Photo: GBA Stock Image
As a global community, we’ve made great strides toward achieving the World Bank Group’s goal of universal financial inclusion by 2020. According to the Global Findex, 700 million people gained access to formal financial services between 2011 and 2014. This is equivalent to nearly the entire population of Europe. But the latest numbers from the Global Findex also revealed a startling fact: The gender gap in financial inclusion remains stubbornly intact, with women in emerging economies 20% less likely to have a bank account than men and 17% less likely to have borrowed formally.
Women who lack access to financial services face a number of related obstacles, including lower income and business growth, lower asset ownership – making it harder to borrow – and lower levels of financial capability. These factors, combined with increasing financial responsibility for their households, make . Recognizing that commercial banks can and must play a vital role in closing the financial access gender gap, the Global Banking Alliance for Women (GBA) made a commitment in April 2015 with a subset of its members – Banco BHD León of the Dominican Republic, Banco Pichincha of Ecuador and Diamond Bank Plc of Nigeria – to provide financial access to 1.8 million previously unbanked women in Latin America and Africa by 2020.
Joint Development Bank's ATM, Lao PDR. IFC Photo Collection
While some 700 million people have gained access to a transaction account between 2011 and 2014, there are still about 2 billion adults in the world who lack access to transaction accounts offered by regulated and/or authorized financial service providers. The increased role that non-banks play in financial services, particularly in the payments area, has contributed to making them available and useful to many people who were previously locked out of the financial system.
There is broad recognition that financial inclusion can help people get out of poverty as it can help them better manage their finances. Access to a transaction account is the first step in that direction. A transaction account allows people to take advantage of different (electronic) ways to send or receive payments, and it can serve as a gateway to other financial products, such as credit, saving and insurance.
Payment services are usually the first and typically most often used financial service. Understanding how payment aspects can affect financial inclusion efforts is important not only for the Committee of Payments and Market Infrastructures (CPMI) of the Bank for International Settlements and the World Bank Group, but for all stakeholders with interest in increasing financial access and broader financial inclusion.
I am pleased to announce the release of the 2014 Global Findex microdata, which includes individual-level responses from almost 150,000 adults around the world. You can download it all here.
Drawing on interviews with adults in 143 countries, the 2014 Findex database measures account ownership at banks and other financial institutions and with mobile money providers, and explores how adults save, borrow, make payments, and manage risk. For each of these countries, the microdata unpacks about 1,000 individual-level survey observations.
With this data, which was collected by Gallup, Inc. in calendar year 2014, you can dive deeper into the indicators presented in the main Findex database. For example, the country-level indicators explore the income gap by looking at adults in the poorest 40 percent and richest 60 percent of households, but the microdata splits it into quintiles. The microdata also covers topics that weren’t included on the country-level, such as unbanked adults' reasons for lacking an account.
I hope you will make good use of the data, and share your findings with us on Twitter @GlobalFindex.
The survey results indicate that 55% of respondents in the Philippines report not having enough money to pay for food or basic necessities and 26% say that this is a regular occurrence. Estimates derived from the survey data indicate that about 23 million adults making financial decisions face this situation.
The majority identify lack of income as the main reason for running short of money for basic necessities. Among households earning less than 10,000 Pesos ($217), 62% report lack of income as the reason. Somewhat surprisingly, 64% among those with income of 50,000 Pesos ($1,086) or more also say that lack of income is the reason for not having enough money for basic necessities.
Financial products must be adapted to women’s needs, like enabling them to open their own account or improving their financial literacy. Photograph: World Bank Photo Collection
Two billion people worldwide still lack access to regulated financial services. Despite significant progress and the increased technical and financial resources devoted to financial inclusion, much work remains ahead.
There is broad consensus that access to a transaction account can help people better manage their life and plan for emergencies.
But financial access and the underlying financial infrastructure taken for granted in rich countries, such as savings accounts, debit cards or credit as well as the payment systems on which they operate, still aren’t available to many people in developing countries. This past September, I participated in the Global Policy Forum of the Alliance for Financial Inclusion (AFI) held in Mozambique. This annual meeting convened policymakers, the private sector and other stakeholders to assume new commitments, discuss best practices and agree on the way forward.
This post is part of a series highlighting the key findings of the Global Financial Development Report 2015 | 2016: Long-Term Finance. You can view the entire series at gfdr2015.
The second part of Chapter 2 of the 2015 Global Financial Development Report examines the use of long-term finance by households. The section first discusses the main reasons that households use long-term finance products, while highlighting the risks inherent to their use. Making use of recent data initiatives, it then shows how usage of long-term finance varies substantially both across and within countries, and then outlines a set of policy recommendations that can help develop and promote long-term finance markets.
Why would households use long-term finance? And what are the risks they can incur?
Long-term finance offers households various tools to achieve their changing objectives throughout their life-cycle. Products such as pensions, insurance, or annuities can help households prepare for retirement, smooth their life cycle income, and insure against various life cycle risks. Student loans or mortgages can make lumpy but potentially high-yield investments affordable to households. Long-term savings instruments can allow households to accumulate and reap term premiums.
These are some of the views and reports relevant to our readers that caught our attention this week.
What Future For Emerging Markets?
Long before the current market debacle, I was confronted with a fundamental question about emerging markets. As I was finishing off my course at the Yale School of Management on “The Future of Global Finance” this past May, a student came up to me. “You have gone to great lengths to emphasize the role of emerging markets in a changing monetary system, “ he said, “ but everything I have been reading says that the era of the Brazils, the Indias, the Turkeys, the Indonesias as up-and-comers is history. Even China seems to have lost its luster. Have you been looking backwards and not forward?”
How Africa can benefit from the data revolution
The UN has estimated that across the world more people have access to mobile phones than to toilets. It is of course distressing to imagine what this means for many people’s exposure to disease and access to clean water, but the choice of mobile phone for the comparative statistic actually offers a great deal of hope. The mobile phone is part of a phenomenon where a new infrastructure is emerging, one that could bring the economic changes that enable those toilets to be built. Our modern infrastructure is based on information. Since the 1950s, investment in data storage and distribution by companies and countries has been massive. Historically, data was centralised a single database. Perhaps one for representing the health of a nation, and another database for monitoring social security. However, the advent of the internet is showing that many of our existing data systems are no longer fit for purpose.
More than half of the world’s population lives in Asia and its robust growth is supporting the world economy. After weathering well the 2008 crisis Asia is now in the spotlight with currencies depreciating and capital markets in retreat. One widely voiced concern is rapid expansion of credit in the past decade fueled by abundant liquidity. Globally, and in Asia, regulatory response to the 2008 crisis has been to strengthen financial regulation and de-risk financial intermediation. Yet the reality of credit markets in most Asian economies is quite different from that in high income economies. While domestic credit by financial sector represented on average over 100% of GDP for high income OECD countries, emerging Asia’s average in 2014 stood at 60%. The differences across countries are substantial in this diverse region, but in two thirds of Asian economies domestic credit is less than 60% of GDP. The reality for most economies in Asia is that of limited and often inefficient financial markets which do not serve fully their growth needs. Low level of financial inclusion is a major contributing factor and a major challenge.