Financial Inclusion Week (FIW) 2022 took place in October during an important time for climate discussions. In 2022, there were deadly floods in Pakistan and Nigeria, tropical storms in Central America, and an ongoing drought in the Horn of Africa – to name only a handful of devastating climate-related disasters which have created a backdrop of urgency to address climate change. In early November, COP27 focused the world’s attention on the urgent need for climate action. In December, CFI hosted a <a href="https://globalrff.org/december-2022" target="_blank" rel="noopener noreferrer">Responsible Finance Forum (RFF) convening</a> focused on the intersection of climate risks and consumer protection. And in the last quarter of 2022, CFI was also in the process of finalizing our multi-year strategy for climate work.

While the urgency of climate change is not new, what has changed in the past year is our understanding of what financial services can – and can’t – do to help low-income and vulnerable people respond to various climatic risks.

The inclusive finance sector has stepped up to this challenge and 2022 marked an important year. The European Microfinance Platform’s Green Inclusive and Climate Smart Finance Action Group (GICSF AG) published its updated <a href="https://www.e-mfp.eu/sites/default/files/action-groups/Green_Index_3.0_conceptual_framework.pdf" target="_blank" rel="noopener noreferrer">Green Index</a>. The <a href="https://www.cifaralliance.org/" target="_blank" rel="noopener noreferrer">CIFAR Alliance</a> has continued to build an industry agenda for the role of digital finance in climate resilience (including a session at FIW on <a href="https://www.youtube.com/watch?v=IyUlwUPPY40." target="_blank" rel="noopener noreferrer">democratizing access to carbon markets</a>). CGAP integrated climate into their <a href="https://www.cgap.org/blog/era-urgent-climate-risk-does-financial-inclusion-matter" target="_blank" rel="noopener noreferrer">new strategy</a> and they ended the year by publishing a <a href="https://www.findevgateway.org/slide-deck/2022/12/cgap-strengthening-climate-resilience-adaptation-through-financial-services" target="_blank" rel="noopener noreferrer">new taxonomy</a> of climate-responsive and climate-supportive financial products. At COP27, AFI published its <a href="https://www.afi-global.org/publications/roadmap-for-inclusive-green-finance-implementation/" target="_blank" rel="noopener noreferrer">Inclusive Green Finance Roadmap</a>, and inclusive green finance is a key priority for UNSGSA Queen Máxima as well as many other development actors.

The importance and urgency of climate change was clear to attendees joining the many FIW 2022 sessions that covered climate and green issues. In <a href="https://www.youtube.com/watch?v=2qENaGgm_4k&amp;t=548s" target="_blank" rel="noopener noreferrer">CFI’s global plenary</a>, we brought together a diverse group of stakeholders to discuss how the impacts of climate change are complex and highly variable. For example, fishing populations in the Philippines, poor urban women in Gujarat, and refugees in Uganda are all negatively impacted by climate change, and panelists described how financial services need to be able to support them all.
<blockquote>Fishing populations in the Philippines, poor urban women in Gujarat, and refugees in Uganda are all negatively impacted by climate change, and FIW 2022 panelists described how financial services need to be able to support them all.</blockquote>
Among the FIW sessions related to climate, there was general agreement that the current state of financial systems is not going to be enough to meet the needs of climate-vulnerable populations, and that we need more innovation and better systems for responsible investment. Catalyst Fund chaired a fascinating panel on the <a href="https://www.youtube.com/watch?v=3XFplsvWs1I" target="_blank" rel="noopener noreferrer">business case for investing in climate resilience ventures</a>. One of my favorite sessions of the week was chaired by David Porteous, exploring whether <a href="https://www.youtube.com/watch?v=D2wQFh8SCZ4" target="_blank" rel="noopener noreferrer">ESG frameworks were for purpose</a> from the perspective of financial institutions in developing nations. And looking ahead to 2023, the organizers of <a href="https://www.ada-microfinance.org/en/sam-2023/home" target="_blank" rel="noopener noreferrer">SAM 2023</a> explored <a href="https://www.youtube.com/watch?v=1PvZtMqYlnI" target="_blank" rel="noopener noreferrer">the links between inclusive finance, agriculture, and food security in Africa</a>.
<blockquote class="pullquote--right">We are hoping that a lot of the promise of 2022 turns into action and investment where it is needed most.</blockquote>
So, what about 2023? At CFI, we have already started on our climate work and recently released our <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-and-vulnerable-people-respond-to-climate-change">latest research on green inclusive finance</a> and the ways it can impact low-income and vulnerable populations. We aim to build on this and go deeper into the role of inclusive financial services in responding to specific climate risks, like extreme heat or flooding. We are hoping that a lot of the promise of 2022, such as the commitment to funding for loss and damage at COP27, turns into action and that we can turn some of our ideas and concepts into real world action and investment where it is needed most.

FIW Recap: The Pressing Agenda of Climate Change and Financial Services

As you drive into Quetzaltenango, the largest city in Guatemala’s western highlands, you pass a large statue. The migrant depicted in "Homage to the Migrant of Salcaja"<em> </em>(the name of the local municipality) stands 30 meters high, wears a backpack, and faces north. The statue pays tribute to the thousands of Guatemalan migrants who, despite the risks and the costs, have left this corner of the country to seek opportunities elsewhere.

The number of international migrants from Guatemala tripled from nearly <a href="https://www.un.org/development/desa/pd/content/international-migrant-stock" target="_blank" rel="noopener noreferrer">462,000 to almost 1.4 million people</a> between 1995 and 2020. A recent survey shows that in 2021, <a href="http://migration.mit.edu/" target="_blank" rel="noopener noreferrer">43 percent of Guatemalan households expressed the desire to migrate</a>, five times the percentage in 2019. Among the reasons for this – food insecurity, unemployment, and desire to send remittances home – one that underlines and exacerbates these issues is climate change.
<blockquote class="pullquote--right">People who are already marginalized tend to experience a greater impact from climate-related events.</blockquote>
The effects of climate change are not felt equally, and people who are already marginalized – such as women, low-income populations living in rural areas, indigenous groups, and smallholder farmers – tend to experience a greater impact from climate-related events.  The impact of climate change is growing and Guatemala is particularly affected because of its dependence on agriculture. In 2018, a <a href="https://www.wfpusa.org/news-release/erratic-weather-patterns-in-the-central-american-dry-corridor-leave-1-4-million-people-in-urgent-need-of-food-assistance/" target="_blank" rel="noopener noreferrer">delay in the rainy season in the Central American Dry Corridor</a> – spanning El Salvador, Guatemala, Honduras, and Nicaragua – damaged 70 percent of subsistence farmers’ first harvest and ruined 50 percent of their second harvest. <a href="https://publications.iadb.org/publications/spanish/document/BIDeconomics_Guatemala_Crecer_m%C3%A1s_y_para_todos_es_es.pdf" target="_blank" rel="noopener noreferrer">Agriculture employs more than 70 percent of the rural population in Guatemala</a>, and because of increased temperatures and shifts in the rainy season, thousands have been forced to leave their homes as they are unable to feed their families.

Guatemalan migrants are predominantly from rural areas – the same areas that have been highly impacted by climate-related disasters. The share of international migrants from <a href="https://blogs.worldbank.org/jobs/migrating-better-life-why-better-jobs-are-key-helping-youth-prosper-home-guatemala" target="_blank" rel="noopener noreferrer">rural areas in Guatemala is twice that of urban areas</a>, and most migrants from Guatemala to the U.S. are from the western highlands, motivated to leave because of natural disasters such as the droughts of 2014, 2015, and 2018. This is true across the region: evidence from Mexico suggests that rising temperatures and weather shocks associated with <a href="https://academic.oup.com/ej/article/128/608/230/5068979" target="_blank" rel="noopener noreferrer">climate change increased the likelihood of internal migration</a> from rural areas to urban areas as well as international migration.

