Why financial inclusion strategies matter—insights from the AFI Network

Klaus Prochaska


Members from the AFI network are featured at the 2015 Global Policy Forum in Maputo, Mozambique in September 2015.

One of the most pronounced trends that we currently observe among the Alliance for Financial Inclusion’s (AFI) membership is the increasing focus on devising national financial inclusion strategies. The recent launches of financial inclusion strategies in the Philippines, Pakistan, and Peru are only a few (albeit highly publicized) examples of the increasing number of countries that follow a nationally concerted approach to financial inclusion. Reflecting this growing interest 45 member institutions of AFI now participate in the Financial Inclusion Strategy Peer Learning Group (FISPLG), a dedicated platform for peer learning on the formulation and implementation of national financial inclusion strategies. Many FISPLG members have also committed to develop national strategies under the Maya Declaration, and eight countries in the group have already benefitted from submitting their draft strategies and action plans for peer review ahead of finalizing their strategy documents.

As I outlined last week in a blog examining the linkage between consumer protection and financial access, AFI conducted extensive research—in cooperation with the Cyrus Vance Center for International Justice, as well as leading international law firms Linklaters LLP and White & Case LLP, and local counsel—on the policy, legal and regulatory framework in 44 countries where we have members. The data will be made available to AFI members in the AFI Policy Profiles that will be accessible in September through the AFI Data Portal.

Among the 44 countries that responded to the survey in 2014, 24 percent reported owning a financial inclusion strategy document, while 38 percent were working on one at the time of responding. The formal adoption of several additional national financial inclusion strategies this year has assuredly pushed the percentage of compiled strategies higher than 24 percent.

Now, I would like to correlate a couple of financial inclusion strategy policy choices made by our members with actual financial inclusion levels and growth as measured by the World Bank Findex. We compared the average level and/or growth of financial inclusion between countries with certain policy choices and countries without them (Note: The growth of financial inclusion was measured by the change in the indicators: “Percentage of adults having an account at a bank or another type of financial institution” based on the Findex 2011 and 2014). To preface this discussion, it is important to note these correlations are not intended to suggest there is causal effect of policies on actual financial inclusion. However the results deserve to be presented and discussed, in part to add to the growing body of available evidence and to whet the appetite of the financial inclusion policy community to use the available data in the AFI Policy Profiles for further in-depth research.

When we asked if the regulator in the 44 responding countries had an official mandate for financial inclusion, 30 percent of the respondents answered that they had prescribed such a mandate for the regulator in the law, 14 percent have such a mandate in another form than a law and 42 percent do not have a mandate (the horizontal axis in the graph below illustrates the number of countries, in addition to the bars that depict the percentage of respondents).

When we compare these different levels of financial inclusion mandates with actual level of financial inclusion we find the average level of financial inclusion of all countries that have a mandate in the law is approximately 49 percent. The ones with “another” mandate show inclusion at around 43 percent and the ones without mandate are at roughly 37 percent. A possible interpretation of why a mandate prescribed in the law is correlated with higher financial inclusion than a mandate “otherwise” prescribed could be that it is generally more difficult in the national policy making process to pass a law than other rules. If there is sufficient political will to pass a mandate through the legislative process one could assume that this political will would also extend (and has already extended) to other relevant issues to financial inclusion that require the cooperation of different arms of government.

When we compare the financial inclusion growth in countries with financial inclusion strategy documents and countries without, we see countries with a strategy display faster growth of financial inclusion (11.9 percent) than countries without such document (10.5 percent). Countries already in the process of devising a strategy demonstrate a slightly higher growth rate (0.2 percent) in financial inclusion than countries that are not formulating a strategy. Even if these figures do not establish causality it is good to see the result is in line with the outcome we would expect.

Looking forward, with the case for the development of a national financial inclusion strategy now widely accepted, and numerous strategy documents published, attention in AFI’s FISPLG is likely to turn to the quality of implementation and effective means of evaluating a strategy’s impact. With many countries still in the early stages of implementation, it remains to be seen how far countries are able to sustain the necessary momentum beyond the launch of a national strategy to ensure the ambitious goals and targets they have outlined can be achieved or, hopefully, surpassed.

Klaus Prochaska is Head of Policy Analysis & Capacity Building at the Alliance for Financial Inclusion.

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