ranking serves as motivation for action.
<blockquote>An index allows the EIU to simplify complex conditions in which no one indicator can signal the environment for financial inclusion.</blockquote>
On the other hand, there are several drawbacks with the use of indices for something as complex as the policy and regulatory environment in a country for financial inclusion. The first drawback is squaring the results with the evidence on the ground. According to the EIU’s Microscope, Colombia has the highest score, 82, in the enabling policy and infrastructure index, yet Colombia’s access figures from the <a href="https://globalfindex.worldbank.org/">2017 Global Findex</a> shows that the country’s financial access is only 46 percent for adults over 15. This is significantly lower than the global average of 69 percent and lower than the 63 percent average in developing countries. A country like Bangladesh is ranked very low in the Microscope (38), but has higher access figures than Colombia, reaching 50 percent in the latest Findex round.

So why is there such a disconnect between a country’s ranking in the Microscope with its access and usage data from Findex? It shouldn’t surprise anyone that the reality on the ground can lag behind regulations. For example, while the US has equal-rights legislation on the books, experience among minorities in the US confirms frequent and continued discrimination in practice. So it isn’t a surprise that even though some countries have favorable policy and regulatory conditions for financial inclusion, there may be cultural issues or social norms that aren’t in line with the regulatory change and may require time and additional effort to change. Change may also require enforcement or supervisory capacity to ensure that there’s compliance with policies and regulations.

But perhaps more importantly, policies and regulations are only part of the financial system, and financial service providers and the users of the financial system have many other influences on their choices and behaviors. If we’re only looking at the policy and regulatory viewpoint, we’re not seeing the full picture of what drives outcomes on the ground.
<blockquote>If we’re only looking at the policy and regulatory viewpoint, we’re not seeing the full picture of what drives outcomes on the ground.</blockquote>
The second drawback is lack of clarity on which policies actually matter. The Microscope tracks five domains with a total of 69 indicators. Each of these indicators has an equal weight in the score. But is it true that each indicator is equally likely to drive inclusion? The Microscope doesn’t do enough to help countries prioritize from among the 69 indicators it tracks. For example, in the new indicators on women’s financial inclusion, variables such as “non-discriminatory access to IDs” and “differences in access to a mobile phone between men and women” are included as indicators. How important is one or the other towards women’s financial inclusion? When everything is important, nothing is. The index may be inadvertently contributing to either paralysis or misguided prioritization by policy makers.
<blockquote>The Microscope doesn’t do enough to help countries prioritize from among its 69 indicators.</blockquote>
Regulators and policy makers are looking for evidence on what works to drive financial inclusion. This is where there is potential for researchers and the EIU to take this important data set and do additional analysis to identify which of the indicators correlate with results on the ground. The <a href="http://documents.worldbank.org/curated/en/926401524803880673/pdf/125804-PUB-REPLACEMENT-PUBLIC.pdf">World Bank’s Women, Business and the Law 2018</a> publication did a deep dive on financial inclusion which did this type of analysis linked to women’s financial inclusion, for example.

While correlations have their own set of limitations, they are nonetheless a step closer to helping us unpack which policies and regulations are priorities to drive inclusion. In the next round of the Global Microscope, we’d like to see less emphasis on rankings and much more effort devoted to helping policy makers understand which policies and regulations should be prioritized.

What’s in a Score? Reconciling Financial Access and Usage With the Microscope Rankings

What counts as financial inclusion? Reporting the number of active accounts in a country is a common way to measure progress in financial inclusion. But as access to, and uptake of, accounts increases, we need more powerful indicators to help us understand the dynamics of how people use financial services, and digital financial services in particular.

At <a href="https://i2ifacility.org/">insight2impact</a>, we’ve spent the last four years exploring these questions and have tested our measurement frameworks and emergent indicators on both demand-side survey data and transactional data in Mexico and Nigeria. We also went further by linking the data sets for the same person to analyze a more complete picture of people’s financial lives, both within and outside of formal financial services. What we found was both curious and transformative for our thinking on how we measure financial inclusion.
<h2>Frequency as a Means to Track Digitization</h2>
The first step to financial inclusion is <a href="http://www.worldbank.org/en/topic/financialinclusion/overview">having access to a transactional account</a>. If I choose to take up an account, I’m able to store money or send and receive payments, but if I use my account very rarely, am I still financially included? Maybe I receive a payment and immediately withdraw it all at an ATM. What if all the transactions I need to do can only be done in cash?

Analyzing frequency of usage gives us an indication of how populations are (or aren’t) switching to digital channels for transacting. We analyzed bank transaction data in Mexico to better understand financial service usage patterns. Debit-card usage by customers was relatively high, with 78 percent using their cards weekly, but 60 percent of monthly card usage occurred at ATMs to withdraw cash, not for purchases via POS or online. The frequency of ATM vs non-ATM card usage paints a more realistic picture of digitization in Mexico. It’s a picture of incomplete digitization, with cash remaining central for most people.

Secondly, we linked the transaction data to survey responses to compare people’s online vs offline transaction behavior. This revealed that most people still use cash for their regular expenses, even if they have a bank account. The graph below shows both banked and unbanked people’s cash usage for regular expenses such as rent and bills, and daily expenses such as groceries and transport. Cash was ubiquitous, regardless of gender, socio-economic segment or account ownership. By only counting the accounts, we would miss the scale of non-digital financial lives.

Counting More than Accounts: What Can Frequency of Transactions Tell Us About Financial Inclusion?

How is the world – and the World Bank – doing on its campaign for <a href="http://ufa.worldbank.org/">Universal Financial Access</a> (UFA) by 2020?

