“By the Numbers”: Financial inclusion still limited for the hardest-to-reach


Figure 8 in By the Numbers shows the projected size of the excluded population by country in 2020. Download the full report.
Click on the image to zoom in.

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>>By Jesse Marsden. Jesse is the program manager for the 100 Million Project at the Microcredit Summit Campaign.

Bravo to the Center for Financial Inclusion’s (CFI) latest By the Numbers report. It does an excellent job of succinctly parsing a large amount of information in such a way that makes the implications of that information quite accessible. Here’s our key takeaway from the report:

We are making the least progress on the hardest-to-reach groups, and unless the financial inclusion community works together to develop a strategy for reaching those groups, there is no way we can meet the goal of full financial inclusion by 2020.

To begin with, we need to address the fact that the rate of improvement reported in the Global Findex seems likely to be overstated. CFI refers, in By the Numbers, to the criticism levied by Daniel Roodman and Daniel Rozas against the claims of this year’s Findex. They very clearly lay out how the differences between the 2011 and 2014 Findex questionnaire could have an inflationary impact on estimating progress.

Of particular interest to the Campaign is how the report demonstrates the unequal gains in access (what CFI calls “access gaps”) for certain segments of the population. The Campaign has a particular focus on understanding financial inclusion efforts as a piece of a larger effort to build pathways that help those in extreme poverty better manage the risks they face and seize on opportunities they find. In this light, it is worrisome that the progress reported by the Findex, and illuminated in By the Numbers, demonstrates that for those living in extreme poverty — often the hardest-to-reach — financial inclusion is still quite limited.

While the overall increase in financial access reported by the Findex was 20 percent, access has improved little or not at all for women since 2011 and there was no change in access for those without secondary education. Rural populations saw an increase in access by a mere 2 percent, and those aged 15 to 25 saw only a 3 percent gain. The wealthiest 60 percent of the population had faster gains in access than that of the poorest 40 percent, who saw only a 6 percent change.

Source: CFI, By The Numbers

Source: Center for Financial Inclusion, By The Numbers

We need a bottom-up strategy

The overall picture we get from CFI’s analysis is that very little of the progress being reported has been among the hardest-to-reach groups. This points to a central weakness of the strategies being employed by the World Bank and others. Most are top-down strategies trying to extend the reach of existing services to new populations. This means they are employing an overall strategy for increasing access that must slow, and eventually crawl to a stop, as it gets to less populated areas and poorer communities where top down approaches become less affordable to implement.

At the Microcredit Summit Campaign we firmly believe full financial inclusion will require a different approach: one that starts with the hardest-to-reach segments of the population and works its way back. It is relatively easier to add features and services to attract higher income groups once you have designed a service that reaches the lowest margin customer first. On the other hand, it is almost impossible to sufficiently reduce costs of a service or product originally designed to reach middle income customers so that it is affordable to the poorest.

If we want to reach full financial inclusion by 2020, the leaders in the financial inclusion movement should be agreeing on who are the hardest to reach and what are ways to begin reaching them now. Thanks to the work from CFI, we know in broad categories who the hardest to reach will be: the extreme poor, women, and those living in rural or remote regions. We will be able to move beyond these general categories to more specific population segments when the World Bank releases the full Findex micro-data in October.

The Campaign wants to work with CFI, the World Bank (including Group members like the IFC), the Alliance for Financial Inclusion, and others to develop the strategies to reach the hard-to-reach groups.

In April, the Campaign introduced six “pathways” to reach the extreme poor and to help them move out of poverty. They are our proposal for the types of interventions we should focus on:

  1. Agricultural value chains
  2. The graduation approach
  3. Savings groups
  4. Conditional cash transfers
  5. Integrated health and microfinance
  6. Mobile platforms linked with agent networks

While these six pathways are not the only financial inclusion interventions, they are some of the more effective interventions currently in use. (This post from April outlines why each of these six pathways matter to the overall picture.)

