Is the Global Findex survey overstating growth in financial inclusion?

NextBillion, 11 May 2015

Since it was published a few weeks ago, the 2014 Global Findex financial inclusion report has made a splash in media around the world. The headlines may have differed, but the articles all mention the key finding from the press release published by the World Bank: Massive Drop in Number of Unbanked. According to the Findex survey, which covered more than 150,000 people in 143 economies, the number of people with financial access grew from 51 percent to 62 percent between 2011 and 2014, a shift that reportedly represents a total of 700 million people worldwide.

While we highly appreciate the survey and the light it shines on the state of financial inclusion across the world, we are concerned about the accuracy of this headline finding. The growth it suggests is almost certainly overstated. To illustrate this concern, we suggest an alternative news headline, also based on the survey findings:

Number of Unbanked in U.S. and Eurozone Cut in Half

U.S. unbanked population drops from 12% to 6% in 2011-14; Eurozone cuts number of unbanked from 9 percent to 5 percent, according to report.

If this headline seems removed from reality, that’s because it is. more →

 

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Categories: next billion

Financial Inclusion 2011-14: Massive growth or a mirage?

e-MFP, 27 April 2015

The press release from the World Bank did not hold back:  “Massive Drop in Number of Unbanked,” reads the headline. In just three years, the number of adults with a bank account has grown from 51% to 62% — an increase of 700 million people. That’s a fantastic number!

And that’s the problem. Fantastic is good for children’s bed-time stories. It’s a bit more concerning when it comes to survey data. What’s the story behind this incredible, utterly unprecedented growth?  What happened in these past three years that might explain it? more →

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The biggest gap in Financial Inclusion? Metrics.

 e-MFP, 27 February 2015

The microfinance sector has been abuzz with the implications of the “final word” study on microcredit impact. For many, including myself, this has been an opportunity to consider a trend that’s been taking place for several years now – from microfinance to financial inclusion. In my last blog, I touched upon the subject of metrics that this new shift requires. I would like to delve deeper.

To use the definition of the Center for Financial Inclusion, “Financial inclusion means that a full suite of financial services is provided, with quality, to all who can use them, by a range of providers, to financially capable clients.”  That encompasses many things, but perhaps more intuitively, financial inclusion means providing serving those who aren’t being served – whether they are too poor, too informal, or too remote.

It’s a compelling goal. Yet the metrics we use to measure progress came from a time when microfinance meant making loans to the poor. They simply are not up to the task of measuring financial inclusion. more →

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Microfinance is dead. Long live Microfinance!

e-MFP, 12 February 2015

The verdict is out. Final publication of six randomly-controlled studies (RCTs) has drawn a pretty thick line under the words of David Roodman: the average impact of microcredit on poverty is about zero. The notion that microfinance lifts the poor out of poverty is officially dead.

Now, the caveats. The studies evaluated microcredit only – not savings or payments or insurance. Nor did they cover so-called microfinance-plus programs, which provide training, health care or other interventions, along with credit. It’s quite possible that these or other specialized branches of microfinance practice do raise the living standards of the poor. But, if I may be so bold, even the best of these initiatives are probably less effective than we might have supposed.

This is good news. We in the microfinance community could use some humility. We’re financiers, not doctors, scientists, or teachers. To think that we can alter the lives of millions is hubris. more →

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Categories: e-MFP

Microfinance and savings outreach: what are we measuring?

e-MFP, 13 March 2014

For years, credit was the driving force behind microfinance. But times have changed. Instead of credit, we now speak of financial inclusion and expanding access to savings stands as one of the topmost objectives for the sector.

We also live in the age where it’s no longer acceptable to claim success without reliable metrics to back it. And on that front, the metrics applied to savings are woefully inadequate. According to a paper recently published by e-MFP, 50-75% of the savings accounts reported by MFIs stand empty. Like shadows cast by an evening light, the majority of savings clients are but illusions that obscure the real savers. We are thus doubly tricked – led to believe that more clients are saving than is the case, and that the clients who save are poorer than they really are. More →

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Categories: e-MFP