When President Calderón of Mexico announced the creation of a National Council for Financial Inclusion, one of the first tasks he assigned was to ensure all financial data included statistics on financial inclusion:
“I would also like to urge the Minister of Treasury, in his capacity as Minister and as member of such Council, not to wait two or three years to conduct the financial inclusion surveys. … Every time the Minister receives financial information related to the country, there must be some financial inclusion data in it.”
We believe both policy making and private sector decision making is much improved when it is rooted in rigorous research and analysis. (In fact, rigor is one of the four values of The Bill & Melinda Gates Foundation). Better evidence can improve outcomes in a number of ways:
- Put a spotlight on the problem of exclusion at both the global and national level;
- Inform policymakers with data to support more effective policy making;
- Enable donors (including ourselves), governments, and service providers to better target their activities and gauge their impacts over time;
- Stimulate research into the barriers to financial inclusion and its relationship to macroeconomic growth, inequality, and poverty.
This understanding motivated our efforts to co-create the Global Findex, which we were very excited to see launch at the World Bank Spring Meetings.
Why the need for a new data set on financial inclusion?
Our initial landscaping in 2010 showed that, while there were a variety of data sources relevant to measuring financial inclusion, there were major gaps. In particular, the field lacked a dataset that measures access to financial services from the demand side across a broad number of countries, over time. The Findex fills this gap. Some of its unique features include:
- Surveys of over 1000 people in each of 148 countries (over 150,000 individuals surveyed worldwide, nearly every country covered, except those at war, civil strife, or tiny islands)
- Data on the individual respondents to identify the correlates of usage such as income, education, gender, and many other variables;
- Asking 20+ questions on savings, credit, payments, insurance product usage and behavior;
- Including questions to determine (i) active usage vs. simply owning an account (ii) whether the respondent is connected to payment system or not (iii) mode of access to convert cash to digital and vice versa (ATM, branch, agent, etc.) and (iv) using mobile phones to transfer money.
- Tracking over time is facilitated as the full questionnaire is repeated 3 times over 10 years, 2 questions on credit and bank accounts repeated every year and even quarterly in some countries within the next few years.
The Findex ”buzz” at the World Bank/International Monetary Fund Spring Meetings
The Findex generated a lot of interest and was cited prominently during the spring meetings. Outgoing World Bank President Zoellick’s remarks at the launch of Findex listed financial inclusion as a top priority, and drew attention to the size of the challenge of financial inclusion worldwide, with 78% of poor people not having access to an account. United Nations Secretary General’s Special Advocate for Inclusive Finance for Development, HRH Princess Máxima of the Netherlands, described the importance of this data for use into the policy making process. A feature story on the Bank’s website includes remarks from Zoellick and Melinda Gates as well as a video short about the survey.
What does the Findex tell us?
The World Bank team, led by Leora Klapper and Asli Demirguc-Kunt, wrote an initial report which discusses a variety of important findings from the data, many of which were cited in various press articles. For example, an Economist piece focused on the fact that the poor are not well served by existing financial options but that there is much room for policy to improve the situation. An LA Times piece focused on the potential of mobile to close the inclusion gap. A Forbes piece highlighted the data showing that anti-money laundering rules hurt the poor. And CNN’s piece described how being unbanked is linked in inequalities.
We’d like to draw attention to two additional interesting data points:
First, 38 percent of account holders in Africa reported receiving payments or remittances with their savings account. Anecdotal evidence indicates that for many people, receiving money and then withdrawing it is the only thing they use their accounts for (i.e. not for saving). This is a wasted opportunity both for banks and for the cause of financial inclusion. These are clients who are already bank customers and are already visiting banks to get their money and yet are not benefiting from any deeper financial relationship than to use banks as a service to move cash. This shows the lack of value clients often perceive in banks existing product offerings and is an opportunity that both banks and policy makers should seek to leverage through better products tailored to the poor, and through designing G2P payment programs with the goal of financial inclusion in mind.
Second, the data show that some of the main barriers to financial inclusion are those imposed by financial regulations. Lack of documentation was cited by many as a central reason for not having an account; especially in countries which require more documentation as indicated in the graphic above (some countries require more than 4 documents to open an account which adds unnecessary cost and hassle and can exclude those who – like many poor people – have no formal identification.) This is a barrier that is already being fixed in some countries.
Mexico recently introduced a “tiered” approach (described in an earlier CGAP blog) and Pakistan recently removed the requirement to have a fingerprint and instead only requires the national ID card which almost all Pakistanis have. Similarly, Haiti introduced tiered KYC procedures which allow lower value accounts to have a lesser client identification requirement (in fact, the lowest level account requires no formal identification documentation at all.)
These new approaches to regulation as well as innovations from banks and mobile companies give the poor the kinds of products and services they value, and point the way forward in banking the 78 percent of the poor who are currently unbanked. The Findex will help us measure if—and how–we are getting there.