Mapping target populations and successful programs

So the question becomes, how do we as diverse stakeholders work together to develop strategies that can address the “access gaps” in By the Numbers? Stakeholders working with data, such as the Campaign, World Bank, Microfinance Information Exchange (MIX), IFC, Finclusion Lab, and others, should begin mapping where these population segments live. We can then layer onto the map those stakeholders, projects, and partnerships that are successfully reaching the hard-to-reach. New collaborations should be created to expand work where populations are not being served.

On the flip side, we should also identify existing programs that are not reaching the hardest-to-reach and ask why they are not. What are the constraints holding back progress in these areas? Is it a misalignment of the regulatory framework? Is the program or intervention failing to use a reliable metric to target its activities? Are there critical stakeholders missing from the implementation equation?

Mapping the location of populations who face more and more challenging obstacles to using appropriate financial tools to support their movement out of poverty is an important step to understanding whether interventions are working in the right places. More specifically, it will also help identify programmatic challenges and, therewith, more relevant solutions to those challenges.

This is a process that will take time, and 2020 is only five years away. Ensuring access is an important first step, but that step must be taken in a way that looks and plans several steps ahead. Moreover, the Campaign is deeply invested in ensuring that the hardest-to-reach not only have access to appropriate financial services, but that those services have a demonstrable effect in support of those individuals’ movement out of extreme poverty. Therefore, if we are to ensure that financial inclusion indeed includes the hardest-to-reach and that it is a major step to ending extreme poverty, we must begin to intentionally develop strategies that work towards these goals in tandem now.

This will require that global players in this movement learn from those who are having success in reaching the poorest and most marginalized, support their efforts, and replicate their strategies. More importantly, we must learn together how we can provide the sort of services that will help those at the bottom of the economy reduce vulnerability and take advantage of opportunity. We look forward to working with CFI and others to make this happen. We invite you to get inspired by our coalition of Commitment makers, set your own goal to help end poverty, and make a Campaign Commitment.

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2 thoughts on ““By the Numbers”: Financial inclusion still limited for the hardest-to-reach

  1. Pingback: #tbt: 2011 workshop paper on microfinance for remote, hard-to-reach areas | 100 Million Ideas

  2. Jesse,

    Thank you for your thoughtful post. The difficulty of achieving full financial inclusion institutions is underscored by the fact that 70 million of America’s 315 million inhabitants are unbanked or under banked – if we are so far away from financial inclusion here what about the rest of the world. Reflecting on the Summit’s Six Pathways:

    • Agricultural value chains – important but most of the very poorest are landless or farm subsistence plots
    • The graduation approach – documented good results but cost $500 to $5,000 per person and carried out only by the most sophisticated institutions – too costly to scale up.
    • Conditional cash transfers – 35 million in Latin America receive payments and guaranteed employment and Food for Work schemes involve many more – substantial potential there
    • Integrated health and microfinance – useful as poor health leads to devastating economic shocks but how to scale
    • Mobile platforms linked with agent networks – growing quickly but mostly for remittances but could extend the outreach of financial institutions. Still miniscule but has potential:

    Agreed that full financial inclusion by 2020 is exceedingly unlikely, but what could work that is simple, scalable and low cost?
    • Improving on the informal ways that the poor manage their money – ROSCAS, ASCAS, animals, grain, lending etc. SGs improved on ROSCAS – what other low lying fruit are out there? Let’s learn from what is out there.
    • Massive scale up of Savings Groups but experimenting with strategies for reaching the poorest. Project Concern in Bangladesh reached the ultra-poor through SGs at virtually no extra cost
    • Introduce Savings Groups through CCTs, Food for Work, refugee camps etc – ProSoli, the CCT in the Dominican Republic is pioneering this approach on a massive scale and could be widely replicated.
    • Use technology for health training, SG record keeping and training thereby decreasing costs and increasing effectiveness.
    • Introduce commitment savings products through mobile money and also through institutional savings accounts which are largely unused

    This calls for supporting, documenting and replicating emerging new ideas as we figure out how to synergistically merge and build on different approaches. Should be an interesting few years. See http://www.intheirownhands.com


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