The populations most impacted by climate change also tend to be financially vulnerable: 60 percent of rural Guatemalans say they would be unable to come up with emergency funds. Only <a href="https://publications.iadb.org/publications/spanish/document/BIDeconomics_Guatemala_Crecer_m%C3%A1s_y_para_todos_es_es.pdf" target="_blank" rel="noopener noreferrer">10 percent of the loans</a> offered by Guatemalan financial institutions are dedicated to agriculture and just a fraction of that is invested in adaptive practices to respond to climate change. So how can financial services work better for these climate-vulnerable populations?
<h1><strong>Remittances Help Families Make Ends Meet But Are Not the Full Answer</strong></h1>
Between 2000 and 2020, <a href="https://databank.worldbank.org/reports.aspx?source=2&amp;series=BX.TRF.PWKR.DT.GD.ZS&amp;country=GTM" target="_blank" rel="noopener noreferrer">remittances exploded from 3 to 14.7 percent of GDP</a> in Guatemala and represented seven times the average in Latin America and the Caribbean in 2020. Three in 10 Guatemalan households <a href="http://migration.mit.edu/assets/mpi-wfp-mit_migration-motivations-costs_final.pdf" target="_blank" rel="noopener noreferrer">receive remittances with an average monthly amount of $350</a>, according to the most recent data published in 2020. Recipients are <a href="https://publications.iadb.org/publications/spanish/document/La-poblaci%C3%B3n-receptora-de-remesas-en-Guatemala-Un-an%C3%A1lisis-de-sus-caracter%C3%ADsticas-socioecon%C3%B3micas.pdf" target="_blank" rel="noopener noreferrer">disproportionately rural</a> and most are located in the north and western highlands of Guatemala.

[caption id="attachment_44509" align="aligncenter" width="8000"]<img class="wp-image-44509 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/05/Personal-remittances-graph-1_Mesa-de-trabajo-1.jpg" alt="" width="8000" height="4500" /> Data: World Bank. DataBank, World Development Indicators (2021)[/caption]

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Remittances from migrants are a critical source of income for many families in Guatemala and are relied on to cover food expenses (57 percent), education (10 percent), or household construction (8 percent). Among the <a href="https://publications.iadb.org/publications/spanish/document/La-poblaci%C3%B3n-receptora-de-remesas-en-Guatemala-Un-an%C3%A1lisis-de-sus-caracter%C3%ADsticas-socioecon%C3%B3micas.pdf" target="_blank" rel="noopener noreferrer">remittance recipients in Guatemala</a>, a large share are women (69 percent), live in or are at risk of poverty (88 percent), and have attained primary education or less (77 percent). However, only <a href="https://www.cepal.org/sites/default/files/a2020-07-22-ude-strategies-inversion-remfam-cv-guat-eng.pdf" target="_blank" rel="noopener noreferrer">3 percent of recipients use remittances to invest</a>.

In a country where the <a href="https://publications.iadb.org/publications/english/document/LAC-Post-COVID-19-Challenges-and-Opportunities-for-Central-America-Haiti-Mexico-Panama-and-the-Dominican-Republic.pdf" target="_blank" rel="noopener noreferrer">losses in agriculture due to natural disasters were around $2.4 billion</a> between 1992 and 2011, and where migrants <a href="http://migration.mit.edu/" target="_blank" rel="noopener noreferrer">spent $1.2 billion dollars to travel</a> to the U.S. in 2021, there are opportunities to encourage Guatemalans to use their remittances to invest in forward-looking practices that build resilience to climate change. Financial services are needed that channel remitted funds into investments in sustainable agriculture and support forest-based livelihoods, while putting women at the center given they are the primary recipients of remittances. While remittances can be a key tool for resilience and risk management, <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">there is also a role for them to support adaptation,</a> by linking diaspora funds to investments in climate-smart agriculture and sustainable rural enterprises.
<blockquote>Remittances can support adaptation as well as resilience and risk management.</blockquote>
In Guatemala, <a href="https://www.dgrv.coop/es/project/guatemala-2/" target="_blank" rel="noopener noreferrer">325 out of more than 1000 cooperatives provide savings and credit services</a> and focus on MSMEs, particularly small-holders. We believe financial services have a key role to play in supporting resilience, through products like insurance and informal social support systems that build on Guatemala’s strong cooperative movement. Financial services also play a critical role in underpinning a just transition for rural populations. One example of this is the Guatemalan government’s social protection initiatives <a href="https://www.inab.gob.gt/index.php/component/content/article/112-servicios/183-pinpep?Itemid=437" target="_blank" rel="noopener noreferrer">Pinpep</a> and <a href="https://www.inab.gob.gt/images/servicios/probosque/foliares/foliar-sitios-sagrados.pdf" target="_blank" rel="noopener noreferrer">Probosque</a> schemes that provide financial incentives for tree-planting and reforestation. CFI is working with The Nature Conservancy and other partners to explore these issues.<strong> </strong>
<h1><strong>Imagining a Constructive Role for Financial Services</strong></h1>
As far as we know, the <em>Migrant of Salcajá </em>isn’t a real person but rather a representation of the thousands who have made the treacherous journey. To make the trip north, the migrant is likely to have informally borrowed up to $17,500 to pay smugglers, known in Guatemala as “coyotes”. If the migrant reaches the U.S. border and finds work, it can take time to find the funds to repay the debt. And if the migrant doesn’t reach the U.S., they remain indebted. The combination of lack of economic opportunity and predatory moneylending can lead to dangerous debt traps.
<blockquote class="pullquote--left">Imagine if the money flowing back from the current generation of migrants could change the incentives for the next generation, encouraging them to stay and build climate-resilient livelihoods.</blockquote>
But imagine if Guatemala’s financial system offered the services needed to invest in resilient rural livelihoods, to adapt to changing climatic conditions, and to diversify into new opportunities in agro-processing. Imagine if the money flowing back from the current generation of migrants could change the incentives for the next generation, encouraging them to stay and build climate-resilient livelihoods. There is a long way to go, but it is increasingly clear that improving the way that financial services work for Guatemala’s smallholders has a role to play in the dual challenges of climate change and migration.

Rural, Poor, and Pressured by Climate Change: Migration and Financial Inclusion in Guatemala’s Western Highlands

A savings product helps pastoralists in northern Kenya smooth consumption during periods of drought. A microloan allows a woman in northern India to buy heat-reflecting white paint for her roof. An insurance policy from a fintech in Mali offers smallholder farmers insurance against increasingly unpredictable rainfall. A mobile money-linked clean cookstove allows a family in Zambia to reduce their exposure to harmful smoke. A combination of remittances and savings helps a family in Bangladesh that was forced to migrate due to rising sea levels.

While each of these is an example of a link between financial services and an aspect of climate change, there's little else tying them together. Customers are urban and rural. Financial service providers are old and new. Channels are analog and digital. Products relate directly and indirectly to climate change. The impacts of climate change are immediate and long-term.

But as the COP26 summit swings into action, one message is clear – climate change is going to affect everyone and in numerous ways.

