> Posted by Center Staff

The recent release of the Global Findex marked a crucial step towards global full financial inclusion. In a post on the CGAP Microfinance Blog, CFI’s Managing Director, Elisabeth Rhyne, discusses the importance of this financial inclusion database for providing demand-side data and allowing service providers to better understand client needs.

The post begins:

With the release by Gallup and the World Bank of the Global Findex (Financial Inclusion Index), the path to financial inclusion has just been made a little easier to travel.

Last year we (the Center for Financial Inclusion) asked practitioners, investors and others to tell us about the biggest “Opportunities and Obstacles to Financial Inclusion”. They identified “Limited understanding of client needs” as the fourth-ranked obstacle and “Improved demand-side information” the tenth-rated opportunity. The availability of data from the Global Findex will go a long way to satisfy those needs, and if data is as important as our respondents believe, it means that a significant constraint to inclusion is starting to give way.

The Global Findex will give providers and other financial inclusion industry participants the ability to test their understanding of prospective clients against the voices of 150,000 real people. Practitioners will be able to explore the database of residents of their own countries to examine current behavior. This can even provide the basis for a first cut at client segmentation. The Findex will challenge providers to act on the basis of a clear and empirically-based picture of their target markets, rather than on preconceived notions or hunches. The Findex will not substitute for careful market research and listening to clients. Its questions are too limited for that. But it will offer directions for such research and questioning, and will act as a reality check for findings.

To give just one example, Findex shows clearly that the existence of a bank account should not be used as a proxy indicator for savings. While 43 percent of adults in developing countries have a bank account, only 18 percent of those same adults say that they are saving at a formal financial institution. What are the rest doing with their accounts? It appears that a great many people use bank accounts mainly as a way to get paid. They receive salaries and payments for goods they sold (15 percent), government welfare and pension payments (7 percent), or money from family members (6 percent). Once paid, they withdraw most of the funds and then function in the cash economy as they may have done before having an account. This is confirmed by the fact that most people don’t make many transactions: about 80 percent of account holders have no more than 0, 1 or 2 withdrawals per month (and a similar number of deposits). Not only are they not using the accounts for savings; they are not using them for money management either.

To continue reading this post on the CGAP Microfinance blog, please click here.

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