Rating progress toward financial inclusion on a scale of 1 to 10

fi2020 progress report homepage2

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The Microcredit Summit Campaign is delighted to support CFI’s efforts to track the progress of the Financial Inclusion 2020 project. In contribution to the “Financial Inclusion 2020 Progress Report,” we recently conducted a series of interviews with microfinance leaders around the world who are committed to reaching the most marginalized. Read “Addressing the financial needs of the most excluded” to hear directly from practitioners engaged in this work. Elisabeth Rhyne believes you will be both astonished by the progress and daunted by the gaps that remain” in financial inclusion. Read her post below and visit the interactive Progress Report website to take part in this financial inclusion diagnosis.


The following blog post was originally published
by the Center for Financial Inclusion at Accion

>>Authored by Elisabeth Rhyne, Managing Director, Center for Financial Inclusion

Today the Center for Financial Inclusion (CFI) is proud to launch the Financial Inclusion 2020 Progress Report, an interactive website that portrays the recent progress and unmet challenges on the path to global financial inclusion.

When we began the FI2020 project in 2011, we hoped to create a sense of both urgency and possibility. We believed that enabling everyone in the world to gain access to quality financial services was a goal of major development significance. We also saw that with many active players and the promise that digitization would enable many more people to be reached at lower cost, it was no longer simply wishful thinking to call for full inclusion within a reasonable timeframe. Global financial inclusion had entered the realm of the possible.

Today, in 2015, we are both astonished by the progress and daunted by the gaps that remain. Global Findex data shows 700 million new accounts in the three years from 2011 to 2014, reducing the number of unbanked worldwide from 2.5 to 2 billion. National governments have created ambitious financial inclusion strategies, the FinTech industry is exploding with $12 billion in global investments in 2014 alone, and the World Bank has a plan for reaching universal financial access to transaction accounts by 2020.

Our quantitative review, By the Numbers revealed that if the current trajectory of expansion in accounts continues, many countries will achieve full account access by 2020. The rails are being laid at a rapid rate, and there is great momentum toward universal access. But access to an account is not the same thing as financial inclusion, and progress toward meaningful financial inclusion, in which people actively use a full range of services, is lagging. The passengers — customers — are often still waiting at the station for services that take them where they want to go.

With assurance of great momentum around access, CFI believes that the time is right to turn greater attention to quality and value for the customer, which are the genuine heart of financial inclusion. In the Progress Report, you will find a recurring concern with the customer side of the equation. Meeting the customer challenge requires everyone — national policymakers, regulators, financial service providers of all types, non-profits, and global bodies — to step up. The challenges range from protecting consumers in the digital age, to building financial capability, to creating services that enable customers to meet important life goals.

As you read the Progress Report you will see just how many players are actively pursuing these goals in innovative ways all over the world. We cite and celebrate dozens of examples. Nevertheless, we find that in many areas, such as financial capability, the level of effort is not yet commensurate with the challenge at hand, and large shifts are called for, both in deployment of resources and in assignment of roles and responsibilities. For example, we find that meaningful financial inclusion requires providers to take on greater responsibility for customer value.

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In the Progress Report, we present our assessment of progress toward global financial inclusion through the lens of five topics that will shape its future: Financial Capability, Addressing Customer Needs, Technology, Credit Reporting and Data Analytics, and Consumer Protection. The report provides a qualitative and interactive assessment of who is doing what, as a companion piece to By the Numbers. The FI2020 Progress Report celebrates the most significant accomplishments, and highlights the gaps that create the agenda for the coming years.

Aside from the content of the Progress Report, we are excited to share with you the format for its presentation. Rather than producing a traditional document, the report takes the form of an interactive website, which allows you to move from topic to topic according to your own interest, and which allows us to bring you many specific examples and graphic illustrations in sidebars throughout the report. We hope you enjoy the format. (If you prefer a traditional PDF, that is also available.)

To provoke a conversation, we have rated progress in each area on a scale of 1 and 10, and we explain why we chose that score. We invite you to use the interactive feature on the website to cast your own vote and compare your scores to ours. Go ahead, disagree with us! While we stand behind the research and analysis that went into our ratings, they are — of course! — our own, and they reflect a global look, which may vary greatly from one region or country to another.

Most of all, consider with us the ways to close the gaps so that each of the scores rises to 10. That’s the point of this exercise, after all: to diagnose where we are today in order to work toward a future of full, meaningful financial inclusion.

Addressing the financial needs of the most excluded

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC's work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh's 86,000 villages. Photo: Conor Ashleigh for AusAID.

Anowara Begoum lives in Kazipara village. Anowara received a cow and goat to from BRAC through its STUP Special Targeting Ultra Poor. AusAID funds BRAC’s work in Bangladesh, its estimated that BRAC works within 70,000 of Bangladesh’s 86,000 villages. Photo: Conor Ashleigh for AusAID.

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The following blog post was originally published
by the Center for Financial Inclusion at Accion

>> Authored by Larry Reed, Director, the Microcredit Summit Campaign, and Jesse Marsden, Research and Operations Manager, the Microcredit Summit Campaign

In collaboration with the CFI’s process to develop the Financial Inclusion 2020 Progress Report (to be released October 1, 2015), the Microcredit Summit Campaign recently conducted interviews with microfinance leaders* around the world committed to reaching the most excluded. In this post, we share some of the insights from these conversations about how to ensure that the most invisible clients are financially included, directly drawn from the experiences of those who are doing it.

