In a recent World Bank working paper, Measuring Financial Inclusion: The Global Findex Database, we provide the first analysis of the Global Financial Inclusion (Global Findex) Database, a new set of indicators that measure how adults in 148 economies save, borrow, make payments, and manage risk. Well-functioning financial systems serve a vital purpose, offering savings, credit, payment, and risk management products to people with a wide range of needs. Inclusive financial systems—allowing broad access to financial services, without price or nonprice barriers to their use—are especially likely to benefit poor people and other disadvantaged groups. Without inclusive financial systems, poor people must rely on their own limited savings to invest in their education or become entrepreneurs—and small enterprises on their limited earnings to take advantage of promising growth opportunities. This can contribute to persistent income inequality and slower economic growth.
Until now, little had been known about the global reach of the financial sector—the extent of financial inclusion and the degree to which such groups as the poor, women, and youth are excluded from formal financial systems. Systematic indicators of the use of different financial services had been lacking for most economies.
The Global Financial Inclusion (Global Findex) database provides such indicators, measuring how people in 148 economies save, borrow, make payments, and manage risk. These new indicators are constructed with survey data from interviews with more than 150,000 nationally representative and randomly selected adults age 15 and above. The survey was carried out over the 2011 calendar year by Gallup, Inc. as part of its Gallup World Poll.
The data show that 50 percent of adults worldwide have a formal account, but the data reveal sharp disparities in the use of financial services across regions, economies and individual characteristics. Eighty-nine percent of adults in high-income economies have a formal account, compared to 41 percent of adults in developing economies and 23 percent of adults living below $2 per day. Worldwide, 55 percent of men have a formal account compared to 47 percent of women. And in developing economies, the poorest 20 percent of adults in a given economy are less than half as likely to have an account as the richest, on average.
Worldwide, by far the most common reason for not having a formal account—cited by 65 percent of non-account-holders—is lack of enough money to use one. Other common reasons reported for not having an account are that banks or accounts are too expensive (cited by 25 percent of adults without a formal account) and that banks are too far away (cited by 20 percent).
Globally, 22 percent of adults report having saved at a formal financial institution in the past 12 months. Of those with a formal account, 43 percent report having saved formally. In developing economies, community-based savings clubs are one common alternative (or complement) to saving at a formal financial institution: in Sub-Saharan Africa 19 percent of adults report having saved in the past year using a savings club or person outside the family.
While the share of adults who report having taken out new loans in the past 12 months is surprisingly consistent around the world, the sources and purposes for these loans are extremely diverse. Globally, 9 percent of adults report having originated a new loan from a formal financial institution in the past 12 months—14 percent of adults in high-income economies and 8 percent in developing economies. In addition, about half of adults in high-income economies report having a credit card, which might serve as an alternative to short-term loans. In developing economies, only 7 percent reported having one.
There is a bright spot in the expansion of financial services in the developing world: the recent introduction of “mobile money.” The greatest success has been in Sub-Saharan Africa, where 16 percent of adults report having used a mobile phone in the past 12 months to pay bills or send or receive money. About half of these adults are otherwise unbanked.
As the first public database of indicators that consistently measure people’s use of financial products across economies and over time, the Global Findex database fills a big gap in the financial inclusion data landscape. The data set can be used to track the effects of financial inclusion policies globally and develop a deeper and more nuanced understanding of how people manage their finances. By making it possible to identify segments of the population excluded from the formal financial sector, the data can help policy makers prioritize reforms accordingly and, as future rounds of the data set become available, track the success of those reforms.
The complete database of country-level indicators (disaggregated by gender, income, age, education, and rural/urban residence) and related reports is available at: www.worldbank.org/globalfindex.
The full paper is available for download here.