When the financial sector development community talks about climate change and green finance, it tends to focus on the macro role of the financial sector in channeling investment to cleaner technologies and large-scale mitigation efforts. This is obviously critical, but what is the role of inclusive finance? How can we support the financial sector to work better for low-income people to improve their outcomes in the context of large-scale climatic risk as well as deteriorating localized environmental conditions?
<blockquote class="pullquote--right">We have mapped out a new way of thinking about green inclusive finance.</blockquote>
Putting a green lens on inclusive finance – or green inclusive finance – is one of CFI’s strategic priorities. Having studied various taxonomies at the overlap of the green economy and inclusive finance, we have mapped out a new way of thinking about green inclusive finance. These four distinct but interrelated pathways provide the framework for understanding how inclusive finance can help low-income populations prepare for and respond to climate change while improving green outcomes.
<h2>Mitigation</h2>
The poorest half of the world’s population only accounts for 10 percent of global CO2 emissions, and their carbon footprints are, in a global context, tiny. However, low-income communities are hit the hardest by climate-related disasters and environmental impacts resulting from climate change. Mitigation supports investments in cleaner technologies that can improve local environmental conditions for households and communities. For example, pay-as-you-go models for clean cookstoves can help reduce localized air pollution, and loans to build toilet facilities can reduce groundwater pollution.
<h2>Resilience</h2>
In this context, we think of resilience as the role financial services can play in low-income people’s ability to reduce their vulnerability to, and their ability to respond to, climate-related events. Index insurance, protecting people against extreme weather events, is an obvious example, but just as important is the ability to save money securely and access networks through which funds for emergency response and rebuilding can arrive. This includes everything from a social protection payment from the state to an emergency loan from a fintech to the operations of a local savings group.
<h2>Adaptation</h2>
Climate change will significantly impact the livelihoods of low-income people across the globe, and financial services are needed to help people and communities manage these changes. We often think of these changes in a rural context -- with smallholders adapting their farming practices and investing in different crops as climatic patterns shift, but urban populations will also need to adapt, for example by investing in low-cost cooling techniques for homes.
<h2>Transition</h2>
At times, climate change and deteriorating environmental conditions will fundamentally change people’s ability to sustain their current livelihoods, and financial services will help transition to new ones. This may mean investing in education and training, making long-term commitments to climate-smart agriculture, or the range of financial services need to liquidate assets in one location to start again in another.

While some of these pathways may be relatively simple to implement, others are quite complex. For example, when climate change leads to resource scarcity, which in turn causes localized conflict and hence forced migration, there may be a critical need for digitized savings and remittance services. This is also an inclusive finance solution to a climate challenge, albeit through a longer-impact pathway. These issues might seem abstract, but the World Bank estimates that the impact of climate change in reducing arable land could see over <a href="https://www.worldbank.org/en/news/press-release/2018/03/19/climate-change-could-force-over-140-million-to-migrate-within-countries-by-2050-world-bank-report" target="_blank" rel="noopener noreferrer">140 million people forced to migrate</a> within their own countries by 2050. These are some of the complex pathways that green inclusive finance will need to support.

This complexity also means that green inclusive finance will intersect with other areas of the inclusive finance landscape. The connections with smallholder agriculture and rural livelihoods are clear. The fact that <a href="https://www.un.org/en/chronicle/article/womenin-shadow-climate-change">poor women are particularly vulnerable to the impacts of climate change</a> means that green inclusive finance approaches must be gender intelligent. The fact that so many potential solutions leverage digital financial services presents both new opportunities, but also challenges (what happens if the storm that leaves people highly vulnerable also knocks out mobile money networks?).
<blockquote class="pullquote--left">For financial systems to support all four of these impact pathways, it’s going to take large-scale, systemic changes, and there is a role for all types of financial institutions.</blockquote>
For financial systems to support all four of these impact pathways, it’s going to take large-scale, systemic changes, and there is a role for all types of financial institutions. We will need to leverage the existing networks of microfinance institutions and build on community-based models, particularly to support rural transitions. Banking sectors need to become better at intermediating funds towards sustainable agriculture and cleaner technologies. New players, including fintechs, need to continue to push out the innovation frontier. Insurance companies need to incorporate more data relating to climate risks. Policymakers, investors, and donors need to support incentives and a positive enabling environment for investment, innovation, and learning in green inclusive finance.

Green inclusive finance isn’t on the agenda at COP because inclusive finance doesn’t have a huge role to play in reducing global emissions. However, it is critically important that we support low-income populations to weather the changing environments around them. What green inclusive finance can do is provide a diverse range of financial tools that can help low-income people and communities reduce their vulnerabilities and make the investments needed to improve their outcomes in the context of climate change.
<h3>Learn more about green inclusive finance at the <a href="https://financialinclusionweek.org/" target="_blank" rel="noopener noreferrer">Financial Inclusion Week</a> plenary session "<a href="https://app.swapcard.com/event/financial-inclusion-week/planning/UGxhbm5pbmdfNzEyMTM5" target="_blank" rel="noopener noreferrer">Greening Inclusive Finance</a>" on Nov. 3, 2021 and by watching the video below:</h3>

Green Inclusive Finance: A Framework for Understanding How Financial Services Can Help Low-Income People Weather Climate-Related Risks

Recently, I went searching for “chin-chin,” one of my favorite local Nigerian snacks, which was out of stock in the grocery store where I regularly shop. I went instead to a small kiosk in my neighborhood and was pleased to find it still in stock there. I noticed how this kiosk seemed about the same since I last patronized it six years ago, with no apparent evidence of expansion. When I shared my observation with the vendor, his response was “country too hard.” This got me thinking of the challenges that microenterprises continuously face, especially as they relate to accessing investment funds to grow their businesses.

Like many developing countries, Nigeria has a <a href="https://www.cbn.gov.ng/Out/2012/publications/reports/dfd/CBN-Summary Report of-Financial Inclusion in Nigeria-final.pdf" target="_blank" rel="noopener noreferrer">national financial inclusion strategy</a> (NFIS) to guide market and ecosystem actors on how to improve the lot of microenterprises such as my neighborhood kiosk. The strategy document spells out specific priority measures to be adopted in a bid to reduce credit risks and transaction costs associated with serving the most financially excluded members of society. Some of these measures include initiatives to support the expansion and reach of digital financial services, increasing agent banking networks, and promoting more channels for cashless payments.
<h2>Flaws in the National Financial Inclusion Strategy</h2>
The pace of financial inclusion remains sluggish, however. The country’s strategy has been less successful than anticipated due to several factors, including overly long intervals in assessing progress/impact of the policies adopted, use of limited progress indicators, lack of flexibility, and limited capacity for making quick adjustments to adjust to a fast-changing financial ecosystem.

Since the national strategy took effect in 2012, there has been some progress. The number of citizens with access to bank accounts and credit <a href="https://www.efina.org.ng/wp-content/uploads/2019/01/A2F-2018-Key-Findings-11_01_19.pdf" target="_blank" rel="noopener noreferrer">increased slightly</a>. But access to non-bank services has barely changed: <a href="http://sustainabledfs.lbs.edu.ng/wp-content/uploads/2021/01/SOMR 2020_compressed.pdf" target="_blank" rel="noopener noreferrer">women and rural households</a> -- and <a href="https://devbankng.com/cms/uploads/FINANCIAL INCLUSION IN A DEVELOPING COUNTRY.pdf" target="_blank" rel="noopener noreferrer">individuals located in the northwest region</a> -- are still largely excluded and face access barriers.

