WEF tackles financial inclusion
The World Economic Forum (WEF) and 15 of its partners have launched a financial inclusion measurement framework in an effort to assist the world's "unbanked", including through leveraging digital financial services.
"Financial inclusion is at a turning point. Due to advances in technology, the unprecedented advent of transactional and behavioural big data and greater multi stakeholder collaboration, there is a realistic opportunity to reach the financially excluded - estimated to be two billion - and the many more who are underserved", the group says in a report.
The framework defines the metrics that are crucial to understanding and improving how people access and use financial products like digital payments, savings accounts and loans in the developing world.
"More nuanced metrics provide businesses and governments with the necessary inputs to offer customer-centric strategies that increase access and usage of financial services in a sustainable manner," according to Cheryl Martin, WEF MD and head of industries.
The findings are summarised in a white paper titled "Advancing Financial Inclusion Metrics: Shifting from access to economic empowerment". The white paper says increased attention to financial inclusion has recently been driven by one core factor: the rise of technology-enabled innovation.
"Digital financial products and services - especially those delivered through mobile phones - have made it cost-effective to reach low-income consumers who conduct transactions for small amounts. These technological advances have enabled scalable and profitable business models and significant commercial prospects in the base of the pyramid segment."
The white paper proposes specific metrics to analyse the maturity of payments, credit, savings services and the overall regulatory environment.
"Greater visibility into these inputs is vital to financially include those left out of the formal economy, whether in India or Mexico, Tunisia or Zimbabwe," the report says.
The initiative's 15 core partners include financial providers, consulting companies, foundations, and consumer goods companies. They are: Alliance for Financial Inclusion, BBVA, Bill and Melinda Gates Foundation, Credit Suisse, International Finance Corporation, MasterCard, Mercy Corps, MTN Group, PayPal, SWIFT, Tata Consultancy Services, Telenor Group, Unilever, UNSGSA and the World Bank.
The report explains the emergence of global data sources since the early 2010s offered, for the first time, reliable statistical data on the progress of financial inclusion, and provided a framework to begin to examine the impact of advancing financial inclusion.
"However, today there are still two billion people worldwide who are financially excluded, resulting in lost economic opportunities and dependence on riskier, more expensive methods to pay, save, borrow and acquire assets. This represents a threat to overall financial wellbeing and social cohesion."
But the group believes significant scope exists for the public and private sectors to increase their cooperation to endorse a more nuanced understanding of how financial services are consumed and their impact on living standards.
"Data is critical to better understand the relationship between financial inclusion and greater wellbeing," says Paul Polman, CEO of Unilever. "By digitising the processes of buying supplies and selling goods, small and micro businesses in emerging markets can gain access to appropriate low-interest credit, further boosting business growth."
The report highlights that much of the required consumer data is already available. However, expanded data collection is needed in certain cases.
Her majesty Queen M'axima of the Netherlands, and United Nations secretary-general's special advocate for inclusive finance for development, also emphasises the importance of data.
"Without good data, we cannot map potential demand for financial services, track progress, and develop customer-centric products and services for the excluded, including women. The knowledge data provides, in turn, will help shape effective policies and generate the strong political will needed to achieve full financial inclusion."
The report was launched ahead of the WEF's annual meeting, which takes place from 22 to 26 January in Davos, Switzerland.