The Group of Twenty Finance Ministers and Central Bankers (G20) is targeting financial inclusion through the G20 Development Working Group (DWG), which is in the process of finalizing an agenda for its 2014 goals. The DWG focuses on developing an agenda for tackling development challenges, with the intent to remove constraints to sustainable growth and poverty alleviation. Recently, through our participation in InterAction’s G20/G8 Advocacy Alliance, CFI teamed up with other non-profits in the financial inclusion community to develop a set of recommendations for G20 leaders. While the Alliance and DWG span a diverse range of issues, our focus was, of course, on financial inclusion.

Our recommendations to the G20 were developed in coordination with CARE International UK, the Grameen Foundation, the Cherie Blair Foundation for Women, HelpAge USA, and the Microcredit Summit Campaign, among others. They urge governments to implement national strategies for financial capability and client protection, ensuring that these strategies and targets address a full suite of financial services and include underserved groups. You can read the full set of recommendations and contributing organizations here.

Last week we had the opportunity to discuss our recommendations with senior leadership from the Australian G20 presidency. As you may know, the G20 Presidency rotates each year, and this is Australia’s year. Each presidency takes a lead in setting the agenda and priorities, which are then discussed and (ideally) implemented by all G20 members.

The G20 Australian presidency issued a global development agenda, which was supported by the DWG. It highlighted two major outcomes for 2014 related to financial inclusion and remittances. We were happy to see an expressed desire to move beyond a focus on cost reduction for remittances, where there has been a great deal of progress, to maximizing the potential of remittances to increase financial inclusion.

During the meeting, our financial inclusion team brought three key points to the conversation:

1. No Financial Inclusion without Financial Capability. An example illustrating this point is CARE’s work with village savings groups for women. In order to ensure that women will benefit from the new formal financial services made possible when savings groups are linked to banks, we must ensure that the women will have the combination of knowledge, skills, attitudes, and ultimately behaviors that translate into sound financial decisions and the appropriate use of the new formal services. The methodology of savings groups is conducive to teaching members about financial services. While the G20 has been supportive of financial capability building efforts, we are calling for countries to incorporate lessons from behavioral economics and also ensure that government-to-person payments promote financial capability.

2. One Product Does Not Mean Full Financial Inclusion. Along with its support of financial capability, we’d like to applaud the G20 Development Working Group’s focus on remittances and migrants (one of the vulnerable groups we’ve identified in our Financial Inclusion 2020 (FI2020) project). But let’s not look at remittances as a stand-alone product. Remittances can be an on-ramp to additional financial services. In our FI2020 consultative process, Developing Markets Associates shared one innovative model with us, which provides financial counseling to remittance recipients, encouraging them to open a savings account.

3. National Strategies Should Focus on the Most Vulnerable Populations Backed by Data. While the current development agenda references vulnerable groups, such as youth, women, and migrants, we asked that the DWG also include the following groups: persons with disabilities, older adults, the extremely poor, rural households, refugees, subsistence farmers, and the LGBT community. We highlight a particular population that is growing in importance: older adults. In fact, older adults are the fastest growing population in the world and by 2050 will reach 2 billion people. In this light, when countries develop national strategies for financial inclusion, they need to make sure that vulnerable groups are fully considered. To ensure that we are doing this, countries should track data for each vulnerable group.

During the meeting, we learned that the G20 Development Working Group is working with the Global Alliance for Financial Inclusion (GPFI) to push the development agenda beyond government stakeholders to include private sector players (e.g. telecommunications companies, technology providers, insurance providers, private banks, NGOs). This is a new step for the GPFI, which has traditionally focused on government stakeholders. We agree with the new orientation. The promotion of public-private partnerships will be vital to increase financial capability building and create on-ramps to financial inclusion.

We encourage you to review our recommendations and comment if you would like to suggest other priorities for the G20 Development Working Group.

Image credit: G20

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G20 Financial Inclusion Indicators: The New Data Sandbox

Financial Inclusion and the Post-2015 Development Goals

What Is “Financial Capability?”

Remember when you were young, and a sandbox presented an opportunity to build your own castle? The GPFI (the Global Partnership for Financial Inclusion) Basic Set of Financial Inclusion Indicators and its accompanying website is kind of like that—it offers a space in which users can customize and test their own definitions of financial inclusion through an interactive platform, building off of a set of key “ingredients” in the data world.

We’ve talked before about the GPFI’s “Basic Set,” but we wanted to be sure to highlight it again, given the attention that it has received over the past few weeks alongside its official release on April 21 at the 2013 World Bank Spring Meetings.

In offering this service, the GPFI addresses one of the biggest challenges in financial inclusion: measurement. We all seem to have a general definition of financial inclusion, but when it comes to operationalizing this definition, things get complicated. Should the use of financial services be an individual or a household measure? How can we parse out (and should we parse out) financial tools used for businesses from tools used for personal things? Are surveys run by international organizations the best source of data or are numbers reported by central banks more reliable? The Basic Set remains fairly agnostic on these questions, instead giving highlights from all of the data—SME, personal, supply-side, demand-side, international organization-led, and government-reported.

See, for example, the diversity of indicators in the GPFI Basic Set as applied to sub-Saharan Africa. “Accounts” includes a demand-side (individual) measure of accounts, SME accounts, and both measures for women in particular.

