Financial Inclusion - Stats and Trends

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Financial Inclusion - Stats and Trends

Research findings suggest that the world seems to be making progress regarding financial inclusion. The North American and European markets lead in financial inclusion, while Asia-Pacific and Sub-Saharan Africa lag. Some challenges currently hindering financial inclusion in Africa include interoperability, digital identification, regulation, and assessment of digital readiness.

I. Adoption and Impact of Financial inclusion in North America

  • While the U.S. is among the most affluent countries in the world, research shows that about 78% of Americans are living paycheck-to-paycheck. In 1989, an estimated 14% of American households lacked a bank account; however, by 2018, the figure had dropped to 7%. Interestingly, about 20% of Americans with bank accounts also use "financial services associated with the financially excluded," e.g., payday loans.
  • According to research, the financial health of most Americans wants, as approximately 57% of American adults struggle financially with significant debts, "irregular income flows, or sporadic savings habits." Equally, about 91 million U.S. adults are credit-challenged because of a credit score below 600 or for being low-file.
  • On the other hand, 99% of Canadians have an account with a financial institution, including 98% of adults with low incomes. Canadians also have access to over 100 different account packages. Research suggests that Canada's accessibility to banking services and products is among the highest globally.
  • Regarding financial literacy, an estimated 61% of Canadians can answer five of seven financial knowledge questions, according to a survey by the OECD. Moreover, about 3% of Canadians are unbanked, while 15% are underbanked. Regarding savings, in 1982, Canadians managed to save 20% of their annual incomes; unluckily, as of 2017, Canadians managed to save only 4.3% of their yearly income.
  • Fintech adoption rates in the U.S. and Canada are relatively anemic at 46% and 50%, respectively, versus other global regions like Russia with 80%, Mexico (72%), the UK (71%), and Australia (58%). The adoption rates for Canada and the U.S. fall below the global adoption rate of 64%.
  • Financial inclusion has impacted the U.S. and Canada significantly; for instance, in the U.S., as of February 2016, fintech startups had grown to over 2,000 fintech companies, including growth in fintech venture capital. In Canada, in January 2019, there were over 850 fintech companies, with 16.5% focusing on payments, (14%) finance and accounting, and (12%) investment tech.
  • Both the U.S. and Canada are witnessing massive bank closures stemming from the impact of financial inclusion. For example, in 2018, a total of 1,947 U.S. retail banks closed branches as more consumers switched to online and mobile banking options. In Canada, the trend is similar, as qualitative data indicates that leading financial institutions have been "shutting down branches in low-income neighborhoods."

II. Adoption and Impact of Financial inclusion in Europe

  • In Europe, an estimated 130 million adults or 15% to 18% of adults do not have access to the formal financial system. Despite the huge number, account ownership in the region has climbed from 45% in 2011 to 65% in 2017. Further, about 55% of adults in Europe's high-income countries save with a financial institution.
  • Fintech adoption in Europe currently stands at 33%, with the UK leading the way at 42%, while Spain and Germany follow closely with 37% and 35%, respectively. Countries with below-average adoption rates include "Switzerland, France, Netherlands, and Ireland at 30%, 27%, 27%, and 26%, respectively." EasyPay, IDFinance, and MyBucks are three examples of fintechs focusing on financial inclusion in Europe.
  • It is estimated that approximately 37 million people in Europe are unbanked, i.e., they are "completely isolated from the formal financial system;" therefore, they do not use banks or banking institutions. The figures could be high, considering the increasing number of immigrants in Europe.
  • In Europe, the adoption rate for fintechs focusing on money transfer and payments was over 50% in 2017, versus 18% in 2015. The United Kingdom (43%) and German (31%) are among the world's biggest markets for insurance fintech. Moreover, the financial sector dominates the adoption of blockchain technology in Europe.
  • According to research, 77% of financial services institutions sought to adopt blockchain technologies as part of their process or production system by 2020. Importantly, over a third of European financial services companies know about blockchain technology, compared to the global average.
  • The impact caused by financial inclusion throughout Europe includes the implementation of the European initiative for financial inclusion. Other similar programs include the "Financial Inclusion for Inclusive Growth in Europe II, which aims to expand and deepen financial inclusion for European citizens.
  • Other impacts include the implementation of cross-border payment processing solutions such as Rewire to help immigrants attain some financial inclusion. Some specific regulation is being reviewed to help European migrants to feel financially included in Europe's formal financial system.

