Measuring Financial Inclusion: The “Basic Set” Solution

Dear Sonja,

Good to read from you again. Your post is informative. It however raises a few issues.

1. The GPFI Data and Measurement Sub-group and the implementing partners, did they check the opinions and facts presented by Inclusion players in the Financial Inclusion information clearing houses such as CFI? The financial inclusion debate has opinion divided right in the middle with many experts dismissing formality as the most suitable measure of financial inclusion. The blogs from reknown researchers and practitioners attest to this fact.

2. It appears, as Sonja has rightly pointed out, that mobile based financial inclusion has been ignored as a basis of inclusion. If that is the case, so many people already included through mobile money system will go unregistered in the inclusion net.

3. Financial regulators may not be the best to propagate and define what is or isn’t financial inclusion. Sonja, You mention that FAS relies on data collected from participating governments, mainly central banks. Central banks are representatives of banks. Banks are sticks in the mud in this financial inclusion agenda. To them, the measure of inclusion is the poor opening accounts with them. It’s either that or nothing. That is a zero sum game. Apologists of informality as a form of inclusion are saying that opening banks accounts as a measure of inclusion is not only myopic but limiting.

4. Since the start of Financial inclusion debate five years ago, one would have thought that GPFI as a peer learning and review forum would have had time to collect, collate and evaluate views as to recognize other parameters of inclusion as generously developed through the various debate forums. CGAP and CFI are powerful clearing houses of views and an ardent reader can see that there are many pertinent views which cannot be ignored that cry for recognition of informality as a frontier that, well addressed can feed into the so desired formal inclusion. By informality I mean the myriad informal financial services that the poor are engaged in.

5. Reading this framework of inclusion indicators, it appears as a case of formal financial institutions and its advocates thinking about how to include more of their own- those already included- as opposed to seeking ways to include the excluded poor. Sample this ” formally banked adults, adults with credits by regulated institutions, formally banked enterprises, enterprises with outstanding loans or lines of credit with regulated institutions”. Where does that leave all the micro and small enterprises run by the poor that do not have bank accounts? Shall the inclusion measurement be accurate without all those who are already within the financial system but do not fit within the formal measurement yardstick? There is a need to cut a path across the dichotomy and build consensus instead of going ahead and creating imbalanced criteria of inclusion measurements.

6. Pre-occupation with measurement sounds like putting the cart before the horse. Attention seems needed in creating ways of bringing the excluded poor into the inclusion limelight before taking the scale to measure them. It is more fulfilling to measure what we have driven in. The Bear needs to be killed before its skin is weighed. If the poor don’t want to open bank accounts, we should be busy finding out why and what should be done to have them open accounts in droves if we are still fixated with that as an inclusion parameter. GPFI may find herself holding the scale with nothing to measure.

We on the ground are saying that we have so many poor people who are enjoying their informal financial services which, given a boost can create a second tier financial inclusion base. The poor are saying that their ASCAs are good enough and serve them well and they are not going to drop them for bank accounts that do not serve them just to be given an inclusion number. If having worthless bank accounts is what will make them participate in the inclusion census, they would rather be uncounted. They want their local shylock to be capacity built so that he can drop the interest rates and serve them better as he is always close to them and ever available at a walking distance. The shylock’s expensive money is compensated by the convenience and understanding. If a shylock goes to the bank seeking money to on-lend, no banks will touch him without formal security. None would consider his two cows for security or even the several huge trees in his land. Help impossible, he would sell his bull to increase his lending capital. The poor want to be shown how they can save money in their phones and access their savings when they need rather than walking long distances to be served by unfriendly bank tellers who are happy to charge them for withdrawing their money. They want their savings in goats, cows, friends, relatives recognized as savings mechanisms that meet their needs. They are upset when their methods of savings are ridiculed by the salaried players in the financial sectors as backward and unsafe.They have homegrown social insurance mechanism which work and they need to be recognized and respected. Their mechanism has no small prints that their illiteracy does not allow them to read. What the poor want is improvement in their terrain infrastructure so that they are able to take their farm yield to the market which increase their revenue to help them expand and diversify into the many opportunities within their terrains. They want the goat thief to be arrested and the local mugger put behind bars so that they can run their micro-businesses in peace. Their needs are basic and perhaps they wonder why we are so preoccupied with formal inclusion to take care of credit, savings, insurance and investments, areas they navigate well so far. They just want small boosts here and there and they do not seem to understand the esoteric language that this financial inclusion is. It’s only that they are polite, otherwise they may ask” who told you we want to be included?”

Sonja, thank you for the post and its awareness that triggers these queries.

It’s wonderful that you are getting thoughts from this piece of writing as well as from our dialogue made here.