Financial Inclusion: What’s the vision?
The Capital Finance International (CFI) provides a definition of financial inclusion built around client needs: Every potential client should have access to quality financial services at affordable prices, mostly through private providers. This focuses the discourse on demand, what is needed rather than what is it that we can offer. CFI sets itself the goal of full financial inclusion by 2020, a target which seems overly ambitious. A case study on what that would mean for Mexico, concludes that despite rapid expansion of consumer credit and technology such as mobile and agent banking, Mexico is unlikely to reach financial inclusion by 2020.It is interesting to note why. Whereas regulators (and a certain number of private enterprises I presume) are very excited about technology to bridge the gap to the excluded, reality – and barriers – are more complex. CFI concludes that « the financial inclusion challenge cannot be solved by delivery channels alone », an important point to retain.
The G20 agreed on the so-called « Basic Set » of data measuring to measure financial inclusion. The indicators draw on three main data sources: The IMF Financial Access Survey (collected by national Central Banks), the World Bank’s Findex survey of clients and potential clients and the World Bank’s Enterprise Survey.
It attempts to measure three things: (1) access to financial services, (2) usage of these services and (3) the quality of the services.
With these indicators in mind we could have a look into Latin America a region in which we have a lot of Microfinance Institutions that we support.
- 250 million adults remain largely outside the formal financial system with only 1 in 10 having borrowed from a formal financial institution in the last year.
- Credit Cards are widespread in Latin America with 18% of adults having one. 39% have an account, only slightly below the 42% average for the developing world (but far below the 89% in high income countries). However these accounts are relatively rarely used to safe and in many cases only serve to receive salaries from employers or government transfers.
- The gender gap remains important with men 26% more likely to have an account compared to women (some countries are an exceptions to this, notably the Dominican Republic and Haiti).
- Cost issues loom large here with 40% of respondence citing that they do not have an account because having one is too expensive.