Highlights:
- Over the past decade, global financial inclusion has significantly advanced, with account ownership rising from 51% in 2011 to 76% in 2021. Several enablers and innovations have contributed to this progress.
- However, many people continue to be financially excluded. This population represents the “last mile” of financial inclusion and should be a priority for development efforts. Digital financial inclusion has been recognized as a vital enabler in achieving the Sustainable Development Goals (SDGs), and many of the SDG target populations fall within this “last mile” of financial inclusion.
- This Note identifies specific groups that belong to the last mile, including women, low-income households, rural populations, migrants, and MSMEs, as well as the barriers that prevent their financial inclusion.
- It provides a framework for the necessary public infrastructure and regulatory enablers to reduce the barriers commonly faced by these last mile segments.
- It also emphasizes the need for more targeted public policies and public investments to address non-financial barriers faced by last mile populations, like gaps in skills, access to public services and legal rights; all of which ultimately impact their financial inclusion. It provides public policy and public investment options to tackle these gaps.
- The Note concludes with a discussion on how public authorities can go beyond access and usage of financial services to start identifying and measuring the quality of financial inclusion. This involves understanding whether the products, services, and delivery channels adequately meet the needs of the population.
G20 Policy Options to Improve Last Mile Access and Quality of Inclusion through Digital Infrastructure, Including Digital Public Infrastructure (DPI), Consumer Protection, and Other FIAP Objectives
Executive Summary
The world has witnessed remarkable progress in financial inclusion over the past decade. The increase in account ownership from 2011 to 2021 is an indication of that progress, having risen by 25 percentage points from 51 to 76 percent. The percentage of people who use formal credit, savings, and payment services also increased during that period. This GPFI Guidance Note celebrates the extraordinary journey of millions of individuals toward financial inclusion and acknowledges the enablers and innovations that have contributed to these positive results.
This Note focuses on describing the individuals who continue to be financially excluded and their unique characteristics. This heterogenous population represents the “last mile” for financial inclusion and continues to be a priority for development efforts, given that financial inclusion at the last mile is shown to be one of the necessary conditions to accelerate progress toward achieving the most pressing development outcomes of our time, such as building resilience to climate change, promoting greater gender equality, and improving food security, among other goals.
The Note identifies the specific barriers faced by the last mile population segments in aggregate that prevent their financial inclusion. It then moves on to offer public policy and public investment options that can reduce those barriers that are common to the last mile population segments described in the Note and enable scalable financial inclusion at the last mile.
The options offered are presented in two categories. The first refers to public policies and investments that have whole-of-market effects, allowing financial systems to reduce costs and enhance the viability of (i) reaching last mile populations, (ii) understanding their financial needs, and (iii) reducing information asymmetries in a way that allows financial services providers (FSPs) to tailor services that meet those needs. All these effects are enabled by policy and regulatory frameworks that promote scale and competition. The discussion identifies those key enablers, or foundational building blocks, of inclusive financial systems that have proven necessary to further financial inclusion at the last mile, given their ability to help address some, but not all, of the barriers faced by last mile population segments.
The second category of options refers to public policies and investments that address the remaining identified barriers to last mile financial inclusion. They are nonfinancial in nature and closely related to prevailing social norms and fragile governance at the country level. The conditions set by the social norms and fragile governance discussed in this Note unintentionally limit the relative access last mile population segments have to education, health, infrastructure services, legal rights, and overall economic inclusion. These conditions, in turn, limit the value these segments can draw from financial services, effectively reducing their demand for such services while limiting their access to key enablers for owning and using an account (i.e., access to IDs, phones, and internet; exposure to FSPs).
The latter category of public policy and investment options is intentional in targeting financial inclusion interventions to the specific last mile population segments prioritized by each country (e.g., women, migrants, indigenous populations, other groups). It also targets the subset of context-specific FSPs with comparative advantages in serving those segments. These financial inclusion interventions are carefully coordinated and co-designed with other public investments and relevant private sector partners to reduce the nonfinancial constraints that indirectly limit financial inclusion at the last mile (i.e., gaps in education, health, infrastructure, etc.).
The approach described in this Note to well-coordinated and co-designed public interventions across several sectors implies a whole-of-government approach to policy implementation that reduces policy silos across different government authorities and agencies, for example, those authorities governing finance, education, agriculture, social protection, and humanitarian aid, among others.
The Note acknowledges that access to financial services is just the first step in people’s financial inclusion journeys. Therefore, it synthesizes the progress made to measure the quality of financial services, identifies persistent knowledge gaps on how to measure quality, and provides ideas on how to track the ways last mile populations can benefit once they begin using financial services.
A range of possible quality indicators is proposed, with a focus on the quality of design and the delivery of products from a supply-side perspective. Measuring these indicators matters because access and usage alone are insufficient if products are not designed and delivered in ways that are safe and suitable for last mile customers. The focus is on three products relevant to last-mile consumers: payments, deposits, and loans. The proposed indicators are not intended to be a definitive list, but rather a set of indicators that can inform a learning agenda to adapt measurements of quality in financial inclusion to each country context.
The Note compiles the most relevant references and resources available so readers can explore in further detail the topics presented. It also showcases successful country interventions coming from G20 countries as well as others, including those in fragile and conflict-affected situations. Each public policy and investment option presented is voluntary and nonbinding and is relevant to all remaining financially excluded populations, even those in high- and upper-middle-income countries.
Ensuring financial inclusion at the last mile is fundamental to accelerating the achievement of the Sustainable Development Goals (SDGs). The last mile populations described in this Note significantly overlap with the most vulnerable population segments targeted by the SDGs. Evidence suggests that enabling digital financial inclusion at the last mile can accelerate 13 of the 17 SDGs. Inclusive and responsible financial systems not only accelerate the achievement of the SDGs but also reverse the trend of the widening digital, economic, and well-being gaps.
Related Resources
The evidence is in: well-designed financial inclusion initiatives can make a difference in the lives of disadvantaged young women navigating tough transitions. But what exactly do "well-designed" initiatives look like?
This series reflects on nearly two decades of learning to help