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financial inclusion

The 2014 Global Findex

Asli Demirgüç-Kunt's picture

The Little Data Book on Financial Inclusion I’m thrilled to announce the April 15 launch of the 2014 Global Findex database, the world’s most comprehensive gauge of global financial inclusion. Drawing on interviews with almost 150,000 adults in over 140 countries, the Global Findex tracks worldwide changes in account ownership and explores how adults save, borrow, make payments, and manage risk. Financial inclusion, measured by the Global Findex as having an account that allows adults to store money and make and receive electronic payments, is critical to ending global poverty. Studies show that broader access to, and participation in, the financial system can boost job creation, increase investments in education, and directly help poor people manage risk and absorb financial shocks.

Our research updates the first Global Findex database, which the World Bank launched in 2011 in partnership with Gallup, Inc. and with funding from the Bill & Melinda Gates Foundation. Their continued support made it possible to add new features to the second edition of the database, including more nuanced questions on mobile banking and an extended module on domestic payments. The 2014 Findex for the first time sheds light on how adults use accounts — and what can be done to have people become more active users of the financial system.

There is much good news to report…. But to learn the details, you’ll need to follow our data launch during the annual World Bank-IMF Spring Meetings.

Financial inclusion: Stepping-stone to prosperity

Sri Mulyani Indrawati's picture

In Pakistan, Salma Riaz, right, shows Saba Bibi how to use her new cell phone to receive payments. © Muzammil Pasha/World BankTwo and a half billion people in the world do not have access to formal financial services. This includes 80% of the poor — those who live on less than $2 a day. Small businesses are similarly disadvantaged: As many as 200 million say they lack the financing they need to thrive.

This is why we at the World Bank want men and women around the world to have access to a bank account or a device, such as a cell phone, that will let them store money and send and receive payments. This is a basic building block for people to manage their financial lives.

Why is this so important? Financial inclusion helps lift people out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contributions to society. And it will help governments provide more efficient delivery of services to their people by streamlining transfers and cutting administrative costs.

A step out of poverty

Studies show that access to the financial system can reduce income inequality, boost job creation, and make people less vulnerable to unexpected losses of income. People who are "unbanked" find it harder to save, plan for the future, start a business, or recover from a crisis.

Being able to save, make non-cash payments, send or receive remittances, get credit, or get insurance can be instrumental in raising living standards and helping businesses prosper. It helps people to invest more in education or health care.

'Understand clients': The major theme from a World Bank forum on microcredit

Erin Scronce's picture



The conference panel of leading scholars and practitioners on microcredit: From left to right: Esther Duflo, Kate McKee, Lindsay Wallace, Carol Caruso, and Peer Stein.
Photo credit: Michael Rizzo.

On Friday, February 27, researchers, policymakers, investors and practitioners joined forces to move forward in the dialogue around microcredit’s impact on the lives of the poor. Many themes emerged from the day, but perhaps the most salient came from Dean Karlan, who summed things up in 2 words: “Understand clients.”



The Evidence

The conference began with six presentations from researchers Orazio Attanasio, Abhijit Banerjee, Jaikishan Desai, Esther Duflo, Dean Karlan and Costas Meghir, who completed randomized control trials (RCTs) in six countries examining the impact of microcredit. Lindsay Wallace, of the MasterCard Foundation, noted, “These studies may not be new, but they are incredibly important.” While specific findings varied from country to country, the studies confirmed with evidence what many in the field already assumed: that, while microcredit can be good for some, it is no magic bullet for tackling poverty.



 

Broadening the Discussion of Microcredit Impact

Erin Scronce's picture



On Friday, February 27, CGAP, IPA, JPAL and the World Bank will host a full-day event to share the latest evidence from six randomized controlled trials across six countries. The event will feature the results presented by the researchers themselves, followed by a discussion on what this evidence means for policy and practice.

The impact of microcredit has been widely debated for the past decade, and has been both vilified and celebrated as a development tool. This new set of RCTs goes a long way toward confirming what many have suspected, but argued without much evidence, in recent years: that while microcredit can benefit some, the effects on poverty are modest, not transformational. Microcredit is but one tool in a multi-dimensional approach to addressing the multi-dimensional nature of poverty.

Reflections on social protection and poverty alleviation from the long term impact of Chile Solidario

Emanuela Galasso's picture
Productive inclusion is the buzzword taking shape in social policy circles in Latin America, and other middle income countries. Graduation out of social assistance does not equate with (or presume) a sustained exit from poverty.

As many middle-income countries are moving towards embracing cash transfers with or without co-responsibilities attached (and the recent hype of handing cash directly to the poor), there is an important wave of programs that provide “cash plus” intervention.

Towards a world that counts: an ID for every woman and every child

Mariana Dahan's picture

This week, the World Bank is hosting the Data2X and the Gender Data Revolution event to draw attention to some of the most disturbing issues in development. Too many people are still uncounted. Too much data is out of date, unreliable or simply not available. Too many people are not able to access and use the data they need to make informed decisions and hold others accountable.

Lack of data on women and girls has hindered efforts to advance gender equality and design evidence-based policies that can lift the multiple constraints holding them back – and shed light on many aspects of their work, health, economic status, financial inclusion, ownership of and control of assets, access to services, voice, and agency. In many countries, particularly in the developing world, these data simply do not exist.

