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> Posted by Amit Jain, Principal, Global Thought Leadership, MasterCard Advisors
The Financial Inclusion 2020 project 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.”
As an avid advocate of financial inclusion, I am deeply saddened by the fact that several hundred years after the first bank opened, 50 percent of the global adult population still lacks access to formal financial services.
The good news is that this may not be the case any longer. So I eagerly read the recent paper from Elisabeth Rhyne and Sonja Kelly from the Center for Financial Inclusion at Accion that talks about how growing incomes could lead to growing inclusion. I am glad that the authors have brought this phenomenon to the forefront.
I agree that rising incomes could be a key catalyst for elevating financial inclusion globally. I have experienced firsthand the tectonic shift in the income profiles and demand for financial services in India reflected in data from the United Nations Statistics Division. It shows that the percent of the population below the poverty line in India has dropped from 45 percent in 1994 to less than 30 percent in 2010. Read the rest of this entry »
> Posted by Center Staff
On Tuesday, in conjunction with the release of our second FI2020 Mapping the Invisible Market report, Growing Income, Growing Inclusion: How Rising Incomes at the Base of the Pyramid Will Shape Financial Inclusion, we hosted a live, interactive webcast with MasterCard. The webcast explored the relationship between rising incomes and financial inclusion, including the opportunity for inclusion presented by the emergence of the “vulnerable class.” The session also spotlighted the Mapping the Invisible Market interactive data tools (available here and here), as well as MasterCard’s work in supporting financial inclusion globally.
Hosted by MasterCard’s Nicole Ward, the webcast’s presenters were CFI’s Sonja Kelly and Elisabeth Rhyne, and MasterCard’s Tara Nathan. Here’s a few of the points that were made during the discussion.
- Rising incomes, changing demographics, advances in technology, and government engagement are factors that are coming together to further financial inclusion
- Global GDP has been growing for the past 30 years, with a projected increase from $61 trillion in 2010 to $85 trillion in 2020
- From 2010 to 2020, the annual income of the bottom 40 percent in low and middle income economies is projected to double, from $3.1 trillion to $5.8 trillion
- In many populous countries, the BOP will move into the vulnerable class in this decade
- At the country level, there is a strong correlation between income and financial inclusion, both in account ownership and account use
- There are many possible on-ramps to financial inclusion, including bill pay, G2P payments, no-frills accounts, and mobile money transfer
- The transition from informal to formal financial services depends on many factors, including income level, income flow, employment formality, and social relationships
- Incorporating the vast influx of new clients requires scaling up client protection and financial education
- MasterCard is working with the government of Nigeria on a national ID program to provide a single proof of identity that also has the ability to deposit, receive, withdraw, and pay
> Posted by Sonja E. Kelly and Elisabeth Rhyne, Fellow and Managing 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.”
This post is based on research from the Mapping the Invisible Market project published in the paper Growing Income, Growing Inclusion by Sonja E. Kelly and Elisabeth Rhyne. The paper was released today, and can be downloaded at mapping.financialinclusion2020.org/growing-income-growing-inclusion.
The World Bank, UN, and The Economist are all talking about it: growing income around the world. The UN’s goal to halve the number of people living in poverty by 2015 has already been achieved, and the media frequently spotlights growth in emerging markets contrasted with reports of malaise in the EU and US economies. In low and middle-income economies, it isn’t just the wealthy or the well-connected who benefit from this growth. Real incomes are rising among the poor, moving hundreds of millions of people from extreme levels of poverty into levels at which they begin to have more income flexibility.
Over the course of this decade, the bottom two quintiles in many of the world’s most populous countries will see movement into and even beyond the “vulnerable class,” defined as having an income of $4 to $10 per day. Read the rest of this entry »
> Posted by Syed Mohsin Ahmed, Chief Executive Officer, Pakistan Microfinance Network
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.”
At the Pakistan Microfinance Network, we are always in search of more data on financial inclusion in Pakistan. So imagine my delight when I heard about the Country Profiles feature on the Center for Financial Inclusion’s Mapping the Invisible Market website that features data from the World Bank Global Findex among other sources. My exploration of the Pakistan country profile page gave me some new insights and raised a few questions for future research.
First, a very high proportion of the people who took loans (largely informal) in the past year in Pakistan took them to deal with health and emergencies. Seventeen percent of all adults in Pakistan borrowed in the past year for health and emergencies, while only about 10 percent of the people in other middle income economies did so, even though in Pakistan, people are less likely to take out loans overall.
Reasons for taking out a loan
This observation makes me wonder if there is a pent-up demand for insurance in Pakistan. For a country that has seen a number of major disasters in the last few years, no doubt there is a great need for insurance products in Pakistan to help prepare for emergencies.
When I looked further at who it was that was taking out these loans (again, both formal and informal) for health or emergencies, I noticed that they were disproportionately rural, or poor, or to have only completed primary school. These observations offer a picture of what vulnerability looks like in Pakistan, and where financial inclusion efforts might be targeted for maximum impact.
Looking specifically at formal financial services, I found that the percent of people who have an account at a formal financial institution in Pakistan is quite low—10 percent—compared to the rest of South Asia—33 percent. In both, the number one use of accounts is to receive wages. Unsurprisingly, in Pakistan, education and gender have a great impact on the use of accounts—25 percent of people whose education level is secondary school or higher have an account compared to only four percent of people who have just a primary school education. Seventeen percent of men have an account compared to three percent of women. Read the rest of this entry »
> Posted by Meghan Greene and Sonja E. Kelly, Manager 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.”
What’s in a number? Part of the Center’s Financial Inclusion 2020 work is to think about how global trends affect financial inclusion demand—we’ve been doing so in our Mapping the Invisible Market work and in our exploration of the client perspective.
