The technological revolution, and the accelerated adoption of digital solutions as a result of the COVID-19 pandemic, are transforming access to finance. As this edition of the Global Findex database shows, 71 percent of adults in developing economies now have a formal financial account, compared to 42 percent a decade ago when the first edition of the database was published. And the gap in access to finance between men and women in developing economies has fallen from 9 percentage points to 6.
This is an important transformation for development. Having a financial account makes it easier, safer, and cheaper to receive wage payments from employers, to send remittances to family members, and to pay for goods and services. Mobile money accounts also make it possible, even for the poor, to save and cope with adverse shocks. And individual accounts give women more say on their households’ finances.
Importantly, the digital revolution is a powerful tool to improve governance. Social programs can now channel transfers directly to their beneficiaries’ mobile phones, reducing leakage and delays. This potential became a reality during the COVID-19 crisis, helping cushion its impact on livelihoods. Digitalization also increases transparency as money flows from a country’s budgets to government agencies to people, reducing the scope for corruption.
This edition of the Global Findex Database shows clear advances underway. The share of adults making or receiving digital payments in developing economies grew from 35 percent in 2014 to 57 percent in 2021, outpacing growth in account ownership. In Sub-Saharan Africa, 39 percent of mobile money account holders now use them to save. And more than one-third of adults in developing economies who paid a utility bill from an account did so for the first time after the start of the COVID-19 pandemic—evidence of its impact on digital adoption.
It is critical to build on these encouraging trends, especially given the current headwinds. High inflation, slow economic growth and food scarcity will affect the poor the most. Expanding their access to finance, reducing the cost of digital transactions, and channeling wage payments and social transfers through accounts will be critically important to mitigate the reversals in development from the ongoing turbulence.
Further supporting this transformation requires decisive action across three areas:
Creating an enabling policy environment. Progress in access to finance depends on the mobile phone much more than the banking system. Ubiquitous and affordable internet access is therefore a prerequisite to further progress. More progress is also needed on the policy front. The lack of verifiable identity is one of the main reasons why adults remain excluded from financial services. India has pioneered a successful model for universal identity, paying due attention to safety and privacy. The inter-operability of systems and the availability of a low-cost switch for financial transactions are equally important. Consumer protections and stable regulations are needed to foster safe and fair practices by financial and technology companies.
Promoting the digitalization of payments. The Global Findex 2021 data show that 865 million account owners in developing economies opened their first financial institution account for the purpose of receiving money from the government. This helped households directly and also helps build digital payment systems. It serves as a foundation to assemble credible social registers, identifying gaps and overlaps along the way.
As digital payments become more common and the cost falls, many private businesses will be able to pay their workers and suppliers electronically – and should. The digital revolution offers a chance to increase formal sector employment without making compliance over-burdening. At a time of tighter budget constraints, digital payments can help reduce tax avoidance and evasion, broadening the tax base.
Emphasizing access for women and the poor. The gender gap in access to finance has narrowed, but it still exists. Women, along with the poor, are more likely to lack identification or a mobile phone, to live far from a bank branch, and to need support to open and effectively use a financial account. Policy makers will need to make additional efforts to include underserved population groups in the ongoing transformation. Financial education programs are among the tools to consider, and they are bound to be more effective if they involve peer-to-peer learning, for instance through women’s self-help groups.
At the World Bank we are firmly committed to financial inclusion through digitalization. Through country engagements, we are supporting our counterparts in boosting mobile phone networks, removing regulatory barriers to foster access to finance. We are also helping with the adoption of e-government platforms and the modernization of social protection systems.
Improving the knowledge on financial inclusion is part of our contribution, and the Global Findex database is one of its cornerstones.
World Bank Group