About 12,000 troops will parade through Tiananmen Square in Beijing tomorrow to celebrate the 70th anniversary of Japan’s surrender to the allies in World War II. China’s leadership is ostensibly using the anniversary as an opportunity, to use the Chinese phrasing, to celebrate “victory in the World Anti-fascist War and the Chinese people’s War of Resistance against Japanese Aggression.”

But really, the purpose is to display its modernized weaponry ahead of several key international visits by President Xi Jinping. For Western leaders, the parade has proven a diplomatic nightmare: The Chinese have pressured them to attend, but they realize that the event is aimed at celebrating the country’s new international assertiveness (and perhaps to sideline a rather bloody summer on the Chinese stock markets). 

Students pose with Chinese national flags and red stars in preparation for the parade on August 31, 2015. Photo credit: Reuters/China Daily.

It’s the present, stupid

Sixty-six years after the end of the war, the world has been learning how to deal with a new China—now a powerful country with a strong economy and an increasingly well-equipped military. China’s defense budget has seen a double-digit increase for the past 25 years, and the country now has J-15 fighter jets, Z-19 attack helicopters, and a truck-mounted version of the DF-41 intercontinental missile. There is little doubt the parade will be impressive both in precision and display. 

In spite of how the Chinese leadership spins it, the parade is not just about history—it’s also about the present and the future. China is using it as a moment to show off its strengths and assert a stronger role in the Asia-Pacific region (as tensions in the South China Sea remain high), if not the world.

The red carpet

One interesting sight will be the VIP box: Which heads of state will actually attend? Confirmed leaders include Russian President Vladimir Putin (who himself hosted Xi Jinping last May for a huge victory parade in Moscow); South African President Jacob Zuma; Venezuelan President Nicolas Maduro; Sudanese President Omar Hassan al-Bashir (who has an international arrest warrant against him); and—somewhat unexpectedly considering World War II sensitivities in the region—South Korean President Park Geun-hye. Park will attend ceremonies, but not the parade. North Korean leader Kim Jong Un will not be present, nor will Japanese Prime Minister Shinzo Abe. 

Fellow leading industrial nations countries don’t want to put Japan in a bind, but no one is willing to offend China. Hence, state leaders have responded to the standing Chinese invitation with an array of contortions. In the end, no Western leader will attend: President Barack Obama—who will be hosting Xi Jinping in the United States in a few weeks—will be represented by U.S. Ambassador to China Max Baucus. Unlike for the launch of the Asian Infrastructure Investment Bank (AIIB) earlier this year, Washington didn’t pressure other Western leaders to avoid Beijing. This wasn’t necessary, as those governments all had their own reasons for staying away. Even the German president—a largely ceremonial figure—has declined. So has his French counterpart François Hollande, who will travel to China in October to discuss climate issues; French Foreign Minister Laurent Fabius will attend instead. Italy will also be represented by its foreign minister. As for the United Kingdom, Prime Minister David Cameron chose to wait for the Chinese state visit to London in October to meet Xi in person. Britain is represented by a former Conservative cabinet minister, Kenneth Clarke. Even more surprising is the list of retired statesmen: former German Chancellor Gerhard Schroeder, who is known to have engaged with Russia’s Putin after leaving office in 2005, will be in there, like his friend and former U.K. counterpart Tony Blair. 

Aircraft perform during a rehearsal on August 23, 2015 for the September 3 military parade in Beijing. Photo credit: Reuters.

Enough troubles

The U.S.-China relationship is already complicated enough and needs no further upsets. While China flexes its muscles with a parade, America is in the middle of a presidential campaign during which candidates—such as Republican Wisconsin Governor Scott Walker, who recently called on President Obama to cancel Xi's visit—are openly criticizing China. For his part, Donald Trump claimed that “China would be in trouble” should he become president, adding: “The poor Chinese.” Although these kinds of comments cannot be taken too seriously, they will require even more diplomatic skills on the part of the current administration, and its successor, to fully restore fully the U.S.-China dialogue.

In these circumstances, it is no surprise that Washington has shown little interest in attending the Beijing events. Nor does the Obama administration want to be part of a demonstration of assertiveness weeks before a state visit to Washington by President Xi. History tells us that U.S.-China relations are going to get even more interesting than a parade.