In this work, it can be useful to think in terms of age. In our demographic work we examined how a person’s stage in life might affect his or her demand for financial services. We also discovered that many developing countries have rapidly aging populations. But just how rapidly the populations are aging depends on the definition of old. When calculating dependency ratios (the ratio of those who are dependent to those who are in the working age population), the UN recommends the following definitions:
- “Child” is a person under the age of 15
- “Youth” is a person aged 15-24
- “Old age” is age 65 and above Read the rest of this entry »
> 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 Danielle Piskadlo, Senior Program Specialist, CFI
Many retirement plans in the United States ask, “What is your number?” Meaning, at which age do you wish to retire? It’s a question that implies it will be up to you – that you will decide when the time has come for you to leave the workforce. However, according to recent reports on National Public Radio (NPR), many older workers, especially in the United States, are being pushed out of the workforce and finding it increasingly hard to find employment. Perhaps retirement plans need to start asking, “At which age will you be forced to retire?”
The Center recently published Looking Through the Demographic Window, which highlights that in many middle income countries a demographic window is opening where there will be more workers than dependents, creating an opportunity for economic growth. One of the reasons there will be more people in the workforce is because people are living longer, and therefore, it is expected, working longer.
A recent blog post by Yuwa Hedrick-Wong of MasterCard points out that countries cannot always take advantage of demographic opportunities. He comments that in sub-Saharan Africa, where youth are the dominant demographic group, “without adequate investment in educating and providing health care for the young…all that a society can expect are demographic burdens of mounting youth unemployment and underemployment.”
Arguably, the same thing is true when the elderly become the dominant demographic group, especially in developed countries where jobs are becoming more and more specialized and technology focused. People are living longer and therefore are willing and able to work longer, but will they actually be a valued and welcomed segment of the workforce?
It seems that a few other trends may need to be considered when talking about an aging population and workforce, and chief among them are the rapidly increasing pace of technological changes, and the possible “ageism” that might accompany those rapid changes in technology.
> Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI
Happy International Women’s Day! I am pretty excited today because I get to wear both my gender and financial inclusion lenses. Year-in, year-out, on International Women’s Day I read posts probing universal progress in women’s political participation, engagement in the work place, and advancement in the boardroom, to mention but a few. Now, I wish to examine the state of women’s access to financial services globally.
Thankfully, the Financial Inclusion 2020 campaign recently launched the interactive Mapping the Invisible Market Data Explorer, so it is easy to put graphs together to examine women’s participation. My work is already half done! I won’t claim to be exhaustive in this post. What I offer here are snippets of cross-regional analyses on women’s access to savings, accounts, modes of payment, and other forms of financial activity.
Let’s start!
Not surprisingly, high-income countries have the greatest percentage of women having an account at a formal financial institution, standing at 87.4 percent. The Asia-Pacific region comes in second at 52.1 percent. The bottom two positions are occupied by sub-Saharan Africa and Middle East/North Africa (MENA) at 21.5 percent and 12.5 percent, respectively.
> Posted by Tanaya Kilara, Financial Sector Analyst, CGAP
The following post was originally published on the YouthSave Blog.
The Center for Financial Inclusion at Accion recently released fascinating demographic data through the Mapping the Invisible Market project, as part of their Financial Inclusion 2020 campaign. It sketches a picture of the world in 2020 building on existing economic and demographic data, and draws implications for financial inclusion.
I do a lot of work on youth. Some of the data really caught my eye and even challenged some of my assumptions about priorities for youth financial services.
Where countries are in their development cycle affects their demographic opportunities. The Least-Developed-Countries (accounting for 27 percent of population growth over the next decade) are entering the first window of opportunity for a demographic dividend as fertility rates fall and the labor force grows faster than dependent populations, freeing resources for development. A second window of opportunity occurs when this expanded workforce ages and people stay in the workforce longer, saving and investing for extended retirement, resulting in more assets which raises the national income and leads to economic growth. Most developing countries, accounting for 68 percent of population growth over the next decade, fall into this category.
(Developed countries, take note: the demographic window of opportunity is largely closed.)
What does this mean for financial inclusion? One conclusion to draw from this is that countries need different financial inclusion strategies to address the needs and priorities of the age segments that are dominant at a particular time. For example, most middle-income countries like South Africa and Mexico are entering the second window of opportunity for a demographic dividend. With their youth population entering into the workforce in the near future, both countries will need to focus on the financial needs of mature adults. For poorer countries, like Nigeria and Pakistan, where the youth bulge will remain prominent for the future, we can anticipate that financial services targeted specifically for the young will be in higher demand and have more impact.
> Posted by Yuwa Hedrick-Wong, Global Economic Advisor, MasterCard Worldwide and HSBC Professor of International Business, University of British Columbia
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.”
One common reason for getting excited about emerging markets in recent years is the notion of demographic dividends, because population growth is generally higher in developing countries with bulging younger age cohorts and few elderly people. This is supposed to be good for economic growth. Demographic dividends are usually explained in terms of higher population growth leading to an expanding working age population, which in turn means that the society can benefit from having more people who are both able to work as well as eager to consume. Such potential benefits have been conceptualized as a “demographic window” in a recent research report by the Center for Financial Inclusion, which argues that financial inclusion has a powerful role to play in capturing such benefits.1
The demographic dividends are seen as especially enticing during the phase in which high population growth is gradually being moderated by a dropping fertility rate, which reduces the growth rate of the very young while the working age population is still large and expanding. This has the virtue of lowering both the child dependency and the old age dependency ratios, with the result that the society is endowed with mostly people of working age with relatively few young and old people to support. Over time, a more mature working age population tends to save more, looking to their future retirement needs; consequently the society’s savings rate is raised, and a larger savings pool can in turn better support the economy’s investment needs. So far, so good.
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