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Financial Inclusion on the Rise, But Gaps Remain

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Financial inclusion is on the rise globally, accelerated by mobile phones and the internet, but gains have been uneven across countries. A new World Bank report on the use of financial services also finds that men remain more likely than women to have an account.

Globally, 69 percent of adults – 3.8 billion people – now have an account at a bank or mobile money provider, a crucial step in escaping poverty.  This is up from 62 percent in 2014 and just 51 percent in 2011. From 2014 to 2017, 515 million adults obtained an account, and 1.2 billion have done so since 2011, according to the Global Findex database. While in some economies account ownership has surged, progress has been slower elsewhere, often held back by large disparities between men and women and between the rich and poor. The gap between men and women in developing economies remains unchanged since 2011, at 9 percentage points.

The Global Findex, a wide-ranging data set on how people in 144 economies use financial services, was produced by the World Bank with funding from the Bill & Melinda Gates Foundation and in collaboration with Gallup, Inc.

“In the past few years, we have seen great strides around the world in connecting people to formal financial services,” World Bank Group President Jim Yong Kim said. “Financial inclusion allows people to save for family needs, borrow to support a business, or build a cushion against an emergency. Having access to financial services is a critical step towards reducing both poverty and inequality, and new data on mobile phone ownership and internet access show unprecedented opportunities to use technology to achieve universal financial inclusion.”

Download The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution

There has been a significant increase in the use of mobile phones and the internet to conduct financial transactions. Between 2014 and 2017, this has contributed to a rise in the share of account owners sending or receiving payments digitally from 67 percent to 76 percent globally, and in the developing world from 57 percent to 70 percent.

 “The Global Findex shows great progress for financial access–and also great opportunities for policymakers and the private sector to increase usage and to expand inclusion among women, farmers and the poor,” H.M. Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, said. “Digital financial services were the key to our recent progress and will continue to be essential as we seek to achieve universal financial inclusion.”

Globally, 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services. Digital technology could take advantage of existing cash transactions to bring people into the financial system, the report finds. For example, paying government wages, pensions, and social benefits directly into accounts could bring formal financial services to up to 100 million more adults globally, including 95 million in developing economies. There are other opportunities to increase account ownership and use through digital payments: more than 200 million unbanked adults who work in the private sector are paid in cash only, as are more than 200 million who receive agricultural payments.

“We already know a lot about how to make sure women have equal access to financial services that can change their lives,” Melinda Gates, Co-Chair of the Bill & Melinda Gates Foundation, said. “When the government deposits social welfare payments or other subsidies directly into women’s digital bank accounts, the impact is amazing. Women gain decision-making power in their homes, and with more financial tools at their disposal they invest in their families’ prosperity and help drive broad economic growth.”

This edition of the Global Findex database includes updated indicators on access to and use of formal and informal financial services.  It adds data on the use of financial technology, including mobile phones and the internet to conduct financial transactions, and is based on over 150,000 interviews around the world. The database has been published every three years since 2011.

“The Global Findex database has become a mainstay of global efforts to promote financial inclusion,” World Bank Development Research Group Director Asli Demirgüç-Kunt said. “The data offer a wealth of information for development practitioners, policymakers and scholars, and are helping track progress toward the World Bank Group goal of Universal Financial Access by 2020 and the United Nations Sustainable Development Goals.”

Regional Overviews

In Sub-Saharan Africa, mobile money drove financial inclusion. While the share of adults with a financial institution account remained flat, the share with a mobile money account almost doubled, to 21 percent. Since 2014, mobile money accounts have spread from East Africa to West Africa and beyond. The region is home to all eight economies where 20 percent or more of adults use only a mobile money account: Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Senegal, Tanzania, Uganda, and Zimbabwe. Opportunities abound to increase account ownership: up to 95 million unbanked adults in the region receive cash payments for agricultural products, and roughly 65 million save using semiformal methods.

In East Asia and the Pacific, the use of digital financial transactions grew even as account ownership stagnated. Today, 71 percent of adults have an account, little changed from 2014. An exception is Indonesia, where the share with an account rose by 13 percentage points to 49 percent. Gender inequality is low: men and women are equally likely to have an account in Cambodia, Indonesia, Myanmar, and Vietnam. Digital financial transactions have accelerated especially in China, where the share of account owners using the internet to pay bills or buy things more than doubled—to 57 percent. Digital technology could be leveraged to further increase account use: 405 million account owners in the region pay utility bills in cash, though 95 percent of them have a mobile phone.

In Europe and Central Asia, account ownership rose from 58 percent of adults in 2014 to 65 percent in 2017. Digital government payments of wages, pensions, and social benefits helped drive that increase. Among those with an account, 17 percent opened their first one to receive government payments. The share of adults making or receiving digital payments jumped by 14 percentage points to 60 percent. Digitizing all public pension payments could reduce the number of unbanked adults by up to 20 million.