With 2020 just a short year away, this question will be asked wherever financial inclusion is discussed at the World Bank Spring Meetings this week. Only so much can change in a year, so it is just a small leap to imagine the likely situation in 2020. During last year’s meetings, the World Bank cited a figure of 69 percent of adults in the world having accounts, according to the 2017 Global Findex data collection round. <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/09/FI_Hype_vs_Reality_Deconstructing_2017_Findex_Results-08032018-1.pdf">Our own look at the 2017 Findex numbers</a>, which removes fully dormant accounts, shows that only 48 percent of adults in low- and middle-income countries had accounts that they actually used.

We think this is the right number to focus on: it sets aside the many useless accounts that inflate the rolls and avoids the overly rosy picture that emerges from including high income countries where account access is no longer a relevant challenge. Based on what we’ve seen in the past several years, we could guesstimate that by 2020 active account access in the developing world will be somewhere between 50 and 60 percent of adults, still well short of universal. We won’t know the 2020 result until 2021, when the Findex 2020 data is published. The Findex team is gearing up now for that massive data collection and analysis effort.

The World Bank could declare victory, recognizing the enormous increases in account access that have occurred, and expressing confidence in the momentum around financial inclusion across the world, which will surely result in universal access within the next decade.

Meanwhile, the World Bank and its partners are focusing on upholding their institutional commitments to the UFA campaign. The bank pledged to contribute to the inclusion of one billion people. Many others have also made numeric pledges, including VISA, Mastercard, and GSMA (500 million people each), large mass-market-oriented financial institutions (Ant Financial, China, 100 million; Equity Bank, Kenya, 50 million; and Bank Mandiri, Indonesia, 50 million) and associations like the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/partnership-for-responsible-financial-inclusion/">Partnership for Responsible Financial Inclusion</a> (70 million) and the <a href="https://www.wsbi-esbg.org/About-us">World Savings Bank Institute</a> (400 million). I am aware first hand of the efforts of some of these organizations to take their pledges seriously, putting in both resources and high-level attention. This week we hope to see some of these partners report on the progress of their efforts.

With the departure of its former president, Jim Kim, who championed the UFA effort personally, one wonders how much attention the World Bank will continue to pay to financial inclusion. The new chief, David Malpass, begins his term with this weeks’ meetings. Malpass, a former Bear Stearns economist and Trump campaign advisor, has been <a href="https://foreignpolicy.com/2019/02/05/will-david-malpass-run-the-world-bank-or-ruin-it/">highly critical</a> of the World Bank. Understandably, World Bank watchers are speculating intensely over whether he will pursue his critiques of the bank, though in the lead-up to his arrival he softened his prior calls for the bank to end lending to upper middle-income countries like China and Brazil and affirmed the focus of the bank on elimination of extreme poverty and on economic growth. This sounds compatible with maintaining a focus on financial inclusion, though staff inside the Trump foreign policy world have reported that the administration does not often use the words “inclusion” or “inclusive”, preferring “market development.”
<blockquote>Unless the new president takes the World Bank in a radically different direction, it's hard to see his arrival affecting the UFA campaign greatly.</blockquote>
Nevertheless, unless the new president takes the World Bank in a radically different direction, it's hard to see his arrival affecting the UFA campaign greatly. Perhaps it will not receive the same spotlight it has enjoyed in recent years, but work will undoubtedly continue off stage. As bank staff members I recently spoke with noted, financial inclusion is embedded in many departments of the bank, with dozens if not hundreds of professionals working with individual countries to make progress every day. Barring a drastic turn in the World Bank’s mission, this will continue, regardless of who takes the helm.

The Outlook for Universal Financial Access in 2020

Evelyn Stark

Mayada El-Zoghbi

Nina Holle

Leora Klapper

Pia  Roman Tayag

Lucciana Alvarez Ruiz

Edoardo Totolo

José Morell-Ducós

Alex Kessler

Isabelle Carboni

Elisabeth Rhyne

Greta Bull

Sonja Kelly

Rwanda

Sierra Leone

Sub-Saharan Africa

Zambia

Bangladesh

Colombia

Latin America and The Caribbean

South Asia

Mexico

Nigeria

East Asia and Pacific

Europe and Central Asia

Middle East and North Africa

Access Usage Gap

Delivery Channels

Digital Transformation

Enabling Environment

Financial Capability

Policy, Regulation and Government Initiatives

Underserved Groups

Women

Appropriate Product Design and Delivery

Consumer Protection

Entrepreneurs of MSMEs

Mobile Banking

Payments

Financial Health

Resilience

Responsible Digital Finance

Transparency

Trends

Challenges and Crises

Digital Financial Services

Data Analytics

Financial Technology

Personal Financial Management

Financial Inclusion Strategy

Persons With Disabilities

Credit

Digital Credit

Saving

Blog Post

Report

Webinar

Case Study

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

This post originally appeared on the <a href="https://www.accion.org/">Accion</a> website.

The Global Findex is crucial for pushing forward financial inclusion. With data from 150 countries, we can see progress toward bringing financial tools to everyone and even understand how people are using those tools. The driving force behind this research is Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank Group. Because of her exceptional leadership in advancing financial inclusion, Accion has chosen Leora as their <a href="https://www.accion.org/leora-klapper-to-receive-accions-edward-w-claugus-award-for-leadership-and-innovation-in-financial-inclusion">Edward W. Claugus Award honoree</a>. We took the opportunity to ask her thoughts on the Global <a href="https://www.centerforfinancialinclusion.org/new-global-findex-sixty-nine-percent-of-global-population-is-banked">Findex</a>, the financial inclusion gender gap, and how we can continue to build a world where all people have financial services that make a meaningful impact in their lives. CFI participated in a panel discussion with Klapper (pictured above) after the bestowing of the Claugus  Award. CFI's Beth Rhyne and Deb Drake participated, along with the Economist Intelligence Unit's Monica Ballesteros Aria.


