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> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published in The Guardian.
When the Global Findex, an unprecedented demand-side survey by the World Bank and Gallup, was released last year, it marked the first time financial inclusion statistics from the demand side were available on a globally consistent basis. The headline: 2.5 billion adults (including 59 percent of adults in developing countries) are “unbanked” — that is, they do not have an account at a bank or other formal financial institution.
Why is having a bank account the top indicator of financial inclusion?
Setting aside the obvious point that bank accounts are among the easiest indicators to track, the policy focus on “banking the unbanked” seems to rest on the premise that bank accounts have a special role in financial inclusion. Three important functions ascribed to bank accounts are: a place to save, a money management hub, and a way to establish an ongoing relationship with a formal financial institution (an “on-ramp” to other services). These assumptions appear to underpin much of financial inclusion thinking and policy.
If a bank account is a money management tool – a central node through which a person’s financial transactions flow – it will be used regularly. This is the way most people in the developed world (and, I suspect, most financial inclusion policy makers) use bank accounts. However, many accounts in the developing world are relatively inactive. Taking the frequency with which people make more than two withdrawals per month as a proxy for operating an account as a money management hub, the following chart divides the “banked” into low – and high – activity accounts.
> Posted by Sonja E. Kelly, Fellow, CFI
There’s a lot of data out there. And some of us are brave enough to use it (including you, my friend).
Recently we released an interactive Data Explorer tool and individual Country Profiles, allowing users to visually explore financial inclusion data in comparison with other development indicators in one central location. You can see our analysis of some of the data, but more importantly, we would like to invite you to explore the data for yourself.
For those interested in financial inclusion figures in specific countries, regions, or income groups of interest, visit Country Profiles. There we display data from the Global Findex along with demographic data relevant to understanding financial inclusion across the lifecycle. As we continue our own analysis of global trends, we will add figures on income, urbanization, technology, and more for each country.
Click on the financial inclusion bars to see a breakdown of the data by client segment, and use the tool to understand why or how people use financial services in particular countries. At the bottom of the page, you can interact with the demographic data by scrolling through the years to see past and projected population trends from 1950 to 2100. (This is very cool.)
> Posted by Jeffrey Riecke, Communications Assistant, CFI
In this decade, Africa is undergoing urbanization at a faster rate than Latin America, Asia, or anywhere else in the world. In these burgeoning areas, the majority of people are building their own housing, and doing so in an incremental fashion – adding what they can, when they can, and developing their facilities as their means allow.
There are a few big challenges to this. In Africa’s urban centers, there is a limited supply of affordable housing, and financial services to aid housing development are also scarce. Global Findex Data indicate that access to and usage of credit in sub-Saharan Africa is among the lowest in the world. Specifically looking at mortgages, a recent study from FinMark Trust revealed that across the populations of Zambia, Malawi, Botswana, and Tanzania, less than 1.5 percent of individuals utilize mortgages.
Enter microfinance. Typical mortgages don’t fit well with the financial profile of most Africans. Compared to microloans, they’re generally for longer terms, larger amounts, and they are less flexible. Most mortgages require clients to provide documentation of regular incomes. Many Africans operate in the informal sector and lack regular income streams. In Tanzania, for example, only 28 percent of the population is able to satisfy this income requirement.
> Posted by Eric Zuehlke, Web and Communications Director, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
The world is undergoing a profound demographic shift with big implications for financial inclusion, according to the new CFI report, Looking Through the Demographic Window: Implications for Financial Inclusion. The report is the first from Financial Inclusion 2020’s Mapping the Invisible Market, sponsored by MasterCard. This research project examines forces that are instrumental in the world achieving full financial inclusion by 2020 including demographic change, economic growth, technology, and more.
Our new Mapping the Invisible Market website features two cool interactive data visualization tools that show the relationship between financial inclusion and demography. Data Explorer is a dashboard that displays the information from over 80 indicators and geographic areas in bar charts, bubble graphs, and maps. Country Profiles allows users to explore any country or region’s financial inclusion and demographic profiles.
So what does the first report have to say? Poorer countries are experiencing lower birthrates and longer life expectancies, leading to larger working-age populations (see figures below). As the share of the population below age 15 and above 65 lessens, a “demographic window” opens for social and economic opportunity since fewer resources are required to care for these “dependent” populations. The window presents a significant opportunity for the developing countries of middle income where most of the world’s population lives. But, benefitting from the demographic window depends on access to quality education and sufficient economic and employment opportunities – and financial inclusion.