Editor's Note: This is the first part of a two piece series on internal displacement that originally appeared online in TerraNullius. The second part is available here.

The Brookings-LSE Project on Internal Displacement recently released a study entitled "From Responsibility to Response: Assessing National Response to Internal Displacement." The study examined 15 out of the 20 countries with the highest number of internally displaced persons (IDPs) due to conflict, generalized violence and human rights violations—Afghanistan, the Central African Republic, Colombia, the Democratic Republic of the Congo, Georgia, Iraq, Kenya, Myanmar, Pakistan, Nepal, Sri Lanka, Sudan, Turkey, Uganda and Yemen.

According to estimates, these 15 countries represent over 70 percent of the world’s 27.5 million conflict-induced IDPs. Wherever possible, we also tried to include government efforts to address internal displacement by natural disasters. But in this and the subsequent blog post, we will focus on our main general conclusions as well as particular issues around housing, land and property (HLP) rights that emerged from our analysis (see Part II of this posting).

The study looks at how governments have fared in terms of implementing 12 practical steps (“benchmarks”) to prevent and address internal displacement, as outlined in the 2005 Brookings publication entitled "Addressing Internal Displacement: A Framework for National Responsibility." The 12 benchmarks are as follows:

1. Prevent displacement and minimize its adverse effects.
2. Raise national awareness of the problem.
3. Collect data on the number and conditions of IDPs.
4. Support training on the rights of IDPs.
5. Create a legal framework for upholding the rights of IDPs.
6. Develop a national policy on internal displacement.
7. Designate an institutional focal point on IDPs.
8. Support national human rights institutions to integrate internal displacement into their work.
9. Ensure the participation of IDPs in decisionmaking.
10. Support durable solutions.
11. Allocate adequate resources to the problem.
12. Cooperate with the international community when national capacity is insufficient.

Stepping back from HLP issues (to be addressed in a subsequent set of comments in Part II of this guest posting), we drew several key observations on our overall findings.

The study found that political will was the main determining factor of response to internal displacement. Governments cannot always control the factors that cause displacement, or may themselves be responsible for displacement, but they can take measures to improve the lives and uphold the rights and freedoms of IDPs. Internal displacement due to con­flict derives from political issues, and all aspects of a government’s response to it therefore are affected by political considerations, including, for example, acknowledgment of displacement, registration and collection of data on IDPs, ensuring the participation of IDPs in decision-making, assistance and protection offered to different (temporal) caseloads of IDPs, support for durable solutions, which durable solutions are supported, and the facilitation of efforts by international organizations to provide protec­tion and assistance to IDPs.

While none of the governments surveyed was fully protecting and assisting IDPs, four stand out in particular—Colombia, Georgia, Kenya and Uganda—for implementing their responsibility toward IDPs while three others—Central African Republic, Myanmar and Yemen—had particular difficulties in fulfilling their responsibilities toward IDPs. In Myanmar, the obstacles were primarily political while in Yemen and the Central African Republic, as in many of the countries surveyed, the limitations appear to arise primarily from inadequate government capacity.

The other eight countries were somewhere in between. For example, some, such as Nepal, have demonstrated a significant commitment at one particular point in time but have failed to follow through. Others, such as Sri Lanka, have at times demonstrated blatant disregard for their responsibility and have moved swiftly to try to bring an end to displacement. Sudan, Pakistan, and to a certain extent, Turkey, have very problematic records with respect to preventing displacement in one part of the country yet have supported efforts to bring an end to displacement in others. In some cases, such as Afghanistan and Yemen, the continuing conflict and the role of nonstate actors (and in Afghanistan, the presence of foreign militaries as well) have made it difficult for the government to respond effectively to internal displacement.

Prevention of internal displacement is paramount, but is probably the most difficult measure to take and the least likely to be taken in the countries as­sessed, which all had large IDP populations. Given the scale of displacement in the fifteen countries surveyed, it was to be expected that these governments would not have been suc­cessful in preventing displacement. Nearly half of the fifteen countries assessed had adopted some preventive measures on paper, but all fifteen have fallen short of actually prevent­ing displacement in practice.