Moreover, the chances of meeting the national financial inclusion target of ensuring 95 percent of the country’s adult population have access to formal and/or informal financial services by 2024 are low. The current <a href="https://www.cbn.gov.ng/Out/2020/CCD/2019 Annual Report of the National Financial Inclusion Strategy Implementation.pdf" target="_blank" rel="noopener noreferrer">official figures reported by the central bank</a> show an inclusion rate of 63.2 percent, making the 2024 target less feasible at this rate. The COVID-19 pandemic has also caused some previously scheduled financial inclusion initiatives, like the recapitalization exercise for microfinance banks and insurance companies, to be delayed and has put a lot of <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/nigeria/" target="_blank" rel="noopener noreferrer">financial and economic strain on Nigerian households and small firms</a>.
<blockquote class="pullquote--right">The COVID-19 pandemic has delayed financial inclusion initiatives and strained Nigerian households and small firms.</blockquote>
Weaknesses in the NFIS reduce its effectiveness, as elaborated on in this <a href="https://www.mfw4a.org/sites/default/files/resources/a_critical_review_of_nigerias_financial_inclusion_strategy.pdf" target="_blank" rel="noopener noreferrer">review</a>. These issues tend to impair the effectiveness of interventions targeted at reducing barriers to financial inclusion. A number of these gaps -- which may be relevant to countries in similar situations -- are summed up below.
<ul>
 	<li>The NFIS was only reviewed and revised for the first time after six years. This timeline suggests that the strategy is not flexible enough, does not encourage real-time learning and adjustments, and restricts the possibility of adapting the plan quickly to suit existing needs and challenges. For instance, the initial strategy listed the use of point-of-sale (POS) terminals as a priority tool for ensuring wider and more efficient service delivery. However, given the constant advancements in technology, this particular focus plan very quickly became outdated and less efficient but was only revisited after the six-year review.</li>
 	<li>The metrics for measuring progress are limited to evaluating just access to finance. However, there are equally important issues that need to be considered in assessing the true inclusion rate. These include affordability, quality, and suitability of available financial products, or appropriate skills to use and maximize these services. While the biannual <a href="https://www.efina.org.ng/wp-content/uploads/2019/01/A2F-2018-Questionnaire.pdf" target="_blank" rel="noopener noreferrer">access-to-finance surveys</a> explore some of these areas on usage, affordability, and quality dimensions, not enough focus is placed on the findings. To buttress the importance of these issues, insights from the <a href="https://nibss-plc.com.ng/" target="_blank" rel="noopener noreferrer">Nigeria Inter-Bank Settlement System</a> indicate that about 30 percent of bank accounts are inactive. It would therefore be useful to consider if and why inactive bank accounts are increasing, or if inactive users are growing faster than the number of new users. This is so that the inclusion rates reported are more reflective of realities.</li>
 	<li>The definition of financial inclusion per the NFIS suggests a bias towards adult individuals. As such, performance monitoring is limited to household surveys and does not provide sufficient information on improvement or lack of improvement relevant to enterprises. Since progress indicators are not directly targeted at enterprises, they do not reveal crucial details of the level of financial exclusion suffered by vulnerable groups (like informal microbusinesses) within this segment of the population. It is therefore difficult to determine which specific policy reforms are needed for this group.</li>
 	<li>In implementing the NFIS, interventions introduced do not fully nor effectively take into consideration the fact that socio-economic developmental problems are entwined. Consequently, financial inclusion programs have not been properly integrated with other development initiatives such as the social protection relief programs used to reduce the impact of COVID-19 on poor households and businesses. The country’s weak institutional landscape creates further problems in this regard. An example is the disbursement of a popular welfare scheme which was done via cash rather than digital platforms because a significant proportion of vulnerable groups still do not have access to digital platforms. Policymakers and market actors need to ensure that more people across the country have access to digital technologies.</li>
 	<li>There have been multiple instances of financial regulations being introduced and subsequently withdrawn or revised, giving the impression that the policy reforms are not properly designed or coordinated. Some of these reforms are also poorly sequenced. Keeping track of the various regulatory changes can be tasking and confusing for customers and service providers.</li>
 	<li>Given that the NFIS does not have adequate legislative backing as it is not yet public policy, it makes operationalizing and enforcing the strategy tedious, thus affecting impact.</li>
</ul>
<h2>Recommendations</h2>
The plan for achieving greater financial inclusion at any national level needs to make room for adapting to the evolving financial landscape. One way of achieving this is to incorporate a comprehensive approach in monitoring and evaluating financial inclusion intervention programs.

In Nigeria’s case, more frequent progress monitoring is necessary to identify initiatives that are working well and others that may need improvement. For example, it would be interesting to monitor if the use of agent banking has significantly helped reach more people in remote locations, or if granting more licenses to new entrants in the fintech space has made the prices of financial products more competitive.
<blockquote class="pullquote--left">More frequent progress monitoring is necessary to identify initiatives that are working well and others that need improvement.</blockquote>
Also, there is a need to expand indicators being measured to include not just individuals/households, but micro, small and medium enterprises (MSMEs). While this does not negate the financial sector development approach adopted in many African markets which has resulted in significant progress, more diverse studies could also evaluate how expensive or cheap financial services are, if the banked population is using available services, and if available products are suitable to individual and business needs. Such analysis can reveal the causes behind observed trends, and how this varies across demographics, to guide appropriate drafting of policies that can improve financial inclusion.

Impact evaluation can then be used to check if and how improved financial inclusion has affected the desired outcomes highlighted in the NFIS, which include reducing poverty, closing the income inequality gap, and boosting faster economic growth. This would inform better targeting of scarce resources, and afford policymakers and implementers insightful lessons for improved interventions.

Better structured linkages with the nation’s broader welfare assistance programs and a digitalization drive can improve the chances of successful financial inclusion outcomes. One avenue for integration is to leverage the social register of poor households and find ways of including this group of low-income earners in the formal financial system. Technologically driven financial service solutions should also be encouraged, meaning the NFIS team would have to work more closely with stakeholders in the country’s digital space such as the <a href="https://www.ncc.gov.ng/" target="_blank" rel="noopener noreferrer">Nigerian Communications Commission</a> and the <a href="https://www.commtech.gov.ng/" target="_blank" rel="noopener noreferrer">Ministry of Communications and Digital Economy</a>, to push for regulations and interventions that will enhance customers’ access to the internet, encourage greater investment in digital infrastructure and more responsible use of data to increase customers’ capacity and trust.
<blockquote class="pullquote--right">Better structured linkages with welfare assistance programs and a digitalization drive can improve chances of successful financial inclusion outcomes.</blockquote>
Beyond addressing the perceived shortcomings in the implementation of the NFIS, it is important for the financial ecosystem to <a href="https://www.thisdaylive.com/index.php/2019/12/13/experts-identify-new-ways-to-deepen-financial-inclusion/" target="_blank" rel="noopener noreferrer">collectively work together</a> to tackle the major barrier of <a href="https://www.efina.org.ng/wp-content/uploads/2019/01/A2F-2018-Key-Findings-11_01_19.pdf" target="_blank" rel="noopener noreferrer">high transaction costs and affordability concerns</a> in serving low-income segments in mostly rural and remote regions. This would involve, among other things, providing a conducive environment for financial service providers to see the value in serving excluded groups.

If these policy reforms get buy-in from all stakeholders, and implementation is properly coordinated to increase policy effectiveness, Nigeria will be better equipped to meet its NFIS goals.

How Is Nigeria’s National Financial Inclusion Strategy Going?

Sustainability of businesses in the short, medium and long term is down to the business environment in which they exist. This is no different for Financial Service Providers working to facilitate financial inclusion across Sub Saharan Africa. The stakeholders must work hand-in hand to build a conducive ecosystem where their innovative business models can thrive in.

The webinar focuses on discussions around the business environment in Sub-Saharan Africa and the approaches used to overcome market constraints in order to deliver financial products and services to smallholder farmers across Sub-Saharan Africa.

