The World Bank and the United Nations have both set their sights on ending extreme poverty by the year 2030. The Bank has also set a concomitant target of universal financial access by 2020 as a major contributor to ending extreme poverty. Our assessment, after reviewing the contributions that microfinance institutions and other financial providers have made toward these two goals, is this: if financial services are meant to play an important part in bringing an end to extreme poverty, we will not come close to reaching it.
Microfinance has demonstrated the viability of providing financial services to people in poverty and technological advances have drastically reduced the cost of providing financial services. But, we still do not see widespread adoption of financial services among the largest groups of those that still need to be reached: those living in extreme poverty.
We use this State of the Campaign Report to highlight the progress of the microfinance community toward two goals set at our 2006 Global Microcredit Summit: 1) reach 175 million of the world’s poorest families with microfinance, and 2) help 100 million families lift themselves out of extreme poverty. This year, we report those numbers in the context of the larger movements to provide universal access to financial services and to end extreme poverty — and they show the challenge we are having in attaining our goals.
The latest World Bank report on global poverty reports that, in 2012, 896 million people lived in extreme poverty. The 2014 Global Findex reports that more than half of all adults in the poorest 40 percent of households in developing countries did not have access to formal financial services. (This is a 17 percent improvement over the 2011 Findex.) That makes those living in poverty one of the largest and most difficult-to-reach population segments excluded from the financial system. The 2020 target of universal financial access compels us to reach everyone living in extreme poverty; yet, the part of the financial community that has done the most to expand financial access among the poor over the last few decades — microfinance providers — have stalled in their outreach to this segment.
A financial system that reaches and benefits everyone will need to provide financial services that people with the lowest income and with households in the most remote places find accessible and useful. This means we need to approach such a challenge with the end in mind — from the end goal and work back to how we want to get there. In this way, we can design a system to sustainably reach clients in the most remote areas and who transact in the smallest sums. This design process must include the following steps:
Measure: In order to track our success with including those living in poverty, we must measure the income levels of the financially included, as well as the excluded. For this reason, we are greatly encouraged by the recent announcement from the World Bank that it will invest in conducting household surveys every three years in the 78 poorest countries — and making sure it happens. It also requires a good definition of success, that is, what it means to be included in the financial system. And, for us, true inclusion means that a person not only has an account but has access to a full range of financial services that they can use in a way that benefits them.
Map: Reaching the excluded requires knowing where they are. Mapping the locations of these excluded people helps us place them in their geographical, cultural, and economic context. It helps us understand the sets of related factors that may contribute to their exclusion.
Understand: People living in poverty use financial services to accomplish their own objectives: to mitigate risks, take advantage of opportunities, build a better future for their children, celebrate joys, and mourn losses. Those who seek to provide financial services for this group need to understand the rhythms of their lives, their aspirations, their fears, and their cash flows.
Design: This understanding can help financial service providers design products and services that match the objectives and life cycles of their clients at price points that reflect what people living in poverty can afford and what they value.
Deliver: Delivering these products and services at scale will require alliances and partnerships that together can provide delivery channels and aggregators to reduce costs, hasten response time, and improve service. MFIs, banks, savings associations, telecommunication companies, governments, civil society organizations, and NGOs can all play a role in delivering a range of useful products and services to a widely dispersed population.
Another sneak peek coming tomorrow! Countdown to the launch on December 9th!
 We use the World Bank definition of “extreme poverty” to mean those living on less than US$1.90 per day PPP (the recently updated international poverty line). We use this interchangeably with “poorest” and “very poor.” Where we mention the “ultra poor,” we are referring to people living on less than $0.70 — $0.80 per day. The World Bank has also adjusted the $2-a-day poverty line (the “poor”) upward to $3.10 a day.
Source for the numbers: World Bank, 2015, “Overview,” Topics: “Poverty.”
 World Bank, “Overview,” Global Findex.
 World Bank press release October 15, 2015, “World Bank’s New End-Poverty Tool: Surveys in Poorest Countries.”