Q: Accion has selected you for our Claugus Award based on your contributions to driving financial inclusion. Are there moments of your career that make you particularly proud of the work you’ve done in financial inclusion?

A: I’m excited that the Global Findex has become a valued resource in the world of financial inclusion research and policy. Several places wrote previews before we released the latest Findex round, and then followed up with reviews after the data was published. People were treating the Findex like a Beyonce album drop. It was a little crazy but very encouraging. But seriously, we’re grateful that the Bill &amp; Melinda Gates Foundation had the vision to fund the Findex data collection and appreciate our great partnership with Gallup. It’s been a privilege to contribute to the policy dialogue with the credibility of data backing us up. Reporting to policymakers the number of millions of unbanked women receiving their welfare payments in cash or the number of government workers with bank accounts, still receiving their wages in cash, is a game-changer.

I’m proud that we moved the needle in highlighting the importance of collecting data not only on household heads, usually men, but on every adult member of the household — including women, young adults, and older adults. I’ve been on my soapbox since the first round of Findex data was published ranting about the importance for women to have their own account. I hope shining light on the gender gap in the use of financial services has helped more women get a safe place to keep their money.

Q: In your time at the World Bank, how have you seen financial inclusion’s role in eliminating poverty evolve?

A: When I started working at the World Bank, the overall thinking in development was that countries should generally focus on getting the macro picture “right” — through privatization, deregulation, and so on — so growth would take off and poverty would drop. Now there’s a greater focus on individuals and more recognition that financial services can help people better meet their goals in health, education, entrepreneurship, and so on, thereby driving <a href="http://SDG_Compendium_Digital_Financial_Inclusion_September_2018">development outcomes</a> overall. Each year, we get more Findex queries from a broader range of World Bank colleagues who see financial inclusion as relevant to what they do.

The focus of financial inclusion research has also shifted during my time at the World Bank. At first, it was almost exclusively about microcredit. Then new data sources, including financial diaries, showed us that even poor families that have small, unpredictable incomes lead complicated financial lives — but they often use informal, expensive, and riskier financial products. Now there are tons of studies on savings, payments, agricultural insurance, financial consumer protections, and more. It’s hard to keep up with all the new papers — which is a good problem to have.

[caption id="attachment_33558" align="aligncenter" width="1000"]<img class="size-full wp-image-33558" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/11/award-klapper-pose.jpg" alt="" width="1000" height="516" /> (L to R) Jim Mercadante of host Reed Smith, EIU's Monica Ballesteros Aria, Deb Drake, Leora Klapper, Beth Rhyne, Accion CEO Michael Schlein, Accion Board Director Tara Kenny, and Accion CDO Brian Clancy at the Accion Claugus Forum[/caption]

Q: What part of the most recent Findex results do you think has resonated most strongly with the industry and why?

A: I think our data on digital financial services has drawn the most attention. One of the great things about financial inclusion is that it appeals to so many constituencies. We attract the development crowd, of course, but also the tech geeks, big data aficionados, policy technocrats, women’s empowerment champions, financial industry titans, bitcoin zealots, blockchain evangelists, and many others. Our data is routinely cited in both the major international media and regional media across the developing world. People are looking at progress and setbacks in neighboring countries and seeing how they can apply lessons to their own countries.

Q: If we could do one thing to promote usage of financial accounts, what would it be?

A: Can I cheat and mention two? First, I would love to see wider digital payment acceptance among merchants in emerging countries. Second, the development advocate in me yearns for cheaper ways to send remittances. Every year migrants send home more money to the developing world than governments spend in aid. That money provides vital support for people in poor countries. But remittances are still crazily expensive: On average, they <a href="https://remittanceprices.worldbank.org/sites/default/files/rpw_report_sept_2018.pdf">cost</a> just beneath 7 percent of the amount being sent, and banks charge the most on average, at more than 10 percent. Our colleagues estimate that reducing costs by 5 percentage points could save up to $16 billion annually — money that could go to development needs.

Q: As we look beyond access to see whether financial tools are being used and improving people’s lives, what are some of the most important metrics to look at?

A: I’m quite excited about the research showing the impact of having an account on household spending decisions — like studies in Africa and Asia showing that offering woman an account leads to greater spending on healthcare, education, and nutritious food. In Bangladesh, we’re finding that paying women into an account increases their savings, decreases their impulse spending, and gives them greater say on how household income is spent. In other words, having an account gives a woman greater privacy, security, and control over her money — which gives her a more comfortable seat at the table.

The link between financial inclusion and productivity has been on my mind lately. We’re starting new work with tea pluckers and asking the question: If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive? Will she be less likely to quit her job? I think this is an exciting new avenue of research to motivate the private sector to partner in our efforts to expand financial inclusion and digital payments.
<blockquote>If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive?</blockquote>
A lot of financial inclusion analysts have raised the importance of financial health and how to measure it. I’m not yet sure what the best metrics are, but lots of smart people at IPA JPAL and elsewhere are thinking about that, and the results should be exciting.

Q: The latest data shows that the gender gap in financial inclusion persists. In your research, have you seen any particularly effective strategies for closing this gap?

A: India’s experience shows that policies can help close the gender gap. Three years ago, men were 20 percentage points more likely than women to have an account. Today, the gender gap has fallen to 6 percentage points, thanks to a government push to expand account ownership by drawing on biometric identification. That progress comes with a lot of caveats. Nearly half of accounts in India are dormant, and women are more likely than men to have a dormant account. But at least they have greater access to this basic financial service — and the potential is huge.

