editorial

Sophie Sirtaine, CGAP CEO

Over the past 15 years, there has been a deepening recognition of the foundational role that financial inclusion plays in sustainable financial and economic development—be it among investors, the private sector, standard-setting bodies and multilateral development banks. The World Bank’s Global Findex has been monitoring progress in financial inclusion for a decade. And while its latest findings point to a positive worldwide trend, persistent challenges need to be addressed to exploit the full potential of inclusive finance.

Ensuring that all of society, especially the world’s most vulnerable people, can better seize economic opportunities that improve livelihoods and withstand financial shocks, such as those caused by climate change, will require a stronger determination to use responsible financial services as a pathway to a green, resilient and inclusive world

Today, 71 percent of adults in developing countries have a bank or mobile money account, up from 63 percent in 2017. Despite this window of optimism, the testing pandemic era and the war on Ukraine have deepened the global economic slowdown. At this rate, the World Bank predicts that nearly 7 percent of the world's population—almost 600 million people—will be struggling with extreme poverty by 2030. The intensification of climate change by then is another grave threat that may push 132 million additional people into extreme poverty.

Ensuring that all of society, especially the world’s most vulnerable people, can better seize economic opportunities that improve livelihoods and withstand financial shocks, such as those caused by climate change, will require a stronger determination to use responsible financial services as a pathway to a green, resilient and inclusive world. To do so, we will need to focus on three areas for starters:

  1. Prioritizing women’s financial inclusion in the development agenda. While the average gap between men and women in account ownership (i.e. the gender gap) is down from 9 to 6 percent in developing economies, 742 million women continue to be financially excluded. In Latin America and the Caribbean (LAC), the gender gap has remained stagnant since 2017 at 7 percent, and while the gap in Brazil and Argentina is minimal, the gap is as high as 11 percent in Bolivia, 16 percent in El Salvador and 20 percent in Honduras. When women access, use and benefit from financial services, they are better able to manage risks and increase economic opportunities that contribute to the wellbeing of their households and communities. ​According to the IMF, gender equality boosts economic growth and leads to better development outcomes. But there are many barriers to women’s financial inclusion and almost all are rooted in constraining social norms. Stronger and intentional efforts not only by policymakers, but by the private sector are paramount to bridging the gender gap. Some are leading by example, such as Bancamía in Colombia and Banco FIE in Bolivia. 
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Sophie Sirtaine, CEO CGAP

  1. Ensuring that digitalization plays a bigger role in financial inclusion. Digitalization helps promote lower costs and broader access to information, but despite the rising adoption of mobile money, government-to-person payments (G2P) and other digital payments catalyzed by the pandemic, hundreds of millions of adults still receive payments in cash. The gender gap in making or receiving a digital payment in developing economies is 9 percent on average and in LAC, this gap has increased from 6 percent in 2014 to 8 percent in 2021. Not only does usage of digital payments provide a pathway into the digital economy, which in turn can open up additional economic opportunities, but it can also help households and small businesses manage weather shocks and invest in a green future. The pathways to digitalization include increasing connectivity, digitalizing financial services and payments, expanding agent networks, and developing adequate consumer protection frameworks. Instant payment and open banking reforms recently implemented by several counties in LAC, such as Brazil, Colombia and Chile, are very promising. By levelling the playing field with banks, they have been creating more competition from fintechs, mobile money operators and other financial service providers, reducing the costs of financial services and providing opportunities to leverage digital data trails to bank the unbanked. 
  1. Designing financial products that focus on development outcomes. In light of the intensifying global shocks and stresses, which hit the poorest and most vulnerable people the hardest, focusing on access and usage of financial services is not enough. We need to redefine our objectives, as a financial inclusion sector, in terms of the outcomes we are trying to achieve and design our products and our interventions with these outcomes in mind. For example, instead of simply focusing on setting up efficient G2P systems that provide access to government transfers, we must shift our focus to ensuring the most vulnerable are able to cope with and adapt to the main shocks they face, including climate change, and design G2P systems that are valuable social protection tools that boost climate resilience. To support this new orientation, we should develop new metrics for our work and for the sector that measure success towards these outcomes, and use these to design our interventions accordingly. 

Progress towards these three focus areas will be no easy task. Success will depend on strong collaboration among members of the financial inclusion community and other stakeholders—perhaps more so now than ever before. But as voices for sustainable development get louder, I am optimistic that the power of inclusive finance can be harnessed to achieve broad sustainable development goals.