Aiding the digital revolution in global financial inclusion


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"Expanding people’s access to finance, reducing the cost of digital transactions, and channeling wage payments and social transfers through financial accounts will be vital to mitigating recent economic setbacks in developing countries. Governments and the private sector can help further this transformation in several ways."

Around the world, high inflation, slow economic growth, and food shortages are hurting the poor the most. Coming on top of the unequal effects of the COVID-19 pandemic, today’s multiple crises have already caused dramatic reversals in development and led to a substantial increase in global poverty.

On the positive side, the COVID-19 crisis spurred unprecedented change, especially in industries with a large digital component . This digital revolution has catalyzed increases in access to and use of financial services in developing economies, transforming how people make and receive payments, borrow, and save. 

These changes are strikingly evident in the latest edition of the Global Findex database, compiled from a survey of more than 125,000 adults in 123 economies, covering use of financial services throughout 2021. The survey found that 71% of adults in developing economies now have a formal financial account – whether with a bank, another regulated institution such as a credit union or microfinance lender, or a mobile money service provider – compared to 42% when the first edition of the database was published a decade ago. In addition, the difference in the share of men and women in developing economies who own an account has fallen for the first time, from nine percentage points to six. 

This digital transformation makes it easier, cheaper, and safer for people to receive wages from employers, send remittances to family members, and pay for goods and services. Mobile money accounts can better handle high-volume, small-denomination transactions, which help users to access financial services and save in order to cope better with crises. Individual accounts also give women more privacy, security, and control over their money.

The share of adults in developing economies who make or receive digital payments grew from 35% in 2014 to 57% in 2021 . In Sub-Saharan Africa, 39% of mobile money account holders now use their accounts to save. And more than one-third of people in low- and middle-income countries who paid a utility bill from an account did so for the first time after the start of the COVID-19 pandemic.

Importantly, the digital revolution also serves as a powerful anti-corruption tool, because it helps to increase transparency as money flows from a government’s budget to public agencies to citizens . Government social programs can now reduce delays and leakage by channeling transfers directly to their beneficiaries’ mobile phones. Millions of people in developing countries received payments in this way during the pandemic, helping to cushion the impact of COVID-19 on livelihoods.

Building on these encouraging trends is crucial, especially given the current economic headwinds. Expanding people’s access to finance, reducing the cost of digital transactions, and channeling wage payments and social transfers through financial accounts will be vital to mitigating development setbacks resulting from the ongoing turbulence.

Governments and the private sector can help further this transformation in several critical areas. First, they need to create a favorable operating and policy environment. For example, enabling the interoperability of systems allows for payments across different types of financial institutions and between mobile money service providers. Improving access to finance depends much more on the mobile-phone system than on the physical banking system. Cheap and functional mobile phones and affordable internet access are prerequisites for expanding digital finance. Consumer protections and stable regulations are also needed to foster safe and fair practices that bolster trust in the financial system.

Establishing digital-identification systems also is essential, because lack of verifiable identity is one of the main reasons why some adults remain excluded from financial services . We know from the experiences of countries such as India and the Philippines that government identification programs and financial-inclusion programs can work in tandem to equip hard-to-reach populations with official identification documents and financial accounts. India, for example, has pioneered a successful accessible digital ID system that pays due attention to safety and privacy.

Another high priority should be to promote the digitalization of payments. The Global Findex data for 2021 show that 865 million account owners in developing economies opened their first account at a bank or similar institution in order to receive money from the government. This helped households directly and also helped build the digital financial ecosystem, because people who received payments into an account were more likely to use their account to make payments and access other services. Digital payments by governments thus serve as a foundation for assembling credible social registers and identifying gaps and overlaps.

As digital payments become more widespread and less costly, many private businesses will be able to pay their workers and suppliers electronically – and should. The digital revolution offers a chance to increase formal-sector employment without making compliance excessively burdensome. At a time of tighter government budget constraints, digital payments can help broaden the revenue base by reducing tax avoidance and evasion.

Finally, policymakers will need to make additional efforts to include underserved groups. The gender gap in financial access has narrowed, but it still exists. Women, along with the poor, are more likely to lack a form of personal identification or a mobile phone, to live far from a bank branch , and to need support to open and use a financial account. Financial-education programs, especially those that involve peer-to-peer learning (such as through women’s self-help groups) are essential as well.

The World Bank is firmly committed to expanding financial inclusion through digitalization. We will continue to support countries as they enhance mobile-phone networks, rework regulations to foster access to finance, adopt e-government platforms, and modernize social-protection systems. For the many millions of people who still lack an account, we need to redouble our efforts and find creative ways to connect them to the financial system, build economic resilience, and reap the benefits of inclusion.

This piece was originally published by Project Syndicate on July 7, 2022


The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience

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Join the Conversation

Srijana Pandey
August 02, 2022

Country like Nepal really needs financial literacy esp for women enterpreneurs who does not have access to finance. Lack of literacy and documentation guidance financial institutions are not able to provide loans to them. The guidance in processing loans, the documentations involved, its repayment plans and risks involved in taking loans and consiquences of loan default, all these needs to be educated to Small and medium enterpreneurs for better financial planning and sustainability of thier business. Financial inclusion is the first step to economic independence, each women should have thier own access to thier bank accounts, atleast basic knowledge of digitalisation.
People still rely on private borrowings which is high cost and cannot sustain on a longer run. These smaller enterpreneurs needs to be connected to financial institutions for formal lending channels, guide them on technical knowhow, how risks and return can be calculated and how the business can be sustainable on a longer run.

Ms. Bella Anis
August 02, 2022

The lack of a new normal is probably the single salient feature of the world at the moment as we seek to manage the late stages of the pandemic and it's made it harder to forecast and manage demand because the routines and the regular rhythms of business are being disrupted unpredictably across different parts of supply chains globally. Improving the visibility of real time data, tracking and traceability would really make a difference and there are many digital solutions available to help but they are not widely implemented. Doing so would also really help improve stock control, reduce waste and manage materials price volatility, as well as giving companies more time to improve things like after sales service and customer satisfaction. Ultimately of course we want to encourage businesses to measure their carbon footprint and emissions too and then find new ways to reduce energy use - to help decrease the likelihood of heatwaves!

Joseph Walugembe
August 02, 2022

we also need to deal with issues to exclude some sections of society from digital financial products, such as the inaccessibility of digital platforms experienced by people with disabilities.

Motto Anthony Xa
August 02, 2022

There are lots of breaks, the say. The flow of currency that targets the underserved finds continuous huddles my community says this is slowing down the speed to help in financial/economic recovery plans extended by their own government and or the World Bank. Policy hindrances that limits what amount of money to be transacted on Mobile Money firms and the like. Is there any option available and currently being undertaken by the World Bank to prioritize and or promote robust digitalized payments? When will enterprises (small to medium sized business owners/entrepreneurs) be included in this kind of development or it is not applicable?

August 02, 2022

Digitalization is world Bank and instilled confidence for it activities

Mustapha Ellis Sani
August 02, 2022

The world must live to the standards and enforce the individual right, it is the stock of the people that is given to the various Governments, if they do not physically reflect on the individual needs, that means there are short comings in the way we operate, Economic basics must be the focus to reflect basic respect on the people's right, we have the smart phones! channelling some basics to the people must not be a problem. you must Stay blessed!

David Mayeku
August 02, 2022

Good job done, I think there should be a deliberate action of involving local SMEs to spur further the financial inclusion strategy

Burphy SORBO
August 02, 2022

Yes we need to work together for one world government