The speakers will provide their unique experiences, insights and perspectives on delivering an enabling business environment which should be a win-win situation for both the businesses and customers.
<h3>Speakers:</h3>
<ul>
 	<li>Eli Pollak, Founder and CEO, Apollo Agriculture</li>
 	<li>George Muga, Head of Market Infrastructure at Financial Sector Deepening Uganda</li>
 	<li>Renita Nabisubi, Head of Digital Financial Solutions at Access to Finance Rwanda</li>
</ul>
To confirm attendance, visit the URL on this page, or email info@frp.org.

&nbsp;

&nbsp;

Webinar: Overcoming Market Constraints to Deliver Sustainable Financial Inclusion to Rural Communities

Earlier this month, we announced that <a href="https://content.centerforfinancialinclusion.org/people/mayada-el-zoghbi/">Mayada El-Zoghbi</a> is joining us as the new Managing Director of the Center for Financial Inclusion at Accion (CFI). Mayada is known for her extensive research in – and advocacy for – financial inclusion. As CGAP’s Lead for Strategy, Research &amp; Development, she coordinated CGAP’s strategy development and its research on women’s financial inclusion, financial services in crisis environments, and other emerging topics.

Prior to CGAP, Mayada founded and managed a development consulting firm, led numerous technical assistance, evaluation, and research assignments, served as a research director for a USAID initiative, helped develop several financial institutions, and lectured at Columbia's School of International and Public Affairs (SIPA).
<h4>CFI: What sparked your passion for financial inclusion, and what continues to propel it as you assume your new role at CFI?</h4>
<strong>Mayada</strong>: After graduating from college, I went to Morocco on a research fellowship with a program called Minnesota Studies in International Development (MSID). I lived both with a family in Rabat and spent a month in a rural community doing survey work on a rural credit research project with a professor from the Agronomy Institute in Rabat. This experience piqued my interest in financial services.

The project in Morocco was clearly not good practice and I was interested to learn more about what works. I decided to go back to graduate school to learn more about it, so I studied at SIPA. It was during a course on microenterprise development, taught by Heather Clark, who was heading UNCDF at the time and who is now a dear friend, that I knew for sure that this was a field that combined all of my interests in business, financial services, and sustainable development. Most importantly, it aligned with my social values.

The inclusive finance field has expanded so much beyond my initial exposure to an agricultural loan program in rural Morocco. The many ways in which this sector continues to evolve and expand is what continues to draw me in. I’m especially excited by our ability to shape responsible growth of the industry, and the role that organizations like CFI have in guiding both public and private sector actors in inclusive finance.
<blockquote>I’m especially excited by our ability to shape responsible growth of the industry.</blockquote>
<h4><strong>CFI</strong>: Why did you choose to join CFI? What about CFI resonated with you?</h4>
<strong>Mayada</strong>: I’ve worked on inclusive finance from many angles: managing institutions in the field, supporting donors on their strategies, conducting research, providing technical assistance to providers and other stakeholders. All of these experiences have been rewarding, but perhaps the role that I’ve enjoyed the most is thought leadership. I’ve been fortunate to do that at CGAP for the past 10 years.

With its convening power, independence, and ability to influence the private sector, investors and the broader inclusive finance community, CFI is unique. Its position as an independent think tank with deep expertise in consumer protection and a strong advocacy platform representing people living in poverty makes it an extremely compelling platform for me personally. At a time when digital platforms represent transformative opportunities to serve the poor and present serious risks for those who are the least able to withstand those risks, there’s no denying that a laser focus on consumer protection has to be front and center. Ensuring that the digital economy evolves in a way that’s both inclusive and protective is critical, and I believe that CFI is well positioned to lead the industry in such a way as to make that a reality.

Q and A with Mayada El-Zoghbi, CFI’s New Managing Director

When I reflect on the future of financial inclusion, I find myself returning over and over to a basic question. What is the purpose of financial inclusion? Why are so many people around the world working towards it, and why do they believe that financial inclusion will contribute to a better world? What purpose have I been pursuing as leader of the Center for Financial Inclusion for the past decade?

This year, in choosing a theme for our 5th annual <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-week-2019">Financial Inclusion Week</a>, CFI reflected this question attitude by selecting Financial Inclusion for What? as the theme. But we are not about to let that important question go unanswered. So, after posing it, the CFI staff came up with <a href="https://www.centerforfinancialinclusion.org/financial-inclusion-for-what">four answers</a> that will be explored during Financial Inclusion Week: financial inclusion for financial health, financial inclusion for equity, financial inclusion for sustainable development, and financial inclusion for the bottom line.

While each of these ideas is important and worthy of exploration, I’d like to talk here about just one of them: sustainable development. In my view, the time is right for the financial inclusion sector to focus smartly on this set of goals. Even more emphatically, if the financial inclusion sector does not embrace sustainable development, it will soon find that it has worked itself out of a job. That’s because the more basic financial inclusion challenges are well on their way to being solved.

In the last decade an amazing transformation has taken place in the ability of most people to move money around quickly and efficiently. Millions and millions have opened bank or mobile money accounts and gained the ability to receive income straight into an account and then use electronic means to buy things. Yes, there are gender gaps, poor country gaps and rural areas gaps. But these are rapidly closing.

When we can presume that basic financial infrastructure is available to everyone for routine payments and banking, the financial inclusion job will be done. Right? This is an accomplishment that everyone in the financial inclusion sector can be very proud of. Even if we are not quite there in 2019, the finish line is well in view. Put an enormous celebration emoji right here, and look for the next challenge.

With financial access infrastructure as a foundation, we can turn to assisting people to do what they care most about: to apply financial services toward problems in the real sector – the real world, where people earn a living, get educated, build a home, go to the doctor and much more. The Sustainable Development Goals offer a widely-accepted list of real sector challenges that financial services can help address, but I’d like to focus on a slightly narrower list that highlights the activities where financial services are critical: agriculture, small business, health, education, shelter, and environment. The financial inclusion world needs to begin developing solutions that contribute directly to these sectors.

Back in the 1970s, the World Bank, USAID and other global development organizations were highly real-sector oriented when they talked about financial services. They provided enormous lines of credit to agriculture, fisheries, small business, and the like. These lines of credit were channeled through government development banks, who pushed them out at subsidized interest rates. Because they were seen as cheap handouts from the government, they were diverted to elites, with dismal repayment records. The development banks required constant cash infusions, either from abroad or from government budgets. And meanwhile, regular banks could not develop profitable businesses in these sectors, being out-competed by the subsidized loans. Development organizations treated banks much like communist countries treated them: as the distribution arms of central planning. Their solvency wasn’t important – they were just an administrative function. This was a disaster – for the banks, for the low-income people who were intended beneficiaries, for the market economy and for the achievement of development objectives.

Fortunately, a band of rural finance enthusiasts at Ohio State University (and others with similar views) convinced the World Bank and USAID to turn off the money hydrants. How they did that is a saga unto itself. For our story, the important thing is that once the subsidized credit spigot was turned off, it left open space in the financial sector for the growth, first, of microfinance and then of financial inclusion. Starting in the 1980s, these movements focused their attention in the right place: building sound financial institutions that knew how to serve the poor and excluded. That institution- and model-building focus was exactly what was needed at the time, and, with a boost from technology innovation, the sector has been on an unbroken path for three decades that is taking us to full realization of basic financial inclusion goals.

But this focus has also meant a three-decade detour away from deep engagement with real sector challenges. We’re working on payments, not mortgages. We’re working on credit algorithms, not pensions. All are important, but our emphasis has been selective.

