How the financial inclusion movement came together

Better data helped underscore the importance of an inclusive financial system for international development

For nearly a decade, the World Bank’s Global Findex has contributed to the growing understanding that inclusive financial services advance developmental goals. New research shows that financial inclusion leads to more autonomy for women, better education for children, and more employment — it’s a crucial enabler for so many of the United Nation’s Sustainable Development Goals.

But the truth is that, up until very recently, we didn’t have nearly enough data about how people used financial services and how they contributed to social and economic progress. Back in the 1970s, when Accion began studying the economic lives of the poor, financial inclusion was a backwater of development research.

That started to change right around the time I joined the World Bank, in 1998. Believe it or not, it was our U.S.-focused work that pushed us to start looking around the world. Research showed that, even in the U.S., entrepreneurs and small businesses used their personal savings, home equity lines of credit, and other personal assets as collateral to grow their businesses.

Because personal and entrepreneurial financial activity were so tightly intertwined, it soon became clear that we couldn’t understand one without the other. We assumed that, because microenterprise and personal financial activity frequently overlapped, providing individuals with better financial services should ultimately support their businesses and, in turn, lead to increased economic development. The problem was that we didn’t know what personal financing decisions people were making, what financial services they had, or if they even used them.

By 2008, the International Monetary Fund had started collecting some of this personal financial information, including how much money was deposited at banks and how many bank accounts had ever been opened in, say, Turkey. But that information wasn’t enough – it was just too simplistic: we didn’t know how many wealthy adults had accounts as compared to poorer adults; how many young adults had accounts as compared to older people; and we certainly didn’t know that men in Turkey were almost 30 percentage points more likely than women to have an account.

Today, we have data to show how those rates differ. With funding from the Bill & Melinda Gates Foundation, we founded the Global Findex database with a passionate belief that to solve a problem you first need to measure it. By surveying how people in more than 150 countries access and use financial services, we’ve learned that we’ve made significant strides promoting financial inclusion and that more than 1 billion people have opened an account and claimed a foothold in the formal economy in the last few years. We also know that 3 billion people are still left out of or poorly served by the formal financial sector — it’s only by first measuring the gaps in account ownership and usage by gender, income, age, education, labor force participation, and more that we can start to address this problem.

Over nearly a decade, I’ve been fortunate to watch the Findex take shape; in that time, I’ve also traveled around the world to talk to people about how digital financial services impact their lives.

The Findex’s findings and these individual conversations have helped me understand how essential inclusive financial services are. I think of the herders in Mongolia who used to spend time and money traveling to pay their bills. Now, thanks to mobile payments, they can do that from the comfort of their yurts.

I remember the women who live in a village in rural Rajasthan, India, at the end of the desert. They collectively borrow from a microfinance institution to purchase a new tool for grinding wheat; they soon started charging other villages to use that tool. Previously, these women had little to no opportunities to go to school, let alone start a business. This new tool gave them the money they needed to hire the first teacher for the village, who was teaching their daughters to read.

And I remember the Kenyan “dreadlock designer” who had just opened his own store. He told me that “cash burns my pocket,” and he could never save enough of it for a down payment. But when he started accepting payments to his mobile payment, he didn’t cash out. Instead, he saved up and opened his own business.

We now understand how vital financial services are to individuals like these and the wider communities that they represent. Because of nearly 10 years of Global Findex research, we can see a path forward to create a financially inclusive world and give people the tools and services they need to build better lives.

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