Measuring Financial Inclusion around the World

September 30, 2009    

As policymakers grapple with the need for appropriate reforms in response to the global credit crisis, the need for understanding the forces at work highlights the importance of having access to comprehensive, rigorous, timely and appropriate financial information.

CGAP is providing this resource through a new report, Financial Access 2009, which contains a sweeping array of data gathered through a survey of financial regulators in 139 countries.
The report, to be released shortly, will be a key resource for policymakers, financial regulators, and finance institutions who need reliable and comprehensive data on access to financial services

The survey regularly collects data from a set of standardized indicators for all of the financial institutions in a country, including the number of deposit accounts and loans, the number of people holding them, and the number of access points to financial services, such as branches, agents, and automated teller machines.

”Survey results thus far indicate that about 70% of adults in developing countries still are excluded from the regulated financial system, despite years of growth in financial sector,” says Report’s lead author Nataliya Mylenko. “As policymakers embark on reforming their financial systems following the crisis, they need to realize there is also a great opportunity to design policies that support financial stability and promote financial inclusion.”

“The Financial Access report can be a useful tool in reform efforts as it reviews financial inclusion policies worldwide and can serve to promote debate on financial access topic,” Mylenko says.

For many policymakers around the world, the issue of financial inclusion – providing financial services for all – had risen on both national and international agendas, highlighted by the emergence of microfinance as an effective vehicle for putting financial services in the hands of the poorest people.

But in order to design effective policies and track their outcomes, policymakers need to see up-to-date, comprehensive, and internationally-comparable indicators. Some countries have relied on household surveys to collect information on financial access, but to get a more complete picture these data need to be complemented by other sources. To address these gaps, CGAP’s Financial Access team collected detailed information from the main financial regulators in 139 countries the first step toward providing more comprehensive data on global financial activity. 

CGAP asked regulators to provide their data grouped into four categories of regulated institutions: banks; cooperatives and member-owned organizations; specialized state-owned financial institutions; and microfinance institutions.

The resulting report examines the ways various countries seek to promote access to deposits, loans, and other financial services, the successes and challenges they have faced, and emerging trends such as the growing use of branchless banking.

Experience with the survey revealed the considerable challenges still ahead of those trying to gather and understand the most relevant and important information in this field. The best indicator for measuring access to financial services is the number of depositors and borrowers, rather than the number of accounts or loans given any one person can hold several accounts.

However, only 30 of the 139 countries surveyed have data on the number of borrowers and just 27 on the number of borrowers. More countries have data on the number of deposits is only available in 83 of the surveyed countries, and on loans in only 63 countries.

In the area of microfinance, data collection is made even more challenging as measuring microfinance is not necessarily defined by the type of institution but by the market segment they serve. In some countries, such as India, Kenya, and Indonesia, banks are often active players in microfinance markets.

The Financial Access 2009 survey is a significant step toward more comprehensive understanding of financial access, highlighting both what is known, and what more we need to know, about this critical sector.