Moreover, many national authorities themselves have been or are perpetrators of violence or human rights abuses that have led to displacement, and many states foster a culture of impunity for alleged perpetrators of serious human rights violations. Further, the presence of foreign military forces and/or non-state armed actors limits the abil­ity of many states to exercise full sovereignty over their territory and therefore to prevent the conditions that drive people into displacement. Some countries have taken steps to prevent dis­placement due to natural disasters or develop­ment but not due to conflict, indicating that the former is perhaps less politically taboo and/or practically less difficult to implement than the latter.

Sustained political attention by the highest authorities is a necessary, though not suffi­cient, condition for taking responsibility for IDPs. Nearly all of the governments surveyed, at least at some point, have exercised their responsibility to IDPs by acknowledging the existence of internal displacement and their responsibility to address it as a national prior­ity, for example, by drawing attention to IDPs’ plight. However, government efforts to raise awareness of internal displacement through public statements was not always a useful indicator of a government’s commitment to upholding the fundamental human rights and freedoms of IDPs.

Among the five countries with laws on or related to internal displacement, there were notable limitations to the scope of the laws and gaps in implementing them. Legislation was quite comprehensive in scope in at least two cases and was narrow in others, address­ing specific rights of IDPs or a phase of dis­placement. Other countries lacked a national legislative framework on IDPs but had generic legislation relevant to IDPs. Still others had laws that violated or could violate the rights of IDPs. Laws on internal displacement must be viewed in the context of other legislation and administrative acts applicable to the general population (e.g., those related to documenta­tion, residency, housing, land and property, and personal status), which this study reviews to the extent possible, particularly in the case studies on Georgia, Kenya, Afghanistan and Sri Lanka. In Africa, the region with the most IDPs, states have recognized in legally binding instruments the importance of addressing internal displace­ment by incorporating the Guiding Principles on Internal Displacement into domestic legisla­tion and policy.

Many of the governments surveyed have adopted policies or action plans to respond to the needs of IDPs, but adequate implementa­tion and dissemination were largely lacking. Nine of the countries surveyed had developed a specific policy, strategy or plan on internal displacement, implemented to varying degrees; those in six of these countries were still active at the time of writing. In addition, at least two countries had national policies in draft form, and one country that does not recognize conflict-induced displacement had a plan for mitigating displacement by cyclones and a plan on disaster risk reduction, although it did not discuss displacement. While in some cases positive steps had been taken, by and large im­plementation of policies on internal displace­ment remains a challenge and has, in some cases, stalled. Available information indicates that efforts to raise awareness of IDP issues and policies have largely been inadequate.

It is difficult to assess governments’ com­mitment of financial resources to address internal displacement, but some trends were identified. Addressing internal displacement, especially over time, is a costly venture. While it was difficult to obtain a full picture of a coun­try’s expenditure on IDPs, several countries allocated funds to assist IDPs, including a few that had no national laws or policies on IDPs. In at least two countries, funds for assisting IDPs seemed to diminish in recent years. In many countries, difficulties arise at the district or municipal levels, where local authorities bear significant responsibility for addressing internal displacement but face many obstacles, including insufficient funds, to doing so. Allegations of corruption and misallocation of funds intended to benefit IDPs at certain points has been observed in some of the countries as­sessed. Some countries seem to rely on inter­national assistance to IDPs rather than national funds.

National human rights institutions (NHRIs) contribute invaluably to improving national responses to internal displacement in a number of countries. In recent years, an increasing number of NHRIs around the world have begun to integrate attention to internal displacement into their work. NHRIs have played an impor­tant role in raising awareness of internal dis­placement, monitoring displacement situations and returns, investigating individual complaints, advocating for and advising the government on the drafting of national policies to address inter­nal displacement, and monitoring and reporting on the implementation of national policies and legislation. In particular, the NHRIs of six of the countries surveyed stand out for their efforts to promote the rights of IDPs in their countries. Interestingly, almost all of their work with IDPs is funded by international sources, raising the question of whether national governments themselves should not be doing more to increase their funding of NHRIs in order to support their engagement with IDP issues.