It is well understood that more developed countries are already beyond this stage, facing different challenges as their populations age. The working-age population is decreasing, creating more dependency as caring for older people requires more public investment and individual resources through health care. Not only is the working-age population decreasing, but older populations are living longer due to health care advances. In the poorest countries, the window has yet to open, as birthrates are still high and life expectancies low.
So what does this all mean for financial inclusion?
> Posted by Merene Botsio and Sonja E. Kelly, Financial Inclusion 2020 Project Coordinator and Fellow, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
People across the world are four times more likely to recognize the Coca-Cola logo than to have saved money in a formal financial institution in the past year. Almost everyone—94 percent of adults in the world—recognizes the Coca-Cola logo, whereas only 23 percent of people have saved at a formal financial institution. When we bring big statistics down to our everyday lives, it often becomes easier to understand their magnitude. Here are some other surprising figures that emerge when we compare the Global Findex numbers on financial services usage to other figures.* Read the rest of this entry »
> Posted by Center Staff
Top Picks is back from a long hiatus with posts on incorporating behavioral economics into financial service design, the potential for academic research in financial inclusion efforts, and the importance of quality data.
- A new post on Next Billion from Jake Kendall of the Bill & Melinda Gates Foundation offers insight into how behavioral economics can be used to improve money management. The post shares work from Ignacio Mas and Colin Meyer on building optimum mobile user-interfaces, includes a study on the effectiveness of basic finance heuristics over formal accounting training, and explores the potential of algorithms that interpret clients’ unique behaviors to better guide them towards financial goals. Read the rest of this entry »
> Posted by Sonja E. Kelly, Fellow, CFI
The G20’s Global Partnership for Financial Inclusion (GPFI) has just unveiled a “Basic Set” of indicators that help to solve the problem of how to measure financial inclusion. Their associated data portal will soon be available, too. This indicators release is timely—it corresponds to a massive increase in the amount of data that we have on financial inclusion, and it fills a need in the industry to define what we mean when we say “level of financial inclusion” in a measurable way.
The release also coincides with our own internal discussions here at the Center. Around the coffee pot, after meetings, and in blog posts, we have been wondering how to objectively measure and track financial inclusion. Beth Rhyne discusses the inadequacies of just using account penetration in her blog post “What’s Wrong with ‘Banking the Unbanked’?.” Ignacio Mas posits “Mobile Money as a (Payment) Planning Tool,” a use that is not tracked in the headline indicators of available data. Leora Klapper’s “We Bring You… DATA!” underlines how critical demand-side data is to complement supply-side data-gathering efforts.
While the Global Partnership for Financial Inclusion does not solve every measurement problem, it certainly is a great start. The “Basic Set” covers five indicators, each measured in multiple ways: individual accounts, individual credit, small and medium enterprise accounts, small and medium enterprise credit, and branch penetration. Read the rest of this entry »
> 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. Read the rest of this entry »
> Posted by Sonja Kelly
Let’s say you have a checking account with First Imaginary Bank. One day First Imaginary Bank wants product feedback because they are thinking of extending their product line. They might ask you to answer this question:
How do you feel about your checking account?
a) It’s great! I really like it.
b) It’s sufficient for what I use it for.
c) It’s sufficient, but I think I could find something better.
d) It’s awful, and I am planning on closing it as soon as possible.
The biggest problem with this kind of market research is that it only gathers information about the status quo, and only for one product. It does well by talking to the consumer, but it is so narrowly focused that we only find out about the preferences surrounding a particular checking account. It’s useful but only as far as the checking account is concerned. It gives First Imaginary Bank very little information about future products. Read the rest of this entry »
> Posted by Kadita “A.T.” Tshibaka, Board of Directors, Opportunity International
The World Bank and Gallup Poll’s “Global Findex” has only been out for a couple weeks now, and already I am seeing its use for my own work in the Democratic Republic of the Congo.
In the 1970s, I was privileged to be part of the team that launched Citibank in my country, the DRC, an experience that was to become useful for another start-up in the Cote d’Ivoire and later, decades later, in Eastern Europe. My career in banking started in operations where cash and tellers were part of my responsibilities. While I was formally exposed to cash first hand, Citibank was a corporate bank in the DRC, with very limited offerings of individual deposit accounts.
This experience with Citibank, while useful and educational, contrasted in many ways with my experience in cash management as I was growing up. Read the rest of this entry »
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