Now it’s time to come back to the real sector and see how individuals, with their newly acquired access to financial services, can better use those services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy. We’re in a much better position do tackle these challenges today than in the 1970s, because inclusive financial systems exist. And, hopefully, because we won’t make the old mistakes.
<blockquote>It’s time to come back to the real sector and see how individuals can better use financial services to accomplish tasks like building a business, using clean energy, getting an education and staying healthy.</blockquote>
To take one example, financing for shelter is a potentially pathbreaking field of endeavor for those concerned with financial services for the poor. Everyone needs a safe and comfortable place to live. But with a few exceptions, shelter has not played a role in the financial inclusion conversation for the past decade. To seriously support the acquisition or upgrading of housing, we need innovations. We already know that the thirty-year mortgage is not the answer for most low-income people around the world, but how can we promote the spread of the two-year home improvement loan that has shown promise in many areas? What models combine new financial products with new forms of construction, or land titling?

To develop innovations that work, financial inclusion and housing experts will have to join together in a multi-disciplinary way, and they will have to draw on the advances available through technology. A handful of organizations do combine housing and financial expertise to solve shelter problems, but many more are needed. Financial inclusion experts need to learn about construction, while shelter experts need to be open to financing methods other than scaled back mortgages. Partnerships are needed to solve barriers such as out-of-date building codes and access to water and sanitation. These challenges are often far beyond the usual concerns of banks and financial institutions, and unsolved, they can impede the development of financing solutions by making it hard to lend or by making housing unaffordable.

Similarly, in order to offer financial services that support health care, financial inclusion experts must learn more about how health care works and what it costs, while the health care experts must be willing to explore models other than public sector hospitals and clinics. And I could say the same about agriculture, energy, environment and education.

Why haven’t financial inclusion specialists already moved into sustainable development in a big way? I can think of three very good reasons.

The Next CFI Challenge: Financial Inclusion for Sustainable Development

As a means of reaching underserved customers at low cost, financial institutions have designated authority and responsibility to banking agents to deliver financial products and services. Agent banking is a model for delivering financial services whereby an institution — be it a financial service provider or a mobile network operator — partners with a retail agent to extend services in remote or hard-to-reach areas.
<blockquote>Innovative financial institutions are streamlining and digitizing their processes, and utilizing real-time data and analytics to increase both the efficiency and effectiveness of agent networks.</blockquote>
Despite the growing volume of agents, the agent network model is rife with utilization and operational challenges. The good news is that technology offers financial institutions an opportunity to make agent models more efficient and productive for themselves and their customers. Based on in-depth interviews with industry experts and senior bank officers, and supplemented by a review of the literature, this brief examines the role of technological innovation as a potential driver for improving the quality and maximizing the productivity of agent models.

We found it useful to study this topic across two time-horizons: the short-and long-term; and from the perspectives of the main stakeholders in the agent network triad: the financial institution, the agent, and the customer. This structure allows us to account for two key trends: 1) the diminishing role of cash as a payment form, and 2) an increasing readiness of institutions to embrace digital transformation. It also allows us to explore commonly-cited challenges with agent networks through an illustrative, hypothetical narrative lens, giving voice to each stakeholder group. The narratives are accompanied by real-world examples of how technological integration and innovation has helped to improve and streamline processes within agent networks. Finally, we anticipate that in a future financial services ecosystem that is digital and cashless or cash-lite, we will see the role of the agent evolving from transaction processors to solution providers.

Leveraging Technologies to Improve the Quality and Maximize the Productivity of Agent Models

One of the most stubborn challenges in financial inclusion has been getting past the famed “last mile” that stands between a well-designed service and the customer, particularly customers in tough-to-reach areas or who have traditionally been excluded from formal services. This is the case in much of China, where there are many remote, rural communities with people who have long been denied access to financial services that promise to boost household resilience and welfare.

But China is also home to solutions that, if pushed to a far greater scale, could get financial services to travel that last mile and generate the “first touch” on a smartphone screen that today represents the new age of products and services.

A wide range of approaches to solving the last-mile problem has been tried around the world. The most common has been the establishment of agents or shared service centers located within shops, employers, or even government agencies.

China is no exception. Regulators and local agencies have encouraged the deployment of shared service centers to augment the agency network established through the Postal Savings Bank. They have even provided subsidies to local businesses to provide these financial services. The effect is that, by 2018, the People’s Bank of China reported the existence of 914,000 rural service centers, covering 99.7 percent of China’s administrative sub-regions. Little wonder, then, that the World Bank’s Global Findex 2017 survey showed that just over 80 percent of China’s adults have a bank account, categorizing them as “included” by the most basic measure.
<h3>Explosion of Internet Access Offers New Access to the Excluded</h3>
Today, most last mile solutions target the 42 percent of Chinese who are not yet using internet or mobile payments. However, that proportion has already shrunk from more than two-thirds only seven years ago, while the share of people using mobile payments has more than tripled to 41 percent. For this large and fast-growing group, “first touch” solutions are required; that is, solutions provided on their mobile phones, bridging the tiny gap between the users’ fingers and their smartphone screens.
The question now is whether these solutions cut out the aggregators; the intermediaries that close the last-mile gap for traditional financial services.

A new <a href="http://bfaglobal.com/projects/the-changing-role-of-aggregators-in-digital-finance-ecosystems/">white paper</a> we’ve just released suggests that this is not the case: in fact, powerful new models of aggregation are emerging in the forms of mobile, app-based financial marketplaces. Created by large techfin companies like Ant Financial and Tencent Holdings, these marketplaces offer customers an expanding range of financial services—digital credit, mutual funds and insurance—offered by third-party providers. Customers can seamlessly transfer funds to providers in these growing ecosystems, and it’s far easier to choose and pay for additional services. It seems likely that these techfins—as new types of digital aggregators—will curate and recommend bespoke financial service solutions using artificial intelligence applied to the wide array of financial data collected, as clients browse and build their financial portfolios (see image above).
<h3>The Rise of the Digital Aggregator</h3>
These new digital aggregators hold great potential to advance financial inclusion by linking clients effectively to financial services that were out of reach before. By reducing the costs of distribution and administration from collecting even small savings, repayments, or premiums, they may make it cost-effective for financial providers to reach people with far lower incomes.

However, will greater choice necessarily improve a customer’s financial health? Hard to say. Financial health is a relatively new term, <a href="https://cfsinnovation.org/research/financial-health/">introduced</a> by the Center for the Study of Financial Innovation (CFSI), and now widely used in the U.S. but less so in other parts. Financial health measures not just whether people have and are using a particular category of product, but whether they can achieve certain outcomes that are considered indicators of financial health; for example, can they meet daily expenses and save a lump sum that is large enough to cover an unexpected expense? Do they undertake longer-term planning of their finances? Do they feel anxiety about their finances? Research in the U.S. has shown that while most Americans today are financially included, a majority are not financially healthy by these measures.

The concept has not been measured or tested yet in China but it seems equally applicable in an environment with high levels of financial inclusion. In particular, as the use of digital aggregation grows, China has the opportunity to research the financial health outcomes from bundling different products for different segments of people. Given that they are now digitally connected and using apps and smart phones, the costs of experimenting with and measuring financial health is much lower than before.
<h3>Delivering (Financial Services) to the Deliverymen</h3>
In our white paper, we cite the example of urban deliverymen who work on a casual basis for e-commerce platforms like Meituan Dianping, typically receiving US $0.20 to $0.50 for each completed delivery. There are now millions of people across China performing similar “gig” work, and their incomes are relatively low (by urban standards) and volatile. Such workers can see their incomes dented at any time by change in their health, by the weather, or even by the day of the week. Many come from rural areas and often leave behind dependent family members. Without a residence permit in urban areas (<em>hukao</em>), these workers lack access to welfare services like health care. They are part share of China’s urban working low-income group. However, aggregated by employment platforms, these deliverymen offer an opportunity for a set of natural experiments; what financial products could they take up and use that would smooth their consumption, reduce their risk exposures, and perhaps even unlock loan or equity capital to start their own businesses at home if they establish a good track record.

