Financial Inclusion - A Foothold on the Ladder toward Prosperity? : An Evaluation of World Bank Group Support for Financial Inclusion for Low-Income Households and Microenterprises
Access to financial services has long been believed to lift people out of poverty by allowing them to seize economic opportunities and increase their welfare. Despite rapid progress of 700 million people gaining access to formal financial services,...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/641411539266866033/Financial-Inclusion-A-Foothold-on-the-Ladder-toward-Prosperity http://hdl.handle.net/10986/35153 |
| Summary: | Access to financial services has long
been believed to lift people out of poverty by allowing them
to seize economic opportunities and increase their welfare.
Despite rapid progress of 700 million people gaining access
to formal financial services, 2 billion remain excluded.
Financial inclusion -- access by poor families and
microenterprises to financial services -- has been an
objective of the World Bank Group for a long time,
reaffirmed in 2013 by President Jim Kim’s commitment to the
Universal Access Goal by 2020. This evaluation examines the
relevance and effectiveness of seven years (FY07-13) of
World Bank Group support to financial inclusion and its
impact on the poor. It found that the World Bank Group
contributed significantly to progress in financial inclusion
globally and in client countries. It has “reached” a
substantial share of the microfinance industry. Its support
is strategically aligned with countries’ needs, focusing
primarily on countries with low inclusion rates and
addressing development priorities. The Bank Group has also
contributed to the sustainability of microfinance services.
Yet the Bank Group’s approach to identify and tackle
constraints to financial inclusion at the country level is
not sufficiently comprehensive. This is of particular
concern for areas that are not subject to prudential
regulations, like mobile money and rural savings and credit
cooperatives. Even though the Bank Group was able to
leverage its impact through international partnerships,
these bear costs and risks and often lack results
frameworks. But most importantly, the commitment to the
Universal Access Goal and the resulting “push” for enabling
access to financial services through transaction accounts
may create a bias for driving up sheer access numbers. This
may be problematic for several reasons: (i) access does not
necessarily lead to inclusion, given high dormancy rates of
newly created accounts; (ii) the link between access to
finance and poverty alleviation is neither certain nor well
understood, given the evidence that, in spite of modest
benefits, the promise of microfinance pulling millions out
of poverty has not been fulfilled; and (iii) current trends
suggest one billion people may still lack access by 2020.
These remaining financially excluded will increasingly be
broadly distributed across many countries and predominantly
in rural areas. Providing access to them is likely to
require subsidization. Striking a balance between the costs
and benefits of universal inclusion and weighing these
against the cost and benefits of other competing development
priorities will be essential. |
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