Q: As mobile phone usage continues to grow, how do we ensure technology can live up to its promise for driving financial inclusion?

A: Mobile phones can be tools for delivering fair, affordable financial services to the poor, and they can also be tools for defrauding the poor. The difference between the two has a lot to do with consumer protections. Recent CGAP <a href="http://www.cgap.org/research/publication/digital-credit-revolution-insights-borrowers-kenya-and-tanzania">research</a> on digital credit suggests that weak oversight has allowed companies to push predatory loans through mobile phones, leading to defaults and indebtedness. Policymakers need to make sure that regulations keep pace with digital innovation to ensure things like that don’t happen. Otherwise, people will distrust digital financial services, and development opportunities will be lost.

We also need to make sure that women have access to the technology and aren’t being left behind at the starting gate. As we increasingly leverage mobile phones and the internet to deliver financial services, we need to watch the 10 percentage point gender gap in mobile phone ownership across developing countries, and much larger in some regions.

Q: How will we know when financial inclusion has succeeded?

A: Ultimately, I’d like to see a situation where everyone has access to affordable and transparent financial services which they can use to meet their needs — whether for saving, investing, moving money, or hedging against risk. But I’m not sure if we’ll ever get to a situation where we can just declare victory and go home. Development progress is always uneven, and there will also be groups of people excluded from appropriate financial services. I think we’ll be working on financial inclusion for a while.

Findex Lead Discusses Gender Gap, Account Usage, and More

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essay and webinar series creates a roadmap to take financial inclusion into the next decade.

You are invited to join CFI on Wednesday, October 24, at 10:00 am EDT for this third virtual event , featuring <a href="https://www.centerforfinancialinclusion.org/bio/shameran-abed">Shameran Abed</a>, Director of BRAC Microfinance and Ultra Poor Programs, on the digital and gender divide. Our Getting Inclusion Right series features insights from:
<ul>
 	<li>Simone di Castri and Ariadne Plaitakis of Bankable Frontier Associates on getting policies right and Buhle Goslar, Chief Customer Officer of Jumo, on getting credit right (held Thursday, October 18 at 10am EDT)</li>
 	<li>Garance Wattez-Richard of AXA on getting insurance right and Elisabeth Rhyne, Managing Director of CFI, on getting inclusion right from the customer’s perspective (now available to listen to <a href="https://www.centerforfinancialinclusion.org/webinar-getting-inclusion-right">here</a>)</li>
</ul>
Over the coming weeks, you will also have a chance to read or hear from Tim Adams of the Institute of International Finance on why financial inclusion matters, and Mark Pickens of Visa on payments. We will also look at the ecosystem with Chris Skinner of the Finanser, data privacy with Katharine Kemp of the University of New South Wales, and the role of investors with Jonathan Whittle of Quona Capital.

Together, these leaders lay out a “true North” for the financial inclusion sector that is both visionary and practical as we work to create tangible benefits for the financially excluded and underserved.

We hope you’ll tune into these live conversations with leading figures as they discuss and respond to your questions about key challenges and opportunities for Getting Inclusion Right—we look forward to having you <a href="https://register.gotowebinar.com/register/7243419170722974721">join us</a>!

Webinar:  Bridging the Digital Gender Gap in Financial Inclusion

<h1>Why Benchmarking Matters</h1>
<h5>HOW DO WE KNOW WE'RE BEING EFFECTIVE?</h5>
Achieving financial inclusion requires continuously evaluating how well the industry is progressing and how far we still have to go. Benchmarking activities help us measure progress and identify priorities for research and action. To reach 3 billion people who are left out of or poorly served by the financial sector, a full understanding of progress and setbacks is essential.

&nbsp;
<h1>Approach</h1>
<h5>INDEPENDENT AND CRITICAL PERSPECTIVE</h5>
We are committed to keeping the industry focused on financial inclusion that benefits consumers. CFI assesses public industry data, like the <a href="https://globalfindex.worldbank.org/">Global Findex</a> and the <a href="https://news.gallup.com/reports/233399/gallup-global-financial-health-study-2018.aspx">Gallup Global Financial Health Study</a> with an independent and critical eye, shining a spotlight on where action is most needed. We also participate in joint benchmarking exercises with partners to examine specific aspects of the sector, like the regulatory environment or risk perceptions. In all our benchmarking and research endeavors, we are keen to reality test prevailing narratives, ask tough questions and shine a light on overlooked trends.

&nbsp;
<h1>Results</h1>
<h5>WHAT HAVE WE ACHIEVED?</h5>
<h2>Benchmarking the Enabling Environment</h2>
Together with partners, CFI sponsors and contributes to the Global Microscope—a project led by the Economist Intelligence Unit. Intended to benchmark the enabling environment for promoting financial inclusion, the Microscope assesses the institutional and regulatory ecosystem based on selected indicators across over 50 developing economies. We have helped the Microscope evolve from a study of microfinance in Latin America and the Caribbean into a global study of the broader financial inclusion ecosystem. Additionally, we also look at new indicators on the enabling environment for digital financial services.

With 2018 marking its eleventh edition, the Microscope is one of the few benchmarking tools in the financial inclusion sector that spans a decade or more. Regulators across the world use its scoring and rankings as yardsticks for their own performance. Investors also consult the study when considering investment strategies. Many countries are cognizant of where they stand in the global rankings and are motivated to improve.

Benchmarking Financial Inclusion Progress

This post was originally published on the <a href="http://www.cgap.org/blog/financial-inclusion-glass-half-empty-or-half-full-pt-2">CGAP Blog</a> and is re-published here with permission.

