> Posted by Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank
Today the World Bank, in partnership with the Bill and Melinda Gates Foundation, unveils an important new source of information that can help advance the financial inclusion agenda. We call it the “Global Findex,” short for the Global Financial Inclusion Database, and it is the first large-scale, comparable, demand-side financial inclusion data-collection exercise of its kind. Using the Gallup World Poll survey, we measure how over 150,000 adults in 148 economies save, borrow, make payments, and manage risk. We also have the ability to disaggregate by gender, age, education, and income, allowing researchers to more precisely identify the unbanked. Eager to get your hands on the data? Click here.
For those that are still with me, let me share some of our initial findings:
- We see regional, economic, and demographic differences in account penetration. We find that 50 percent of adults worldwide have a formal bank account, with large disparities in account penetration across regions, income groups, and individual characteristics.
In high income economies account penetration is 89%, and in developing economies account penetration is only 41%. Among those living below $2 per day, only 23% have a formal account. In developing economies, if you are wealthy (within the highest quintile in your country), you are more than twice as likely to have an account than if you are poor (within the lowest quintile in your country), on average. Furthermore, 46% of men in developing economies have a formal bank account, compared to 37% of women.
- We have data not only on account ownership but also usage. Globally, 23% of adults report having saved at a formal financial institution in 2011. 61% of account holders worldwide use their account to receive payments from an employer, the government, or family members living elsewhere.
- We can identify why adults don’t have an account. While 65% of non-account holders report that they do not have enough money to use a formal account, there are also other reasons (multiple answers are permitted): for example, an account is too expensive (25%), or is too far away (20%). This is valuable information for policymakers—for instance, mobile technology might offer the opportunity to provide cheaper and more convenient accounts to rural residents. See the chart below for a full breakdown.
- Formal borrowing and formal insurance are rare. Globally, only 9% of adults originated a loan from a formal financial institution in the past year. However, 50% of adults in high-income economies report having a credit card which likely reduces the need for short-term loans. In developing economies, only 7% of adults have a credit card. In addition, only 17% of adults personally purchased health insurance in developing countries. Only 6% of adults in developing economies in the farming or fishing industries reported having personally purchased crop, rainfall, or life insurance.
The Global Findex can be used to benchmark how adults around the world manage their day-to-day finances and help policymakers develop evidence based financial inclusion strategies. Over time, we will be able to track trends, study the impact of policy reforms, and better understand the links between financial inclusion and development outcomes.
For additional information on the methodology and country results, please read the report for the Global Findex here or visit the Global Findex website here.
Leora Klapper is a Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank. She holds a Ph.D. in Financial Economics from New York University Stern School of Business.
The citation for the Global Findex is: Demirguc-Kunt, Asli and Leora Klapper, 2012, “Measuring Financial Inclusion: The Global Findex Database.” World Bank Policy Research Working Paper 6025.
For more information, sign up for updates from the Financial Inclusion 2020 campaign.
Image credit: Global Findex
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Voices of Financial Inclusion: ‘It’s the Clients, Stupid’
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April 19, 2012 at 10:52 am
Daryl Skoog
We have been looking for robust data on mobile money for years now, and here it is. According to the numbers here, it seems as if mobile money is not necessarily replacing formal deposit-taking accounts, but it certainly is doing well in some places in the world as a compliment to deposit accounts. In Kenya, 57 percent of adults who use mobile money also have a deposit-taking account, which means that we are seeing financial inclusion in multiple products. However, in Sudan, we see that 92 percent of people in Sudan who use mobile money do not have a deposit-taking account. The differences between countries underscores for me the necessity of tailoring technology to fit different specific contexts. Looking forward to further exploring this data for how we can use it at MicroPlanet Technologies to help our clients build products to fit the needs of their customers. I must say digesting such a data set in one reading is beyond me. I expect I will be coming back to study this body of work many times in the weeks and months to come. My thanks and congratulations to the authors of this fine body of work.
April 19, 2012 at 10:52 am
Susy Cheston
Hats off to the World Bank, Gallup and the Gates Foundation for an extraordinary contribution to financial inclusion that truly puts clients at the center. My one request is that in future rounds, the questionnaire should include not only uses of credit for personal finance but also for business purposes. That said, I am eager to explore the Findex data sets, and especially excited that there is a portal through which we can access and explore correlations with other indicators available through the World Bank. Very exciting stuff…..
April 19, 2012 at 11:01 am
Andrea Levere
I am so impressed with the efforts of the World Bank and Gallup on this rich data set. Just looking through it initially, I am struck by the information on credit cards. We always knew that credit cards were unevenly distributed throughout the world, but the fact that only seven percent of adults in developing economies have a credit card is striking. As we have conversations here in the US about getting out of debt and using credit wisely, we should also be having conversations about providing access to affordable credit where there is none currently in the developing world. The uneven spread of this financial resource further solidifies my conviction that there is no one-size-fits-all model for how financial inclusion should be undertaken.
