Regulatory policies, individual initiatives determine financial inclusion: Report

By Matthew Fuchs

Microfinance Focus, Nov. 3, 2009: Regulatory and policy environment as well as the actions of individual financial providers are key determinants of financial inclusion but are largely independent of socio-economic factors, said a report released recently by the Financial Access Initiative, “Half the World is Unbanked”.

The report provided India and Thailand as two examples with far higher levels of financial inclusion, indicated by GDP per capita or extent of urbanization.

This proves, the report argues, that it is possible to provide financial access to low-income earners, with two-thirds of adults who use formal or semi-formal services in Africa, Asia and the Middle East living on under $5 per day. This amounts to 800 million people.

Other key findings included that over half of adults globally, or 2.5 billion people, do not use financial services to borrow or save. Of these 2.2 billion, or 90%, live in Africa, Asia, Latin America and the Middle East. The study categorised microfinance institutions as formal or semi-formal financial services, while moneylenders were excluded.

The findings follow the recent Financial Access 2009 report by CGAP, which found that 70% of adults in developing countries are excluded from the financial system.

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