As I stated in my <a href="http://cfi-blog.org/2018/08/09/financial-inclusion-is-the-glass-half-empty-or-half-full-part-1/">previous blog</a> on the debate over the latest <a href="https://globalfindex.worldbank.org/">Findex</a>, we continue to make important progress toward the goal of universal financial access. Progress is uneven and the timeline uncertain, but we have a pretty clear idea of what to do. Unfortunately, the picture is less clear on the important question of usage, and CFI is right to raise high dormancy rates as a concern in its report, “<a href="https://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/996-financial-inclusion-hype-vs-reality">Financial Inclusion: Hype vs Reality</a>.” As with the access data, however, disaggregating the figures on account usage reveals differences across countries that offer more encouraging signals than the aggregated figures, albeit with one very important caveat.

Findex shows we still have a lot of work to do on usage: 25 percent of account holders in the developing world haven’t used their accounts for a single deposit or withdrawal in the past year (as shorthand, I will refer to these as dormant accounts). Part of the challenge in the Findex data, however, is that backsliding or slow progress in a few big markets is drowning out progress in the rest of the world. The primary reason is India, which is skewing the account dormancy figures significantly because of its large population and extraordinarily high levels of inactivity — at 48 percent of account holders in 2017. If we take India out of the equation, the percentage of inactive account holders in the developing world comes down from 25 to 16 percent.

If, however, we look at the change in dormancy rates for individual countries, rather than the aggregate, a more nuanced picture emerges. Findex collected data on dormant account holders for 87 low- and middle-income countries in 2014 and 2017. Of these countries, 46 saw their dormancy rates go down by an unweighted average of 14 percentage points, 12 saw their dormancy rates go up by an average of 10 percentage points, and 29 had no discernable change (as the difference was within the 3.5 percent margin of error in either direction).

<img class="size-full wp-image-32066 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/gretabullchangesininactivityrates-1.png" alt="" width="632" height="318" />

&nbsp;

But here’s where the caveat comes in. Findex’s dormancy and usage numbers are not quite what they seem. To ensure greater accuracy in capturing mobile money accounts, respondents are not asked if they have a mobile money account; they are asked if they have used a mobile money account in the past year. In other words, Findex counts only active mobile money accounts. For financial institution accounts, respondents are asked if they have an account and then whether they have used it in the past year, so a clear distinction can be made between active and inactive accounts (see the Findex glossary for details). The net effect is to understate the number of account holders added in Sub-Saharan Africa and to overstate the activity rates for these accounts.

Given the prevalence of mobile money in Sub-Saharan Africa, this has a significant impact on Findex’s activity rates for the region. A back-of-the-envelope exercise using GSMA’s supply-side data (which correlate closely with those of Findex), helps illuminate the degree to which this affects Africa’s dormancy data. According to GSMA, there were 338 million registered mobile money accounts in Sub-Saharan Africa in 2017. If we add these accounts to the 195 million financial institution accounts from Findex, we can infer that there are roughly 533 million registered accounts in the region (the number of account holders will be lower because of people holding both mobile money and financial institution accounts, which Findex accounts for). This means that roughly 232 million accounts have been added since the last Findex, not the 72 million that you would get from doing the math with the Findex data.

That’s potentially good news, but with this increase in number of accounts comes an increase in the overall inactivity rate in Africa. Roughly 64 percent (216 million) of the mobile money accounts reported by GSMA were considered inactive. If we combine the GSMA and Findex data on inactivity, the 2017 dormancy rate in Sub-Saharan Africa shifts from 13 percent of account holders (in Findex) to 49 percent of accounts (combining the two data sets). This adjusted dormancy rate is now roughly equivalent to dormancy rates in India and represents a significant increase from the inferred rate in 2014 of 41 percent (again, based on accounts, not account holders). This adds approximately 129 million dormant accounts back into the global total, raising our developing country dormancy rate sharply back in the direction of the 25 percent mark.

<img class="size-full wp-image-32067 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/greta-bull-financial-accounts-dormancy-rates-1.png" alt="" width="629" height="255" />

The point of this exercise is not to provide an exact estimate of dormancy rates in Africa, but to demonstrate that we have a pretty serious usage challenge and that it is concentrated in India and Sub-Saharan Africa, where the denominator of new accounts has grown the most. Not coincidentally, they are also the two regions with the highest rates of extreme poverty. India increased access to accounts from 53 to 80 percent of adults from 2014 to 2017, adding 290 million account holders. In Africa, we have inferred that 232 million accounts were added in the same period. If the Africa data are normalized for inactivity, then India and Africa together would account for roughly 77 percent of all people accounts added between 2014 and 2017. But a large portion of them are inactive. It seems intuitive that, with the addition of accounts at this pace, there might be a delay between opening an account and using it, but we will have to wait until the next Findex to properly test this assumption.

CFI is right to point out dormancy as a problem, but it missed a big part of the challenge in its analysis: high dormancy in Sub-Saharan Africa, which barely registers in Findex, and the fact that mobile money accounts are measured differently means it is difficult to compare inactivity rates across regions. But I am not sure this means we should ignore the registered account numbers entirely, as CFI suggests. They are important because they show progress in giving people access to accounts. But activity rates matter, too, and the clear challenge now is to stimulate usage of those accounts in Africa and South Asia. This is a more complex undertaking because it involves behavior changes for new account holders and the testing of different value propositions for providers — and both of these challenges take time to address. But there are hints about how this can be done. GSMA, in its latest <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2018/05/GSMA_2017_State_of_the_Industry_Report_on_Mobile_Money_Full_Report.pdf">State of the Industry Report on Mobile Money</a>, focused on four factors that are closely associated with high activity rates: a robust agent network, enabling mobile money regulation, a digital account-based model and providers serving as integrated platforms for the wider payments ecosystem. It provides the example of MTN in Ghana, where activity rates went from 7 percent in June 2012 to 73 percent in June 2017. Understanding the factors that created the change at MTN in Ghana will provide valuable insights into what it will take to move inactivity rates, which have been stubbornly sticky in the mobile money industry since 2011.