April 19, 2012 at 11:06 am
alexcountshaitibook
This is an incredible resource — I am looking forward to digesting it. –Alex Counts
April 19, 2012 at 11:22 am
Jeffrey Lee
This is an enormous amount of data with comprehensive analysis of all countries in the world. I believe this report will show a fresh perspective on the real picture of financial inclusion status in the world. Congratulations on the excellent work!
April 19, 2012 at 11:31 am
Larry Reed
Hurray!!! Thanks to the World Bank, Gallup and Gates for this great data set.
Some questions for Leora on the data:
- The number one reason that people say they don’t have accounts is because they don’t have enough money. How much is this as result of minimum balances required to open an account? Can this issue be addressed through technology and more appropriate products?
- In developing countries financial inclusion is highly correlated with education. Did you get a sense of whether this means that more financial capacity training could lead to more accounts, or whether it was other aspects of education (i.e. more confidence, wider social network, more contact with people that have accounts) that led to this difference?
I look forward to the ways that the financial community and governments can use this data to provide useful and appropriate financial and other services for those living in poverty.
April 19, 2012 at 1:50 pm
Leora Klapper
Larry– Thanks for your support!
First, only 30% of adults report “not enough money” as the only reason for not having an account, and most adults who give this answer also mention another barrier, such as cost, distance, or lack of documentation (respondents could choose more than one answer). These additional barriers suggest that a key to reducing the gap in financial inclusion may be new products and technology, such as bank agents and mobile banking, which can provide affordable and accessible banking services, particularly to the rural poor.
Second, we do not have data on financial literacy, per se. However, I agree that these other aspects associated with higher education are also important—and perhaps picked up by the 13% of unbanked adults (and 31% of unbanked in ECA) that report “lack of trust” as a barrier to the use of formal accounts.
Regards, Leora
April 20, 2012 at 6:45 pm
Larry Reed
Thanks for your responses, Leora. It was interesting to me that the percentage of people citing lack of trust as a reason increased with education levels. Does this mean that the more people in developing countries know about financial institutions, the more they mistrust them?
April 19, 2012 at 2:16 pm
Todd A. Watkins
Delighted to learn about this dataset and kudos for putting it together and making it broadly available. This will be valuable not only for researchers investigating financial access issues and barriers, but also to innovators and financial product designers and entrepreneurs looking for opportunities an ideas for enhancing access in niches your data may help uncover. It’ll also be a huge asset for engaging students in deeper inquiry in the field. Looking forward to digging in.
April 19, 2012 at 2:41 pm
Kadita "A.T." Tshibaka
What an important effort to understanding both our global and national financial inclusion contexts! The finding that 96 percent of adults in the DRC do not have access to formal financial inclusion is especially striking. That’s one of the reasons why Opportunity International decided to open a microfinance bank for the poor in the D.R. Congo. Opportunity DRC, in Kinshasa since January 2011, sees this reality first hand and is beginning to have its own impact felt. While 96% is a sobering figure, it just underscores the continued need for regulators, banks, multilateral and microfinance institutions as well as other NGOs to work together to provide financial services for those living in poverty.
More broadly, it does appear that a limited supply of financial service providers, as is the case for the DRC, is an important factor. Difficult regulatory regimes, bank-specific policies and prohibitive charges on account opening and maintenance,inter alia, constitute another set of undeniable deterrants to access and use of the formal financial sector by those still struggling at the bottom of the pyramid. The bottomline question then is whether and how this vital data will be used to change the face of global poverty, for the better…
April 19, 2012 at 3:14 pm
Scott Gaul
This is truly a fantastic resource – congratulations to the Gates Foundation, the World Bank and Gallup for making this a reality. The Findex data gives invaluable insight into the voice of the consumer, especially on the barriers to use, as well as the nature of use for a wide range of products. It’s also encouraging to see that the main barriers – cost and distance and paperwork – are things that we can measure, allowing for focused initiatives by policymakers and practitioners.
The survey also illustrates the need to continue to fill in gaps in how we track financial inclusion and think about the structure of financial sectors. For example, both Cambodia and Kyrgyzstan are cited in the report as countries where “more than 95 percent of adults do not have an account at a formal financial institution.” Yet both these markets have also recently figured in discussions about overheating in the microfinance sector. (See for instance: http://eng.24.kg/business/2012/03/14/23400.html, http://www.centerforfinancialinclusion.org/Document.Doc?id=897). To the extent that the Findex can help trigger a discussion around our understanding of the products and services that are part of financial inclusion at the local level, it’s value will only increase.
April 19, 2012 at 6:07 pm
leahwardle
It’s important that MFIs manage their institutions around the needs of their clients. Understanding the client is the first crucial step and these data will add valuable, client-level insight to the industry. I am also excited to hear that they will be updated regularly and available to the public.