Gig workers like these can now be found in most parts of the world. But in China the size of the group, and their existing use of digital platforms for their livelihoods, opens great opportunities to discover whether digital aggregation can travel that last mile to the first touch on an app that could deliver financial health on an epic scale.

Financial Services in China: Crossing the Last Mile to Reach the First Touch

<i>This post was originally published on the <a href="http://www.cgap.org/blog/financial-inclusion-glass-half-empty-or-half-full?utm_source=CGAP+Reader+%2808.06.18%29&amp;utm_campaign=CGAP+Reader+%2808.06.18%29&amp;utm_medium=email">CGAP Blog</a> and is re-published here with permission.</i>

We can choose to see a glass as half empty or half full. And our perspective often has a lot to do with our initial assumptions.

Beth Rhyne and Sonja Kelly of the Center for Financial Inclusion (CFI) have generated discussion in the financial inclusion community with their paper exploring the latest <a href="https://globalfindex.worldbank.org/">Findex </a>data, titled “<a href="https://www.centerforfinancialinclusion.org/financial-inclusion-hype-vs-reality-deconstructing-the-2017-findex-results-2">Financial Inclusion Hype Versus Reality</a>.” In the paper, Rhyne and Kelly express concern that the rate of access to new accounts slowed between 2014 and 2017 and that the usage gap for those accounts appears to be growing. They also highlight stagnation in the growth of credit and a decline in savings, but an increase in the use of payments. While I have very little to disagree with in their paper, I think the financial inclusion community has a lot more cause for optimism than it makes out.

Let me state up front that it has never been my expectation that we would reach full financial inclusion by 2020. Or even that 79 percent of adults in developing countries would have an account by 2020, a prediction made by Rhyne and Kelly in their previous paper, “<a href="http://www.centerforfinancialinclusion.org/fi2020/mapping-the-invisible-market/by-the-numbers">By the Numbers: Benchmarking Progress Toward Financial Inclusion</a>,” published after the release of the last Findex data set in 2015. The World Bank’s access goal is aspirational and meant to inspire action, which it clearly has. But as Rhyne and Kelly quite correctly point out, accounts are largely meaningless if people are not using them. The point of the Findex data is to help us measure progress against the overall access goal and to understand the levers that will take us to the next level. And there is plenty of food for thought on what the key levers might be in this year’s Findex.

Over the course of two blogs, I would like to offer a few reasons why I believe we have done better than Beth and Sonja think, starting with access.

While I would describe this year’s CFI report as overly pessimistic, I would say the 2015 paper was overly optimistic. The 2015 report assumed straight line increases in access, based on the rate of growth achieved between only two data points: the 2011 and 2014 Findex. While the report acknowledges that this was done to present a scenario for discussion, the net effect was to create an overly optimistic strawman. It seems obvious in hindsight that the pace of change achieved between 2011 and 2014 was not likely to be repeated. Why? Because progress doesn’t move in straight lines. New gains at the margin will be harder to reach than previous gains. This holds true at the country level and for important segments within countries.

At the country level, there is an implicit assumption in “By the Numbers” that all countries have equivalent regulations and providers willing to serve the poor. But all regulatory frameworks are not created equal, and not every provider has the same ability to serve the poor. One has only to look at the data for Sub-Saharan Africa to see this at work. Countries like Kenya, Ghana, Uganda, Tanzania and the West African Economic and Monetary Union (WAEMU) region put enabling regulatory frameworks in place and on average enjoyed a 2.5x increase in the rate of account access between 2011 and 2017, far outstripping the 43 percent increase for developing markets as a whole.

<img class=" size-full wp-image-25811 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/graph-greta-bull-cgap.png" alt="graph Greta Bull CGAP" width="624" height="245" />

Africa also demonstrates that providers and regulations matter. The continent is full of mobile network operators (MNOs) trying to mimic the success of M-PESA in Kenya. Although this did not happen overnight, MNOs have by now clearly demonstrated that they are making a measurable difference in multiple African markets. In the 2014 Findex, there were only 11 countries globally that had more than a 5 percentage point differential between access to any account (including mobile money) and access to a financial institution account only. And the gap between these two numbers in Sub-Saharan Africa was 5 percentage points. By this year’s Findex, this had grown to 28 markets, all but two of which were in Sub-Saharan Africa, and the gap grew to 10 percentage points. This differential is almost entirely attributable to the work of MNOs. According to GSMA's 2017 <a href="https://www.gsma.com/mobilefordevelopment/sotir/">State of the Industry Report on Mobile Money</a>, MNOs have added 338 million accounts in Sub-Saharan Africa, of which 122 million are active (this is corroborated by the Findex estimate of 124 million active mobile money accounts in the region). It is safe to say that MNOs have been responsible for adding the better part of 141 million accounts in Sub-Saharan Africa since 2011, representing 10 percent of new accounts globally. Given that Findex counts only active mobile money accounts, this quite significantly understates the level of new account addition in Africa compared to other regions.

But restrictive regulatory and competitive frameworks meant MNOs did not have the same opportunity everywhere. Nigeria, the continent’s largest market, has been a subject of great interest from MNOs for the past 10 years. But Nigeria has a regulatory framework that restricts the ability of MNOs to operate independently of banks, and this has had an impact on access. In contrast to the 2.5x growth in account access in the cohort of countries above, Nigeria experienced growth of only 33 percent in access to accounts from 2011 to 2017, and there is no appreciable difference between access to a financial institution account and access to any account. In the 10-country cohort, the average delta between any account and a financial institution account had grown from zero in 2011 to 21 percentage points in 2017. What’s more, the increasingly visible success of mobile money encouraged banks to expand their service offerings to the mass market. In these 10 countries, access to accounts in a financial institution grew by 52 percent, outperforming Nigeria, which grew financial institution accounts by only 30 percent. Providers and regulations clearly matter.

An additional challenge as we add accounts at the margin is delivering financial services to difficult segments. Women and rural households are particularly challenging, albeit for different reasons: women because of cultural and legal norms inhibiting access, and rural households because they are difficult and expensive for commercial providers to reach.

The gender gap remains stubbornly persistent at 9 percent in developing countries and is particularly challenging in the Middle East and North Africa region and parts of Sub-Saharan Africa and South Asia. The World Bank calculates that, of the remaining 1.7 billion unbanked, nearly half come from just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan. Bangladesh, Pakistan and Nigeria all have substantial gender gaps: 29, 28 and 24 percentage points, respectively. If in these three markets alone, access for women had grown at a rate equivalent to that experienced by men, the access numbers for 2017 would have increased by nearly 50 million, representing a 9.5 percent boost on the 515 million new account holders added in the three previous years.

For rural populations, the picture is a bit brighter. Access for rural households grew from 44 percent to 66 percent globally from 2011 to 2017, largely driven by rapid change in China and India. But Africa has maintained a stubborn 4 percent gap between access for the rural population and access for the population at large. If we could lift the roughly 61 percent of Africans who live in rural areas up to just the regional average, it would add another 20 million new accounts. If we brought them to the same level as urban Africans, it would add roughly 50 million new accounts.