International actors are valuable resources for efforts aiming to improve government response to IDPs. In many cases, the past Representatives of the UN Secretary-General (RSGs) mandated to study the issue of internal displacement (Francis Deng and his successor Walter Kälin) and the current UN Special Rapporteur on the Human Rights of Internally Displaced Persons (Chaloka Beyani) had exercised significant influence on governments in encouraging and supporting action on behalf of IDPs. Along with these actors, UNHCR and the Brookings Project on Internal Displacement have provided technical assis­tance to support governments’ efforts to de­velop national legal frameworks to ensure IDPs’ access to their rights.

Durable solutions: Return was the durable solution most often supported by the govern­ments assessed. The Framework for National Responsibility identifies three durable solu­tions—return, local integration and settlement elsewhere in the country. However, the fifteen countries surveyed herein reflect a global ten­dency to emphasize return, often excluding the other durable solutions. Yet for solutions to be voluntary, IDPs must be able to choose among them, and local integration or settlement else­where in the country may in fact be some IDPs’ preferred solution. Especially in situations of protracted displacement, those may be the only feasible solutions, at least in the near future.

The most difficult benchmarks to analyze were those whose underlying concepts are very broad and those for which data was seemingly not publicly available. Chief among these were the benchmarks on preventing internal displacement (Benchmark 1), raising national awareness (Benchmark 2), promoting the participation of IDPs in decisionmaking (Benchmark 9), and allocating adequate resources (Benchmark 11). Analysis on all other benchmarks also faced data constraints as in many cases data were outdated or incomplete or simply were not available. Nonetheless, we found that the twelve benchmarks all directed attention to important issues in governments’ responses to internal displacement.

We also found that while protection is central to the Framework, the issue is of such importance that there should be a benchmark explicitly focused on it—and specifically on protection as physical security, provided to IDPs during all phases of displacement. This benchmark would also underscore the responsibility of governments to protect the security of humanitarian workers engaged with IDPs.

Overall, the study found that the Framework for National Responsibility is a valuable tool for analyzing government efforts to prevent dis­placement, to respond to IDPs’ needs for protection and assistance and to support durable solutions. But this study also reveals certain limitations to using the Framework as an assessment tool, particularly in terms of accounting for the responsibility of nonstate actors; accounting for national responsibility for protection, particularly during displacement; and accounting for causes of displacement other than conflict, violence and human rights violations.

Although a few political analysts have been focusing on the white working class for years, it is only in response to the rise of Donald Trump that this large group of Americans has begun to receive the attention it deserves. Now, thanks to a comprehensive survey that the Public Religion Research Institute (PRRI) undertook in collaboration with the Brookings Institution, we can speak with some precision about the distinctive attitudes and preferences of these voters.

There are different ways of defining the white working class. Along with several other survey researchers, PRRI defines this group as non-Hispanic whites with less than a college degree, with the additional qualification of being paid by the hour or by the job rather than receiving a salary. No definition is perfect, but this one works pretty well. Most working-class whites have incomes below $50,000; most whites with BAs or more have incomes above $50,000. Most working-class whites rate their financial circumstances as only fair or poor; most college educated whites rate their financial circumstances as good or excellent. Fifty-four percent of working-class whites think of themselves as working class or lower class, compared to only 18 percent of better-educated whites.

The PRRI/Brookings study finds that in many respects, these two groups of white voters see the world very differently. For example, 54 percent of college-educated whites think that America’s culture and way of life have improved since the 1950s; 62 percent of white working-class Americans think that it has changed for the worse. Sixty-eight percent of working-class whites, but only 47 percent of college-educated whites, believe that the American way of life needs to be protected against foreign influences. Sixty-six percent of working-class whites, but only 43 percent of college-educated whites, say that discrimination against whites has become as big a problem as discrimination against blacks and other minorities. In a similar vein, 62 percent of working-class whites believe that discrimination against Christians has become as big a problem as discrimination against other groups, a proposition only 38 percent of college educated whites endorse.