Beyond overall account dormancy, the CFI report raises interesting questions about important use cases that deserve brief examination — savings, credit and payments.

On savings, it is disappointing that the number of survey respondents in developing countries who reported saving in the past year came down from 53 percent in 2014 to 43 percent in 2017. Unfortunately, Findex doesn’t tell us why this might be happening. While customers not perceiving the value of their accounts is one possible explanation, factors like inflation, the availability of alternatives, economic stagnation or other disruptions could be affecting the amount of money people are able to save. What is encouraging is that more of those who did save used a financial institution: this figure grew from 42 percent in 2014 to 47 percent in 2017.

On credit, I am more sanguine for a couple of reasons. First, we can’t draw any real conclusions from the Findex data. For developing countries, the number of respondents who reported borrowing in the previous year dropped from 47 to 44 percent, which is just outside the margin of error for the sample size and not a particularly strong signal. And Findex may or may not capture data on credit provided via mobile money accounts, depending on whether people consider this a loan, so it is potentially missing some digital credit borrowing. But more to the point, credit is a financial product where more isn’t necessarily better. The main constraint to accessing credit shouldn’t be whether someone has an account. It should be whether they can afford it.

Digital payments are the real story in Findex, and it is no surprise that this number is going up. Many accounts in places like India and Africa were established expressly to facilitate payments. In the developing world, the proportion of respondents who reported sending or receiving a digital payment in the past year went from 32 to 44 percent, and this growth was consistent across all markets. It makes sense. Just think about the way you use your bank account: you might save, and you may or may not have a loan for a house or a car, but you almost certainly make regular payments from your account. A mobile or low-value bank account in many ways mimics a current account. It is a store of value from which payments can be sent and received. You don’t expect to get a return on it, but you might use it to help establish a credit rating.

Payments seem to me to be a foundational product, especially for people with very little money, who may not have enough to save consistently and may not be creditworthy. Comparing payments usage in developing countries to high-income OECD countries puts this issue in perspective. In high-income OECD countries, 92 percent of respondents reported making or receiving a digital payment in the past year. The figure for low income countries was only 26 percent, a gap of 66 percentage points. The usage gaps between OECD countries and low-income countries was less pronounced for both savings and credit (45 and 49 percentage points, respectively). This is primarily because credit and savings products were not as widely used in rich countries as payments: only 56 percent of account holders reported saving in a financial institution in the past year, and only 20 percent borrowed from a financial institution (although this rose to 57 percent when credit cards were counted). The concept of “universal usage” is best applied to payments services rather than the other financial services where customers’ needs are more varied.

<img class="size-full wp-image-32068 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/greta-bull-usage-gap-oecd-and-low-income-1.png" alt="" width="617" height="365" />

For me, the jury is still out on usage. We have seen massive growth in accounts in the past three years, but dormancy rates have remained stubbornly steady, particularly in markets with rapid account growth. The trick will now be to activate all of those newly opened accounts, and we will have to wait until the 2020 Findex (and perhaps beyond) to understand whether we are simply dealing with a time lag or whether we have a bigger problem on account usage. What I would expect to see is a gradual improvement in activity rates for accounts in India and Sub-Saharan Africa, and payments will be key to that story. Payments are a gateway use case. Over time, they can create a foundation for other use cases to emerge through improved data on customer activity and by creating trust in formal financial services.

But we should not necessarily expect to see other use cases grow in proportion to payments, not least because it takes time to build data trails and the level of trust required for more habitual use of financial services. Nor should we expect it to happen quickly. Financial inclusion, as opposed to just financial access, is and has always been a long-term endeavor.

&nbsp;

Financial Inclusion: Is the Glass Half Empty or Half Full? (Part 2)

This post originally appeared on <a href="https://nextbillion.net/is-financial-inclusion-stalling-the-2017-findex-results/">Next Billion's blog</a> and is reposted here with permission.

<img class=" size-full wp-image-25657 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/06/cfi_2017findex_final-cover_fig.png" alt="geographic distribution of 3 billion people without active accounts, 2017" width="2300" height="2325" />
About 3 billion people in the world either have no account or have an account that sits unused. The countries with the largest number of financially excluded people are also the highest population countries: India and China. This picture has changed little in the past three years.
The Global Financial Inclusion Database (Findex) is a survey of the financial habits of adults in 144 countries with data from 2011, 2014 and now (2017). Governments, foundations, big financial companies and fintechs alike rely on the Findex to understand how people are using (or not using) financial services. It is the best available yardstick through which we measure global progress toward financial inclusion.
<h3>A Misleading Findex Headline</h3>
Unfortunately – as we share in our recent report, <a href="http://www.centerforfinancialinclusion.org/storage/FI_Hype_vs_Reality_Deconstructing_2017_Findex_Results.pdf" target="_blank" rel="noopener">Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results</a> – while we see a few bright spots, the overall results in the latest survey are decidedly less exciting than they were in 2014. The World Bank, which houses the Findex, announced the 2017 results with the headline that 69 percent of the world’s adults now have bank or mobile money accounts – which represents good progress toward its target of “<a href="http://www.worldbank.org/en/topic/financialinclusion/brief/achieving-universal-financial-access-by-2020" target="_blank" rel="noopener">Universal Financial Access” by 2020</a>. We agree that connecting hundreds of millions of people to the formal financial system is worth celebrating: If nothing else, it serves as heartening evidence that a sustained movement involving the private and public sectors in nearly every country can meet an important global challenge.