The recent explosion of data in the financial inclusion space can make it difficult to know where to go for the numbers you need. The GPFI, however, puts all of the data into one central location. Within the platform, you can download the visualizations, share indicators, and download and save the data (all using the World Bank’s DataBank platform).

Most importantly for those of us who cannot seem to get enough data on financial inclusion, this Basic Set will be giving rise to a more robust set of financial inclusion indicators, including nuanced data specific to certain country contexts, financial inclusion regulations, and more. So watch this “sandbox”—there is more to come!

For an overview of the Basic Set, click here. To explore the data, visit the GPFI here.

Image credit: GPFI

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Measuring Financial Inclusion: The “Basic Set” Solution

We bring you… DATA!

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.

Image taken from “The G20 Basic Set of Financial Inclusion Indicators” by GPFI.

This amalgamated dataset recognizes a few critical challenges in the exercise of measuring financial inclusion:

• The measurement of financial inclusion must take into account both supply side and the demand side of finance. Accordingly, the “Basic Set” of indicators pulls from demand-side sources (the Global Findex and the World Bank Group Enterprise Surveys) and pairs them with supply-side sources (the IMF Financial Access Survey) within the same categories (see the “Indicators” column above).
• Financial inclusion is more than access to accounts. While the GPFI “Basic Set” does not include all indicators (mobile phones, for instance), it does include individual credit, SME credit, and SME accounts.
• In addition to use, financial inclusion measures should include availability of services. As a measure of penetration of points of service, the GPFI uses the number of branches per 100,000 adults from the IMF Financial Access Survey.
• People access financial services for both business and personal use. The “Basic Set” consists of both individual and small and medium enterprise use of formal financial services in addition to tracking both the supply and the demand side.

For more information, head over to the Global Partnerships for Financial Inclusion’s website, which will soon include the “Basic Set” of indicators data portal, complete with visualizations of the different datasets. We look forward to continuing to watch how the industry asks the question of how to measure and track financial inclusion.

Image credit: GPFI

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Financial Inclusion 2020: Are we out of our minds?!

> Posted by Susy Cheston, Senior Advisor, 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 Financial Inclusion 2020 campaign begins with an audacious premise: that it is possible, if all the stars align, to achieve full financial inclusion for all with quality financial services by the year 2020. Yes, that would take quite a few stars to line up perfectly, but here are my top seven reasons for optimism as we work to advance inclusion.

1. There are more mobile phones than toothbrushes in the world today.

Bad news for dental health, but good news for billions of previously excluded clients who have access to a device that can include them in financial services if the mobile money folks play their cards right. With mobile subscriptions exceeding 86 percent of the global population, there is great promise if providers can figure out the business models.

2. Big private sector players are making big plays in the market.

Visa’s new focus is to be the best way to pay and be paid for everyone, everywhere. For Visa, financial inclusion is a business strategy, not a social mission—and for a publicly held company, that means serious business. MasterCard has followed suit, and Western Union is promoting a vision of financial inclusion and financial dignity. Fast Moving Consumer Goods companies (FMCGs) buy from and sell to the customers who make up the “invisible market” that is excluded from financial services. Wal-Mart launched Banco Wal-Mart in Mexico in 2001, but FMCGs can have an impact on this market in other ways, too.

3. Microinsurance is exploding.

The ILO reports that microinsurance has increased by a factor of 6.5 in the last five years, now reaching half a billion people. Thirty-three out of 50 of the largest insurance companies in the world offer microinsurance today, up from only seven in 2005. The potential market for microinsurance, according to Lloyds, is between 1.5 billion and 3 billion policies. (See here for a good summary article from which I drew these facts.)

4. The Maya Declaration is building momentum.

Countries from Armenia to Vanuatu have made specific commitments to implement the Maya Declaration, a signature initiative launched last year by the Alliance for Financial Inclusion. The declaration commits countries to create and implement regulatory frameworks that balance inclusion, stability and integrity, and is one of a number of promising signs of regulatory breakthroughs. With AFI facilitating peer exchanges and knowledge-sharing to ensure that more countries can build on the examples of the Philippines, Kenya, Peru, and others, an enabling space will be opened up to allow providers to enter new markets.

5. The G20 embraces financial inclusion as a “main pillar of the development agenda.”

The G20’s focus on financial inclusion data and SME Finance could be helpful, but I’m especially interested in their work on integrating financial inclusion into existing standard setting bodies such as the Basel Committee on Banking Supervision (BCBS) and the Financial Action Task Force (FATF).

6. The power of…data! 

I have a dream that simply having good information about who is included and excluded in financial services will inspire policymakers and providers to reach these invisible markets. At the very least, I hope market researchers are having a field day with the rich data in the new Global Findex. And “big data” is changing credit reporting. Technology companies are creating algorithms that capture alternative data on people who are currently excluded, such as call log data, utilities payment histories, and patterns of topping up prepaid phone cards. Will they provide a big opportunity to create credit histories for millions who have been excluded?

7. The Better Than Cash Alliance is spurring the move toward electronic payment systems.

If governments, the private sector, and the development community can distribute more of their billions in payments through electronic means, recipients of direct deposit payrolls, social benefits, pensions, and humanitarian aid will have an entrée to formal financial institutions. The trick will be making sure this is truly an on-ramp to other financial services. With heavy-hitters such as the Bill and Melinda Gates Foundation focused on just this kind of issue, I’d count this as a reason for optimism.

For more information on Financial Inclusion 2020, sign up for campaign updates.

Image Credit: USAID

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