Created by former U.S. Secretary of State Hillary Clinton,Data2X is an exciting initiative that aims to build new partnerships to improve data collection and demonstrate how better data on the status of women and girls can guide policy, leverage investments and inform global development priorities.

All over the world, women are denied basic services and protection of their rights because of deficient civil registration and national identification (ID) systems. Lacking records of their birth and civil status, they are excluded from health coverage, schooling, social protection programs, and humanitarian response in emergencies and conflicts.

Means versus ends: Deconstructing the Sustainable Development Goals and the role of identification

Mariana Dahan's picture
The post-2015 development agenda is being shaped as we speak. The United Nations recently released a report that synthesizes the full range of inputs received from various stakeholders. These inputs, among which the ones from the World Bank Group, are a substantive contribution to the intergovernmental negotiations in the lead up to the September 2015 Summit that will officially launch the new Sustainable Development Goals (SDGs) agenda.

But today, with 17 goals and 169 targets, the SDGs are a big mouthful for the global development community to chew on, let alone to digest. Some see a risk that they will be simply unimplementable.

However, the problem becomes a little more manageable if we reflect on the means towards the goals. Not all of the goals are unrelated. Measures towards some targets can open up new ways to achieve others. 

Consider, for example, target 16.9: By 2030, provide legal identity for all, including birth registration. These are actually two different, though related, targets as explained in the recent working paper by the Center for Global Development. Regardless the modalities to achieve it, the recognition of legal identity – together with its associated rights – is becoming a priority for governments around the world. Although there is no one model for providing legal identity, this SDG would urge states to ensure that all have free or low-cost access to widely accepted, robust identity credentials.[1]

With legal identity – including name, nationality and recognized family relationships – one of the basic human rights set out in the Declaration of Human Rights and the Convention on the Rights of the Child can be achieved and target 16.9 can stand on its own merits.

Mind, Society, and Behavior – and Financial Inclusion

Douglas Randall's picture

Like many World Bankers, I took some time recently to look through the newly released 2015 World Development Report “Mind, Society, and Behavior.” From my perspective, in the Finance and Markets Global Practice, one thing jumped out immediately: The report is packed with insights that are directly relevant to our work on financial inclusion.

In the Overview alone, the reader is met with an abundance of findings related to consumer protection, financial capability, savings and other key topics involving financial inclusion (grouped together under the theme of “household finance,” which is fully explored in Chapter 6). We’re told of how changes to the framing of payday-loan terms dramatically altered borrowing behavior in the Unitedc States; how embedding financial messages in an engaging television soap opera in South Africa improved the financial choices of viewers; and how SMS reminders increased saving rates in Bolivia, Peru and the Philippines.

Of course, this is not the first body of work to summarize key behavioral lessons learned from decades of careful research on financial inclusion: See, for example, Chapters 6-9 of Banerjee and Duflo’s Poor Economics or the Bank’s 2014 GFDR on Financial Inclusion.) But these examples do help drive home the key message of the report: Paying attention to how people think, and to how history and context shape their thinking, can improve the design and implementation of development policies and interventions that target human behavior.

The report highlights that psychological impulses such as present bias, loss aversion and cognitive overload can lead to poor financial decision-making. For those in or on the edge of poverty, the ramifications of these poor decisions – low savings, chronic over-indebtedness, investment shortsightedness – can be devastating. We are reminded that most adults in developing economies do not benefit from the sophisticated financial tools such as automatic salary deposits, mandatory retirement contributions, or default insurance programs that help mitigate the effects of automatic thinking.

Yet, as outlined in Chapter 6, there are a range of interventions that have been shown to help address behavioral constraints on financial decisions in a developing-country context. Many of those interventions take advantage of what we know about the natural processes of the mind, using techniques such as framing, default settings and emotion persuasion to nudge people toward better financial decisions.

The GSMA Code of Conduct for Mobile Money Providers: Does It Go Far Enough to Protect Consumers?

Ros Grady's picture


The recently launched GSM Association Code of Conduct for Mobile Money Providers is a welcome initiative. There is increasing recognition of the economic benefits that digital financial services can bring, along with an understanding that achieving ambitious financial inclusion targets may well depend on their rapid rollout. Such targets are being proposed by the World Bank, under the Maya Declaration and in other forums.

At the same time, there is a recognition that consumer protection is a critical element in building trust in the use of such services. See, for example, Principle 4 of the G20 Principles for Innovative Financial Inclusion and the recently held Responsible Finance Forum, as well as the outcomes of the 2014 deliberations of the 2014 Global Partnership on Financial Inclusion.

The code of conduct will apply to “mobile money providers” and to “mobile money.” The former term is not defined (could a bank be a provider?), whilst the latter term has a broad definition that provides (in summary)  that “mobile money is a transformational service that uses information and communication technologies (ICIs) and non-bank retail channels to extend the delivery of financial services to clients who cannot be reached profitably with traditional branch-based financial services.” The example given (in summary) is an e-wallet, payments-related service.

The object of the code is expressed as being, in short, to support the continued development of the industry by:
  • "Improving [the] quality of services and customer satisfaction;​
  • "Facilitating the implementation of trusted partnerships; and 
  • "Building trust with regulators and encouraging the implementation of appropriate and proportional regulatory standards.


To support these objectives, there are eight principles dealing with safeguarding client funds; measures to combat money laundering and terrorism financing; monitoring of staff, agents and entities providing outsourced services; reliable service provision; security of the mobile network and channel; the provision of information to customers; complaints and personal data.


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