But that headline is deeply misleading, for two reasons. First, and somewhat embarrassingly, many new accounts are simply dormant. The accounts of a fifth of reported account-holders have had zero activity in over a year – no deposits and no withdrawals. If a small shop owner has a bank account but does not use it, the account is valueless to her and a burden to the financial service provider that invested in technology, staff and infrastructure to serve her. It’s wasteful.

<img class=" size-full wp-image-25655 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/06/cfi_2017findex_final-fig03.png" alt="Graph of percentage of account-holding population with an inactive account, 2017" width="1370" height="1746" />
In 29 countries, more than one in five people have an account but have not used it in the past year. Inactivity has increased in the past few years.

India accounts for the greatest number of these dormant accounts. In 2014, Prime Minister Modi launched the Pradhan Mantri Jan Dhan Yojana (Prime Minister’s People’s Money Scheme), which required banks to open millions of new accounts. The Guinness Book of World Records recognized the effort when <a href="http://www.guinnessworldrecords.com/news/2015/1/india-makes-financial-world-record-as-millions-open-new-bank-accounts" target="_blank" rel="noopener">a staggering 18 million bank accounts</a> were opened in a single week. This campaign and many related Indian government efforts show up clearly in some of the Findex results. Bank account ownership in India more than doubled since Findex began in 2011. But more than a third of those accounts appear to be idle, even using the very soft definition of “active” as one transaction in a year.
<h3>Sobering Financial Inclusion Stats in Emerging and Frontier Markets</h3>
Beyond the positive headlines, the data raise some issues: First, focusing only on active accounts, the number to remember is that across the developing world, only 48 percent of adults have accounts, whether at a financial institution or mobile money provider. But the second problem with the World Bank’s positive Findex spin is even more important than slow growth in active accounts. Savings and credit are at least as important as accounts when it comes to indicators of financial inclusion. But little or no progress is apparent in either. More precisely, since 2014, in the developing world as a whole, savings is down and credit is flat.

<img class=" size-full wp-image-25656 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/06/cfi_2017findex_final-fig06.png" alt="Graph of saving, borrowing, and digital payments, 2011-2017 (developing countries)" width="2300" height="1446" />

Credit is flat, and savings is declining, even as digital payments make significant gains.

Take savings, a stepping stone to better financial health. If access to accounts is making a difference in the lives of the newly included, this should show up in more people saving. Instead, the fraction of people who saved through a formal account – 20 percent – was slightly lower than the 22 percent reported in 2014. The segment saving for retirement fell to a very low 15 percent in 2017, worrisome indeed as the global population ages.

On the credit side, the number of people borrowing from a financial institution increased very slightly in the past three years. However, the data do not provide evidence that the new and much-lauded forms of digitally delivered and big-data-based credit have substantially boosted access. Fintech innovations using algorithms, machine learning and artificial intelligence for credit scoring may revolutionize access to small loans, but as of 2017, either they are simply transforming the way credit is provided to existing groups, or they have not yet achieved transformative scale.

The lack of progress on savings and credit could help explain why the Findex responses to the question on financial resilience – whether a person can quickly come up with money needed for an emergency – also failed to show improvement.
<h3>Looking on the Bright Side</h3>
Findex results offer one important bright spot: digital payments. We are witnessing an enormous transformation in the infrastructure of banking, as more people use digital payments to send and receive money and to buy goods and services. In the developing world, 44 percent of the people surveyed had used digital payments in the past year, up solidly from 32 percent in 2014. All kinds of digital use cases are increasing, from online purchases and direct deposit of salaries to paying utility bills through an account. There is a clear and convincing trend – even if there is also a long way to go before the developing world reaches the degree of digitization common in high-income countries, where 91 percent have made such payments.

The emerging digital infrastructure may one day support the financial well-being of most of the world’s people. But we’re not there yet. The latest Findex results set the stage for the financial inclusion community to reflect and reconsider its assumptions so that everyone working in this field can better ensure that access to accounts and payments translates into active use and benefit for the 3 billion financially underserved people around the world.

&nbsp;

&nbsp;

Is Financial Inclusion Stalling? The 2017 Findex Results Raise Several Red Flags

<div class="getty embed image">

Financial inclusion momentum has slowed in the past three years, the 2017 Global Findex revealed. The financial inclusion community may wish to reflect on these results, recalibrate expectations, and then re-engage.

In a <a href="https://centerforfinancialinclusion.org/financial-inclusion-hype-vs-reality-deconstructing-the-2017-findex-results-2/" target="_blank" rel="noopener noreferrer">new report</a>, the Center for Financial Inclusion at Accion journeys through the 2017 Global Findex data recently released by the World Bank, which assess progress toward financial inclusion on the basis of a 150-country study conducted by Gallup. We examined the 2017 Findex data from our own perspective, and although we found some good news, there are also some concerning trends.

In recent years, the headline for financial inclusion has been the percentage of adults in the world with accounts (either financial institution or mobile-based). That number has grown since 2014 to 69 percent – good news. But we believe it is more relevant, if less encouraging, to focus on the number of adults with active accounts, that is, accounts they have used at least once in the past year. That number is 55 percent, representing a net gain of 280 million active accounts between 2014 and 2017, a much more modest gain than the nearly 700 million total new accounts added in the previous three years (2011-2014).

Looking specifically at the developing world and correcting for account dormancy, only 48 percent of adults in developing countries have active accounts – disappointingly, participation remains below half. Overall, account growth has slowed, and at the same time the access-usage gap has grown.

