Content area
Full Text
ABSTRACT This paper summarizes the first publicly available, user-side data set of indicators that measure how adults in 148 countries save, borrow, make payments, and manage risk. We use the data to benchmark financial inclusion-the share of the population that uses formal financial services-in countries around the world, and to investigate the significant country- and individual-level variation in how adults use fonnal and infonnal financial systems to manage their day-to-day finances and plan for the future. The data show that 50 percent of adults worldwide are "banked," that is, have an account at a fonnal financial institution, but also that account penetration varies across countries by level of economic development and across income groups within countries. For the half of all adults around the world who remain unbanked, the paper documents reported baniers to account use, such as cost, distance, and documentation requirements, which may shed light on potential market failures and provide guidance to policymakers in shaping financial inclusion policies.
Well-functioning financial systems serve a vital purpose, offering savings, payment, credit, and risk management products to people with a range of needs. More-inclusive financial systems-those that allow broad access to appropriate financial services-are likely to benefit poor people and other disadvantaged groups. For instance, access to formal sav- ings and credit mechanisms may facilitate investment in productive activi- ties such as education or entrepreneurship. Lacking such access, individuals rely on their own limited, informal savings to invest in their education or become entrepreneurs, and small enterprises on their limited earnings to take advantage of promising growth opportunities. This can contribute to persistent income inequality and slower economic growth.1
This paper benchmarks financial inclusion and explores country- and individual-level variation in how adults around the world use formal and informal financial products to manage their finances and plan for the future. We define financial inclusion as the use of formal financial services, and we investigate how patterns of financial inclusion vary across countries at different levels of income per capita, and within countries at different lev- els of relative income. Next, we examine the barriers to financial inclusion and document the relationship between subjective and objective barriers to access. Finally, we discuss examples of public and private sector-led initia- tives in this realm and...