To set the stage, Luis Fernando Sanabria, general manager of Fundación Paraguaya, made this central point: “Our clients need to be the protagonists of their own development stories. Our products should be the tools they use to meet their needs and empower their aspirations.” With that reminder of the purpose of financial inclusion, we begin the discussion by asking who are the most excluded.

In each country, people living in extreme poverty (below US$1.25 a day) make up the largest segment of those excluded from the financial system. We spoke with leaders from organizations that make intentional efforts to reach this large excluded market: Fundación Paraguaya, Pro Mujer, Fonkoze, Plan Paraguay, Equitas, Grama Vidiyal, and TMSS. These organizations not only address poverty, but also a host of other dimensions that lead to exclusion, including literacy, race, gender, physical disabilities, and age. Less frequently-discussed reasons for exclusion include sexual orientation, language barriers (especially among indigenous populations), and mental or emotional health issues. In India and Bangladesh, for example, those interviewed noted that the lack of personal identification often drove exclusion, especially among women, persons with disabilities, and the socially excluded, such as transgender individuals.

In order to reach the most excluded, you have to know who they are. “Often the poorest families are invisible in their own communities,” said Steve Werlin of Fonkoze in Haiti. “When we do the wealth rankings in a community, they aren’t even mentioned.” Fonkoze takes steps to make sure that all households get included in their surveys so that the community can see who they have left out. Creating this visibility is essential. On a wider scale, in government statistics on economic activity, data on people over 65 is simply discarded or never collected.

Everyone, and every client, is unique. One of the messages of the FI2020 Progress Report is that the base of the pyramid (BoP) is not a monolithic bloc. Arjun Muralidharan of Grama Vidiyal in India noted, “You need to have a particular and unique strategy to seek out and serve these groups. This begins with deciding who you are going after. Different populations have very different problems.”

Two key elements for including the most excluded populations are building trust and overcoming prejudice. Not only do the financially excluded need to become confident in their services providers’ ability to responsibly manage their money, but they often have to become comfortable participating in a society that has regularly closed its doors to them.

“Working with disenfranchised groups is hard. We need to provide extra training and services to help overcome their self-exclusion,” said Muralidharan. Grama Vidiyal provides health services and legal rights training to members of the Dalit group (formerly known as untouchables) before including them in savings and lending groups.

On the other side of the equation are financial services staff attitudes. “In order to include people with disabilities, we need to train our staff first, to get them to overcome their prejudice,” said John Alex of Equitas in India. Equitas provides disability awareness training for its staff and clients and encourages them to find people with disabilities in their communities to include in the institution’s borrowing groups. Equitas also adapted its training and application systems to be accessible for people who are blind, deaf, mute, or face other physical limitations.

Excluded groups may have financial needs that do not fit the typical cash flows of other clients. TMSS asked rural farmers in northern Bangladesh what programs the farmers felt would be best to introduce. This client-first approach led to new programs that combined loans and savings in sync with the growing season. TMSS also changed its policies and products to meet the needs of an aging population — eliminating its age limit for borrowers. The institution also provides savings services for these clients and training for the next generation of family members to make sure they will be cared for as they age.

Those excluded from financial services often face many other types of exclusion as well, leaving them with a range of constraints that they need to address:

  • Both Fonkoze and Plan Paraguay employ the Ultra Poor Graduation Model developed by BRAC that provides a combination of cash transfers, training, savings, an asset, mentoring, and access to credit.
  • Equitas works with homeless people and provides housing and financial capacity training before providing loans.
  • TMSS provides health services, financial capability training, and vocational training.

These organizations often partner with the government and others to make sure their clients have access to the range of services they need. Fundación Paraguaya uses its Poverty Stoplight monitoring system to assess its clients on a checklist of 50 items related to poverty, health, education, and employment. It uses this data to bring in government services for common areas of need. Equitas partners with local hospitals, and Grama Vidiyal works with the government health insurance system to provide for the health needs of clients.

Achieving financial inclusion requires consistent energy to attain, maintain, and measure progress. Fundación Paraguaya uses its Stoplight system to enable clients to define and measure their own achievements over time, and provides incentives to its staff based on these clients’ achievements. Equitas provides incentives to its account officers for including persons with disabilities and measures the progress of its clients along consumption and health indicators. Plan Paraguay and Fonkoze measure the success of their ultra-poor graduation programs based on the numbers of clients who “graduate,” having met a comprehensive set of indicators related to food security, income security, asset ownership, school enrollment, housing quality, etc., and having reached a level at which they can use unsubsidized financial services.

Financial inclusion has always been about going where others wouldn’t go, addressing the needs of people who were excluded because it was too hard to serve them, or too risky, or too unsustainable. The people we spoke with represent the many financial pioneers who use innovation to expand the boundaries of inclusion, reaching those assumed to be impossible to reach.

For more on addressing client needs, check out the interactive FI2020 Progress Report, launching on Thursday (10/1).

Persons interviewed for this post: Luis Fernando Sanabria, Fundación Paraguaya; Carmen Velasco, co-founder of Pro Mujer; Steve Werlin, Fonkoze, Haiti; Mariella Greco, Plan Paraguay; John Alex, Equitas, India; Arjun Muralidharan, Grama Vidiyal, India; and Munnawar Reza, TMSS, Bangladesh.