In Latin America and the Caribbean, wide access to digital technology could enable rapid growth in financial technology use: 55 percent of adults own a mobile phone and have access to the internet, 15 percentage points more than the developing world average. Since 2014, the share of adults making or receiving digital payments has risen by about 8 percentage points or more in such economies as Bolivia, Brazil, Colombia, Haiti, and Peru. About 20 percent adults with an account use mobile or the internet to make a transaction through an account in Argentina, Brazil, and Costa Rica. By digitizing cash wage payments, businesses could expand account ownership to up to 30 million unbanked adults—almost 90 percent of whom have a mobile phone.

In the Middle East and North Africa, opportunities to increase financial inclusion are particularly strong among women. Today 52 percent of men but only 35 percent of women have an account, the largest gender gap of any region. Relatively high mobile phone ownership offers an avenue for expanding financial inclusion: among the unbanked, 86 percent of men and 75 percent of women have a mobile phone. Up to 20 million unbanked adults in the region send or receive domestic remittances using cash or an over-the-counter service, including 7 million in the Arab Republic of Egypt.

In South Asia, the share of adults with an account rose by 23 percentage points, to 70 percent. Progress was driven by India, where a government policy to increase financial inclusion through biometric identification pushed the share with an account up to 80 percent, with big gains among women and poorer adults. Excluding India, regional account ownership still rose by 12 percentage points—but men often benefited more than women. In Bangladesh, the share with an account rose by 10 percentage points among women while nearly doubling among men. Regionwide, digitizing payments for agricultural products could reduce the number of unbanked adults by roughly 40 million.

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Asia and Pacific on course to miss all Sustainable Development Goals

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Unless progress is accelerated, Asia and the Pacific are on course to miss all of the 17 Goals of the UN’s 2030 Agenda for Sustainable Development, the Executive Secretary of the UN regional commission for Asia and the Pacific (ESCAP), told UN News at the Organization’s Headquarters on Wednesday.

Under-Secretary-General Armida Salsiah Alisjahbana was in New York to take part in the High-Level Political Forum on Sustainable Development, the main UN platform for monitoring the progress that countries are making towards the Agenda, which is the UN’s blueprint for ending poverty and preserving the planet.

ESCAP’s latest Sustainable Development Goals Progress Report shows that, when it comes to some of the Goals, the region is actually going backwards. These are the goals related to access to clean water and sanitation (Goal 6), decent work and economic growth (Goal 8), and responsible consumption and production (Goal 11).

There are, said Ms. Alisjahbana, several reasons for this: “There is water scarcity, because of the pressure of urbanization, and the management of natural resources and the environment are making the situation worse. As for moving towards sustainable consumption, that has to do with behaviour and lifestyle. With increasing wealth you consume more, but what you consume is something that is actually not sustainable.

Governments, said the head of ESCAP, must ultimately be responsible for investments in sustainable development. Investing in basic infrastructure costs money, but there is a considerable multiplier effect, that has a positive effect on the economy. Countries with smaller financial resources should look at raising money through fiscal reforms rather than looking for aid, and risking becoming dependent, she added.

The Progress Report complains about a lack of data, an important point because, says Ms. Alisjahbana, without the correct data you can’t track progress, or evaluate the best actions to take going forward. Improved data must go hand in hand with improved capacity for analysing data, which means national statistical offices, and SDG monitoring.

Despite the many challenges facing the region’s efforts to achieve the Goals, Ms. Alisjahbana remains optimistic. The situation, she believes, can be turned around, through better cooperation, as well as the abundant talent and expertise found in the region.

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Asia and Pacific Growth Steady Amid Global Trade Tensions

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Developing Asia will maintain strong but moderating growth over 2019 and 2020, as supportive domestic demand counteracts an environment of global trade tensions, according to a new Asian Development Bank (ADB) report released today.

In a supplement to its Asian Development Outlook (ADO), ADB maintains growth forecasts for developing Asia at 5.7% in 2019 and 5.6% in 2020—unchanged from its April forecast. These growth rates are slightly down from developing Asia’s 5.9% growth in 2018. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook has been revised down from 6.2% to 6.1% in 2019 and maintained at that rate in 2020.

Deepening trade tension between the People’s Republic of China (PRC) and the United States (US) remains the largest downside risk to this outlook, despite an apparent truce in late June that could allow trade negotiations between the two countries to resume.

“Even as the trade conflict continues, the region is set to maintain strong but moderating growth,” said ADB Chief Economist Mr. Yasuyuki Sawada. “However, until the world’s two largest economies reach agreement, uncertainty will continue to weigh on the regional outlook.”

The growth outlook for East Asia in 2019 has been revised down to 5.6% because of slower than expected activity in the Republic of Korea. The subregion’s growth outlook of 5.5% for 2020 is unchanged from April. Growth for the subregion’s largest economy, the PRC, is also unchanged, with forecasts of 6.3% in 2019 and 6.1% in 2020, as policy support offsets softening growth in domestic and external demand.