III. Adoption and Impact of Financial inclusion in Asia-Pacific

  • Almost 50% of households in Asia-Pacific have a bank account. Approximately half of the individuals aged 15 and above in the region also have a bank account. According to research, a household could have one member with a bank account or all household members, with each having their bank accounts.
  • In some countries like China, Malaysia, and Thailand, over 80% of adults make digital payments or have a bank account at a traditional financial firm. Unfortunately, in other countries like Cambodia and Nepal, only 40% of the population own a bank account, as most individuals still borrow from informal lenders like family, friends, Shylock, etc.
  • Gender, income, and residential Inequalities persist in access to financial services in Asia-Pacific. In Indonesia, 10% of adults in the poorest category own a formal bank account, versus 60% from the richest group. Likewise, in India, approximately 46% of male adults from the poorest group have a bank account, versus 79% from the richest group. Significant gender gaps are seen in South Asia, where almost 40% of women own a bank account, versus 60% of men.
  • Qualitative data indicate that the prevalence of financial exclusion in Asia-Pacific is among society's most vulnerable groups, including the young, uneducated & unemployed individuals, and the poor people in rural areas. In 2014, inequality of access based on gender was 18%, but in 2017 it had reduced to 11%.
  • Similarly, inequality of access by position in income distribution (upper 60% versus lower 40%) in 2014 was 14% for South Asia and 13% for East Asia and Pacific (developing only), but in 2017, the gap for South Asia had decreased to 7%, while that of East Asia and Pacific (developing only) had climbed to 19%.
  • According to the International Monetary Fund (IMF) report on financial inclusion in Asia-Pacific, a 1% rise in the financial inclusion index, i.e., moving from the fourth to third quartile results in a "cumulative 0.14 percentage point increase" in the growth of per capita income over half a decade.
  • An increase of 1% in financial inclusion, i.e., moving from the fourth to the third quartile, can lower the poverty level in the Asia-Pacific population by 1.4% within 5 years. Financial inclusion can as well reduce income inequality and poverty. Importantly, most nations in Asia-Pacific are advocating for financial inclusion to become part of their growth plan.

IV. Adoption and Impact of Financial inclusion in Africa

  • In Sub-Saharan Africa, more than 95 million unbanked adults rely on cash payments for the sale of farm produce, while about 65 million use semi-formal savings. In 2014, about 34% of adults in Sub-Saharan Africa had a bank account, but that figure rose to 43% in 2018. Moreover, those with a mobile money account rose to 21%, while in every other region, mobile money penetration is less than 10%.
  • Sub-Saharan Africa remains home to eight African economies (Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Senegal, Tanzania, Uganda, and Zimbabwe) where over 20% of adults have a mobile money account only. Mobile driven financial inclusion in Africa has resulted in over $300 million monthly transactions from 7.2 million new users of digital financial services and more than 45,000 new banking agents.
  • Research shows that financial inclusion in Sub-Saharan Africa has soared from 23% in 2011 to 43% in 2017. The financial inclusion for women in Sub-Saharan Africa continues to make significant gains, with the number of accounts growing by 600% in Senegal.
  • In Kenya, the percentage growth more than doubled that of Senegal to increase the financial inclusion of women to about 80% in 2017 from 40% in 2011. It is also estimated that 88% of Kenyan account owners or 72% of adults use the internet or a mobile phone to transact from their accounts.
  • The impact of financial inclusion in Africa is felt wide and far; for instance, from 2016 through 2018, African policymakers implemented over 160 financial inclusion policies and regulations. Financial inclusion in Sub-Saharan Africa has attracted global networks, such as the Alliance for Financial Inclusion (AFI), which promotes peer learning among African regulators, capacity building, public-private dialogue, etc., to facilitate "digital innovation, gender-inclusive finance, and inclusive green finance."
  • The impact of financial inclusion in Africa includes the emergence of new financial solutions offered by agent banking, including reasonably priced, fast, & convenient transactions, savings, credit, and insurance options in remote villages and urban centers without banks. For instance, from 2011 to 2017, the financial inclusion rate in the Democratic Republic of Congo has risen from 3.7% to 26%, driven by mobile money services that had also increased to 16% by 2017.

V. Challenges Currently Hindering Financial Inclusion in Africa


Digital Identification

  • While people need to prove their identity when accessing some services such as healthcare, opening a bank account, etc., most low- and middle-income countries lack robust ID systems to provide secure and reliable ID credentials to the whole population.
  • These countries also lack the essential legal and technical restraints to protect data, its use, and prevent any breaches. In this regard, an estimated 38% of the population in low-income nations do not have a reliable national ID, compared to only 5% in high-income countries.
  • Unluckily, women are disproportionately affected, i.e., about 45% of them in low-income countries do not have an ID, versus, 30% of men. In some nations like Benin, Cameroon, and Congo, married women must provide additional documentation proving the name of their husbands before they can get an ID.


Assessment of Digital Readiness

Research Methodology

To uncover financial inclusion statistics and trends, including insights that show the adoption and impact of financial inclusion in North America, Europe, Asia Pacific, and Africa, along with challenges currently hindering financial inclusion in Africa, we explored financial data published by numerous sources. In particular, we relied on data released by the World Bank, the International Monetary Fund, Bill & Melinda Gates Foundation, Center For Financial Inclusion, the Canadian Business Association, the Financial Brand, the Canadian Government, Center for the Promotion of Imports European Union, Forbes, United Nations ESCAP, and the International Finance Corporation, among others. We also reviewed expert opinions, along with industry and global financial inclusion reports published by local and national media outlets. Importantly, for each region, we have provided seven insights that show the adoption and impact of financial inclusion.