Regulatory change that opens markets to increased competition and a sustained focus on equal inclusion for women and rural communities would do a lot to move us in the direction of full financial access.

For me, the glass is still half full. Meaningful financial inclusion is hard, involving a complex interplay of factors: regulatory change, viable business models and significant behavior change by new account holders. And for certain segments, cultural and legal norms and distance represent significant barriers. We have to be realistic about how long this will take. When I read the CFI report, it took me back to a time when everyone was disappointed that a new M-PESA had not emerged overnight. It didn’t. But we now have a whole slew of providers that are beginning to look like M-PESA did five years ago, sometimes in surprising places. Progress happens, just not according to our wishful time frames. On access, we have already harvested the low-hanging fruit — now the hard work truly begins.

<em><strong>What do you think? Do the Findex data present an overly rosy picture of the state of financial inclusion, or should we remain optimistic? Leave your comments below. </strong></em>

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&nbsp;

Financial Inclusion: Is the Glass Half Empty or Half Full? (Part 1)

Howard Miller

Lucciana Alvarez Ruiz

Sone  Osakwe

Mayada El-Zoghbi

Ezra Mannix

Elisabeth Rhyne

Jacqueline Foelster

Amin Khairy

David Porteous

Duoguang Bei

Greta Bull

Guatemala

Latin America and The Caribbean

Nigeria

Sub-Saharan Africa

China

Colombia

Dominican Republic

Ecuador

Nicaragua

Peru

Challenges and Crises

Enabling Environment

Financial Health

Refugees and Migrants

Resilience

Rural Populations

Underserved Groups

Smallholder Farmers

Index Insurance

Insurance

Financial Inclusion Strategy

Payments

Policy, Regulation and Government Initiatives

Consumer Protection

Responsible Digital Finance

Women

Financial Service Providers

Partnerships

Agent Banking

Banks

Data Analytics

Delivery Channels

Financial Technology

Fintechs

Telcos

Digital Financial Services

Mobile Banking

Trends

Financial Capability

Youth

Blog Post

Event

Report

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.

China’s economy has experienced tremendous growth in recent years, with a booming micro, small, and medium enterprise (MSME) market. There are over 50 million MSMEs in China that collectively account for over 60% of China’s GDP and over 50% of the government’s tax income. These businesses create 80% of total employment in China’s urban areas.

Despite China’s overall economic growth, the need to foster full financial inclusion is still imperative. In 2010, 38 million MSMEs lacked access to formal financial services, forcing them to borrow informally from friends, family, and moneylenders.

<em>&gt; Posted by Center Staff</em>

<a href="http://www.centerforfinancialinclusion.org/fi2020/global-forum" target="_blank" rel="attachment noopener wp-att-11854"><img class="alignright" style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/07/fi2020-date.jpg?w=490" alt="" width="310" height="121" /></a>The FI2020 Global Forum in London gets underway this Sunday with a pre-Forum side meeting on financial inclusion for persons with disabilities (PWDs). This client-centric start feels like a fitting precursor for an event to expand financial inclusion.

Financial inclusion requires that financial services meet the unique needs of all clients, especially the needs of the most underserved and vulnerable client groups. Sessions throughout the Forum reflect this key tenet. In addition, there are side meetings on the <a href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/financial-capability">Financial Capability Roadmap</a> and the <a href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/client-protection">Consumer Protection Roadmap</a>, focused on moving these roadmap principles and recommendations to action. These and the other three <a href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/">financial inclusion roadmaps</a> were developed through a consultative process that collected and incorporated the perspectives of specific client groups.

Among Forum participants are representatives of various client segments – such as PWDs, women, the elderly, youth, rural populations, and migrants – to help raise awareness of their unique needs and assets. Here’s a collection of pertinent statistics for financial inclusion on these client segments:

Youth:
<ul>
 	<li>1.8 billion of the world’s population is between the ages of 10 and 24</li>
 	<li>87 percent of youth are concentrated in the developing world</li>
 	<li>About half the world’s youth report being economically active</li>
 	<li>38 percent of young adults have an account compared to over 54 percent of older adults</li>
</ul>
The Elderly:
<ul>
 	<li>In 1950, globally, 1 in 20 people were elderly. By 2050, it will be 1 in 5.</li>
 	<li>In 2000, only 6 percent of people in less developed countries were over 65 years old. By 2050, that number will grow to 20 percent.</li>
</ul>
Women:
<ul>
 	<li>In all regions, women are less likely to have a bank account than men</li>
</ul>
[caption id="attachment_12936" align="aligncenter" width="600"]<a href="http://cfi-blog.org/2013/10/25/seeking-financial-inclusion-for-all-at-the-global-forum/women-chart/" target="_blank" rel="attachment noopener wp-att-12936"><img class=" wp-image-12936 " style="border: 0" src="http://centerforfinancialinclusionblog.files.wordpress.com/2013/10/women-chart.png" alt="" width="600" /></a> Source: World Bank, Global Findex (Washington, DC: World Bank, 2011)[/caption]
<p style="text-align: left">Persons With Disabilities:</p>

<ul>
 	<li>Over 15 percent of the world’s adult population, or 785 million people, live with a disability</li>
 	<li>Unemployment for persons with disabilities is as high as 90 percent in the developing world</li>
 	<li>In developing countries, 80 percent of persons with disabilities live in rural areas</li>
</ul>
Migrants:
<ul>
 	<li>There are an estimated 214 million international migrants around the globe, and over 700 million more people migrate within their own countries</li>
 	<li>Developing countries will receive over $410 billion in remittances in 2013</li>
 	<li>Cross-border remittances are a growing market</li>
 	<li>The top recipient countries of remittances include India, China, Mexico, the Philippines, and Bangladesh</li>
 	<li>For the Philippines and Bangladesh, more than 10 percent of their GDP comes from remittances</li>
</ul>
Rural Populations:
<ul>
 	<li>About 20 percent of the world is living in rural areas, compared to about 40 percent in 1950. This trend, however, does not mean a shrinking of all rural populations. <sup>                        </sup></li>
 	<li><span style="font-size: 13px;line-height: 19px">In low and middle income economies, those who live in rural areas are much less likely to have an account than those living in urban areas</span></li>
 	<li>An estimated 30 to 40 percent of remittances go to rural areas</li>
</ul>
<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2013/10/10/fi2020-global-forum-gearing-up-for-the-homestretch/" target="_blank" rel="noopener">FI2020 Global Forum: Gearing Up for the Homestretch</a>

<a href="http://cfi-blog.org/2013/10/22/combatting-exclusion-for-persons-with-disabilities-in-india-and-mexico/" target="_blank" rel="noopener">Combatting Exclusion for Persons With Disabilities in India and Mexico</a>

<a href="http://cfi-blog.org/2013/03/08/international-womens-day-2013-where-are-we-with-womens-access-to-financial-services/" target="_blank" rel="noopener">International Women's Day 2013: Where Are We With Women's Access to Financial Services?</a>

Seeking Financial Inclusion for All at the Global Forum

<em><em>The Financial Behavior of Rural Residents: Findings from Five Latin American Countries</em>
</em>By Jacqueline Urquizo - Published: March 2012

&nbsp;

This report provides the financial industry with important recommendations for creating and improving services to rural residents in Latin America. The study – based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru – provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and microentrepreneurs.  The study offers a unique opportunity to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.

The study targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers.  The study describes the rural population according to socioeconomic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management.  Financial education and awareness and use of formal financial services are discussed.
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The Financial Behavior of Rural Residents