In South Asia, the economic outlook is robust, with growth projected at 6.6% in 2019 and 6.7% in 2020, albeit lower than forecast in April. The growth outlook for India has been cut to 7.0% in 2019 and 7.2% in 2020 because the fiscal 2018 outturn fell short.

The outlook for Southeast Asia has been downgraded slightly to 4.8% in 2019 and 4.9% in 2020 due to the trade impasse and a slowdown in the electronics cycle. In Central Asia, the growth outlook for 2019 has been revised up to 4.3% on account of an improved outlook for Kazakhstan. Central Asia’s growth outlook of 4.2% for 2020 is unchanged from April. The growth outlook in the Pacific—3.5% in 2019 and 3.2% in 2020—is unchanged, as the subregion continues to rebound from the effects of Cyclone Gita and an earthquake in Papua New Guinea, the subregion’s largest economy.

The major industrial economies have had slight revisions to their growth forecasts, with the US revised up to 2.6% for 2019 and the Euro area revised down to 1.3%. The growth outlook for Japan is unchanged at 0.8% in 2019 and 0.6% in 2020.

Developing Asia’s inflation projections were revised up from 2.5% to 2.6% for both 2019 and 2020, reflecting higher oil prices and various domestic factors, such as the continuing outbreak of African swine fever in several Asian economies, which is expected to drive up pork prices in the PRC.

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How to measure blockchain’s value in four steps

MD Staff

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To help organizations identify the value of blockchain technology and build a corresponding business case, the World Economic Forum, the International Organization for Public-Private Cooperation, has released the Blockchain Value Framework as part of the white paper, Building Value with Blockchain Technology: How to Evaluate Blockchain’s Benefits.

Co-designed with Accenture, the Blockchain Value Framework is the second in a series of white papers for organizations to better understand that blockchain technology is a tool deployed to achieve a specific purpose, not a goal in itself. This new framework provides organizations with the tools to begin measuring blockchain’s value, including key questions to consider. It is the first visual roadmap of its kind and is based on a global survey of 550 individuals across 13 industries, including automotive, banking and retail, public-sector leaders, chief executive officers and an analysis of 79 blockchain projects.

“In our last paper, we stressed that blockchain deployment is not the end goal,” said Sheila Warren, Head of Blockchain at the World Economic Forum. “We wanted to get beyond the hype. This new framework is for those business leaders that have figured out blockchain is the right solution for a specific problem, but don’t know what to do next.”

“Organizations need to make business decisions and investments with confidence and that requires proof of the value-add and an analysis of why, or why not, they should consider something new,” said David Treat, Managing Director and Global Blockchain Lead at Accenture. “Through this new framework, we aim to educate businesses and challenge them to rethink their current business models, relationships between ecosystem partners, customers and their investments in technology. The path to blockchain adoption starts here with evaluating the technical and strategic priorities and aligning them with investments in innovation.”

The framework starts with questions on blockchain’s role and desired impact. Assessing potential pain points and areas for opportunity without thinking about the technology is essential. Next is to examine the three key dimensions of blockchain’s role alongside its capabilities. The roadmap can assist organizations in moving from current-state assessment to future blockchain opportunity, and to identify where the value will be created and delivered. Cost savings, increased revenue and improved customer experience are all possible business case results.

According to the global survey conducted in conjunction with the new framework, 51% of survey respondents identified “missing out on developing new products/services” as the number one expectation if they do not invest in blockchain technology in the near future. The other two most common answers were missing out on speed/efficiency gains (23%) and missing out on cost savings (15%). The interviews highlighted the potential of the technology to simplify and optimize complete value chains through the sharing of simplified real-time data with increased efficiency. However, the paper also cautions businesses to carefully consider whether blockchain is the best solution, relative to other technologies or other digitization strategies. As noted in the Blockchain Beyond the Hype white paper, blockchain may not be a viable solution or it may not be the correct time to pursue this avenue.

In nine of the industries surveyed, the full traceability and integrity of the data were the top two potential advantages of using blockchain technology. Most of the industries surveyed could benefit from smart contracts and automation provided by blockchain. Surprisingly, few organizations selected “new business products or services” as one of the benefits. This suggests the current focus for organizations is on improving existing products and services before considering investing in new opportunities.

“We may be moving beyond the hype, but blockchain isn’t going away. Central banks are experimenting with digital currencies and supply chain networks are piloting blockchain policies. We are also seeing companies like Facebook and Starbucks entering the blockchain and cryptocurrency space. This means practical use cases of the technology will become more widespread,” Warren said. “A draft of the framework was further validated at a multilateral session of global leaders at the World Economic Forum Annual Meeting 2019 in Davos-Klosters.”

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