April 20, 2012 at 1:57 am
Richard Leftley
This is quite interesting research, and coupled with the research we have been doing at MicroEnsure, it creates a more nuanced picture of the microinsurance market. Your report mentioned that among farmers in developing countries, insurance rates are still in the single digits! Not only does that mean that there is a huge market for insurance, but it means that we have to continue to be diligent about getting our products into the hands of those who need them most. Especially in a world where natural disasters have been on the rise, insurance could mean the difference between devastation and economic success. I am looking forward to continuing to engage with this data to see how we might use it.
April 20, 2012 at 4:27 pm
SonjaKelly
Wow, Leora! Thanks for giving us some of the highlights here. I’m already thinking about how I can use this data for my dissertation research. The link you posted to the actual data is very user friendly as well, and I love the ability to create charts and graphs.
One question that I have is whether you are going to release the full datasets with the complete responses to the survey for the purpose of sub-national econometric analysis?
Again, great data, and I’m looking forward to using it.
April 20, 2012 at 5:13 pm
Shannon Mudd
Leora, Congratulations and thanks to you and your team, both for the project and, just as importantly, providing access to the project data. Students of poverty, income disparity, growth, development, etc. will find much with which to work in these data. The graphs of the initial study are eye catching and, along with the text, thought provoking. For example, the imperfect correlation of account use and domestic credit to the private sector, a common variable in many cross-country studies, will lead researchers to think in more subtle ways what is meant by financial depth. At a more micro level, the large amount of inactive accounts should give regulators pause as they work toward better client protection. Researchers will find the data immediately useful and will be looking forward to the longitudinal data to come.
April 24, 2012 at 7:26 pm
Henri E. Haber
This article provides a wealth of useful data. I am so glad to see insurance becoming a part of the conversation (not just savings and loans). We must provide an array of affordable insurance products (life, health, crop, political unrest, funeral…) as part of a comprehensive strategy in our quest to bring people living in poverty to the formal economy.
The statistics are staggering, (“Only 17% of adults personally purchased health insurance in developing countries. Only 6% of adults in developing economies in the farming or fishing industries reported having personally purchased crop, rainfall, or life insurance.”)
April 30, 2012 at 7:17 pm
Diego Guzmán
This is such a great and valuable effort, for sure it put us all into the same page regarding definitions, units of measure, and availability of up-dated data. Besides, this Findex is one of a kind because it refers not only to financial access indicators (supply of services), but also to use of financial services (demand as well as supply), not to forget the possibility of disaggregating data by individual characteristics, and among regions. Most important of all, Findex allows industry , institutions and policy makers to identify main challenges and opportunities to improve financial inclusion.
For example, according to the self -reported barriers to use of formal accounts, globally more than 58% of people identified external barriers associated with lack of trust in banks, banks being too far away, and banks or accounts being too expensive. This is a big opportunity for banks to improve on the perceived barriers that do not depend on clients, but on the industry. In our experience, these last three reasons also apply completely to Latin America & Caribbean, and more specific to the microfinance industry. In the case of the region, as the report shows, 25% of adults reported saving over 2011, 15% using informal methods (community based savings), and 10% at financial institutions. This figure shows us that 75% do not reported to have saved over 2011; a potential market of a total 90% (including 15% of informal savers). One of the challenges for Latin America & Caribbean financial system is then to be more inclusive, and break down clients’ reported barriers. This implies for the industry to take advantage of opportunities to 1) increase trust in banks (having clients as the focus of the operation and the communication for example), 2) be closer to clients (improving alternative distribution channels), and 3) developing a more competitive market that will allow to reduce cost of having a formal account. All this efforts, will definitely strength the financial system and contribute to facilitating the path for people, especially in the base of the pyramid, to be financially included.
May 9, 2012 at 3:56 pm
Ana Ruth Medina
This is definitely a database that will allow us to be informed and take advantage of up-dated cross-country information, and most important, available to all! The possibility to disaggregate data by individual characteristics (gender, education level, age and rural or urban residence) as well as identification of self-reported barriers to use formal accounts, will for sure guide the development of tools for adoption of services and products, and leverage of financial inclusion. Without doubt, this data will from now on be a primary source of information for the industry and groups of interest; great contribution for the industry, but most important for clients at the Base of the Pyramid around the world!
May 10, 2012 at 4:07 pm
Paula Cortes
This is really a great report not only because it creates an excellent data base to be consulted to know more about the dynamics of the supply and demand of financial services around the world, but also because the authors did a great job analyzing how the use of savings and credit vary among regions and why these variations occur. It is really interesting to see that the report analyzes how formal and informal savings interact, it also proves that just having a formal savings account do not necessarily mean that people save. Moreover, the report shows that people at the Base of the Pyramid combine formal and informal savings through community based methods; although, it would be great to identify which informal savings methods, besides community based, people also use.
August 15, 2012 at 12:05 am
Claudia Lozano
Hi, i want to acces to tha data at individual-level. How will i do to acces?
August 30, 2012 at 11:25 am
SonjaKelly
I think the data at the individual level is set to release in mid-October. I know because I’m waiting for it too!