Moreover, these new accounts have not resulted in greater availability of credit or greater incidence of savings. Savings has dropped slightly in many countries in the past three years – and that includes both saving in any form and saving in financial institutions. In developing countries as a whole, about 20 percent of the adult population saves in financial institutions. Credit is essentially flat at 15 percent of the adult population, which may be a surprise for some who have watched with anticipation the rise of fintech-enabled digital credit using alternative data and algorithms. These new forms of credit will need to scale a great deal more before they can make a significant difference in the big picture of financial inclusion.

Financial inclusion promises to provide people with more options and tools to manage their day-to-day funds, respond to emergencies, and seize opportunities. The Findex survey asked whether people believe they can come up with funds in case of emergency. In developing countries, however, responses were slightly less positive in 2017 than in 2014. Asked whether they could come up with 1/20 GNI per capita in a month, only about 50 percent of people in developing countries said it was possible—down 8 percentage points from the 2014 survey.

In short, a full suite of quality financial services that supports financial well-being is still a distant dream for more than half of the developing world.

The bright spot, however, involves greater use of digital payments. Many more people in the developing world have been involved in a digital transaction in the past year than ever before. In developing countries, an additional 12 percent of adults reported having made a digital payment in the last year. Of wage recipients in developing countries, about half received wages into an account in the past year, and 21 percent of people in developing countries purchase things and pay bills using mobile phones or the internet. Mobile accounts are connecting people to financial services all across Africa and in a handful of other countries, and at the same time in other regions, more people are using mobile phones to access their financial institution accounts.

Despite the growth of digital payments, the Findex 2017 results overall are sobering. Financial inclusion, while further away than expected, is still an achievable goal. It requires considerable thought and engagement from all industry stakeholders to ensure that inclusion will create active usage and meaningful change in the lives of consumers. We hope the financial inclusion community will use the 2017 results to engage in a serious conversation about how financial inclusion initiatives are affecting usage, products and financial well-being, and then to re-engage with eyes open as we continue pursuing the important tasks at hand.

For more analysis on these and other areas of financial inclusion, read the new report, <a href="https://centerforfinancialinclusion.org/financial-inclusion-hype-vs-reality-deconstructing-the-2017-findex-results-2/" target="_blank" rel="noopener noreferrer">Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results</a>.

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Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results

The World Bank's Global Findex is the most comprehensive database on how people access and use financial services in 150 countries across the world. In Financial Inclusion Hype vs. Reality, we examine the Findex data from our own perspective, seeking to deconstruct what it's telling us about financial inclusion progress.

This report spotlights key financial inclusion indicators, including account usage, borrowing, saving and resilience, among others, and takes an in-depth look at six countries that help tell the story of financial inclusion progress around the world. In short, we find that after correcting for account dormancy in developing countries, account growth has slowed, the access-usage gap is widening, credit is flat and savings is declining. A bright spot, however, is the proliferation in the use of digital payments.

The Findex analysis is sobering, but financial inclusion, while further away than expected, is still an achievable goal. We hope the financial inclusion community will use the 2017 Findex results to reconsider how financial inclusion initiatives are affecting usage, products and financial well-being, and to re-engage with eyes wide open as we continue pursuing the important tasks at hand.

After great anticipation, three years’ worth to be exact, the 2017 Global Findex Database was officially released this morning. The Global Findex is the authoritative data source on global progress toward financial inclusion. Released every three years, the Global Findex surveys more than 150,000 adults in 144 economies to better understand how people access and use financial services to make payments, and also to save and borrow.

Since the 2014 Findex, the percent of the global population that has a bank account with a financial institution or mobile money service rose from 62 percent to 69 percent. Five-hundred and fifteen million individuals opened an account for the first time over the past three years, reducing the unbanked population to 1.7 billion adults worldwide. However, the new data also reveal critical shortcomings in progress. For instance, the financial inclusion gender gap didn’t improve. Globally, women remain 7 percent less likely to own a bank account than men.

Here are a few of the 2017 Global Findex’s high-level statistics:
<ul>
 	<li>Half of the 1.7 billion unbanked individuals worldwide live in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan.</li>
 	<li>In higher-income countries, 94 percent of adults have a bank account, while in developing countries this figure is 63 percent.</li>
 	<li>The proportion of individuals globally who send or receive digital payments increased from 42 percent to 52 percent; this figure is 76 percent for those who have a bank account.</li>
 	<li>In Sub-Saharan Africa, the proportion of individuals with a mobile money account nearly doubled to 21 percent, while bank account ownership increased by only 4 percent.</li>
 	<li>Globally, roughly two-thirds of those who are unbanked have a mobile phone, but Sub-Saharan Africa is the only region where mobile money penetration is greater than 10 percent.</li>
 	<li>In addition to the persistent gender gap, the difference in bank account ownership rates between the rich and the poor has not improved, with those living in the wealthiest 60 percent of households in the poorest 40 percent of economies 13 percentage points more likely to have a bank account.</li>
 	<li>The accounts of one-fifth of banked individuals worldwide are inactive.</li>
 	<li>The Findex’s financial resiliency question revealed that individuals in higher-income economies would be far more likely to be able to come up with emergency funds than those in developing economies.</li>
</ul>
For more findings, you can access the <a href="http://globalfindex.worldbank.org/">2017 Global Findex Database report</a>, <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/29510/211259ov.pdf">an abridged overview report</a>, and <a href="http://globalfindex.worldbank.org/sites/globalfindex/files/2018-04/Global%20Findex%20database_0.xlsx">the full dataset</a>.

In several weeks, the CFI will release a brief distilling our key takeaways from the 2017 Global Findex.

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New Global Findex: 69 Percent of Global Population Is Banked

Access Usage Gap

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Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results

Financial Inclusion Hype vs. Reality: Deconstructing the 2017 Findex Results

New Global Findex: 69 Percent of Global Population Is Banked