Research & Analysis

Financially Inclusive Ecosystems: The Roles of Government Today

Financial inclusion today is about financial markets that serve more people with more products at lower cost. The term "microfinance," once associated almost exclusively with small-value loans to the poor, is now increasingly used to refer to a broad array of products (including payments, savings, and insurance) tailored to meet the particular needs of low-income individuals.

Different products present different risks and delivery challenges, and it is unlikely that a single class of service providers will effectively provide all the products poor people need. A key challenge is how to create the broader interconnected ecosystem of market actors and infrastructure needed for safe and efficient product delivery to the poor. And many are asking what roles a government can or should play in the development of these financially inclusive ecosystems, especially in light of innovation in financial services delivery.

This Focus Note first describes the challenges of the broader financial inclusion landscape and then explores three promising roles government can play in developing more financially inclusive ecosystems.