This brings us to the issue of immigration. By a margin of 52 to 35 percent, college-educated whites affirm that today’s immigrants strengthen our country through their talent and hard work. Conversely, 61 percent of white working-class voters say that immigrants weaken us by taking jobs, housing, and health care. Seventy-one percent of working-class whites think that immigrants mostly hurt the economy by driving down wages, a belief endorsed by only 44 percent of college-educated whites. Fifty-nine percent of working-class whites believe that we should make a serious effort to deport all illegal immigrants back to their home countries; only 33 percent of college-educated whites agree. Fifty-five percent of working-class whites think we should build a wall along our border with Mexico, while 61 percent of whites with BAs or more think we should not. Majorities of working-class whites believe that we should make the entry of Syrian refugees into the United States illegal and temporarily ban the entrance of non-American Muslims into our country; about two-thirds of college-educated whites oppose each of these proposals.

Opinions on trade follow a similar pattern. By a narrow margin of 48 to 46 percent, college-educated whites endorse the view that trade agreements are mostly helpful to the United States because they open up overseas markets while 62 percent of working-class whites believe that they are harmful because they send jobs overseas and drive down wages.

It is understandable that working-class whites are more worried that they or their families will become victims of violent crime than are whites with more education. After all, they are more likely to live in neighborhoods with higher levels of social disorder and criminal behavior. It is harder to explain why they are also much more likely to believe that their families will fall victim to terrorism. To be sure, homegrown terrorist massacres of recent years have driven home the message that it can happen to anyone, anywhere. We still need to explain why working-class whites have interpreted this message in more personal terms.

The most plausible interpretation is that working-class whites are experiencing a pervasive sense of vulnerability. On every front—economic, cultural, personal security—they feel threatened and beleaguered. They seek protection against all the forces they perceive as hostile to their cherished way of life—foreign people, foreign goods, foreign ideas, aided and abetted by a government they no longer believe cares about them. Perhaps this is why fully 60 percent of them are willing to endorse a proposition that in previous periods would be viewed as extreme: the country has gotten so far off track that we need a leader who is prepared to break so rules if that is what it takes to set things right.

Hillary Clinton’s release of her campaign finance proposals on Tuesday confirms there will be no significant substantive differences on political reform among the aspirants for the Democratic presidential nomination but a huge gulf between the two parties, whoever the nominees.

Harvard law professor and activist Larry Lessig announced his candidacy for the Democratic nomination this past weekend based on the single issue of political reform, but his quixotic and gimmicky campaign is akin to carrying coals to Newcastle. His only difference with the other Democratic candidates is his insistence that political reform (primarily on campaign finance) should be of the highest priority and other concerns (immigration, wages, climate change, economic inequality, infrastructure, national security) should play second fiddle. Lessig apparently believes that Republican and independent voters will rally to his call and create a broad base of public support for bipartisan cooperation on changing the rules of the electoral game.

If only it were that simple. The gaping differences between the parties on campaign reform are both ideological and strategic. Republicans are more philosophically disposed to elevate free speech over political equality. They also realize that as presently constituted, their party is advantaged by fewer or no restrictions on money in politics, lower turnout among minorities and youth, and single-member districts. Democrats instinctively reject the argument that money is speech and are comfortable with using public authority to set and enforce the rules of democracy. But they also know that they would benefit from restrictions on big money in elections, guaranteed voting rights for all citizens, and a more proportional translation of votes into seats.

The Clinton campaign finance proposals generally follow the thrust of liberal reformers: building a counterforce to big money through multiple matching funds for small donors, increasing transparency by requiring timely disclosure of mega-contributions and transfers that now evade public scrutiny, and overturning Citizens United, which set the stage for a Wild West of outsized contributions and spending. Her support for a constitutional amendment to accomplish the latter is a pipedream and probably wouldn’t work if it were adopted. As she acknowledges, appointing Supreme Court justices to change the current 5-4 majority is the more promising route to the desired change.

Lessig’s dream notwithstanding, this particular agenda will be achieved only if and when Democrats manage to control both ends of Pennsylvania long enough to put the policies and a sympathetic Supreme Court in place. It’s an important choice for voters to consider in the 2016 elections but by no means the only or most pressing one.

In new Urban-Brookings Tax Policy Center analysis of Earned Income Tax Credit (EITC) take-up at the county level, Benjamin Harris, a fellow in Economic Studies, and Research Assistant Lucie Parker use zip-code level data on taxes and demographics to take a "fresh look" at the EITC. "Since its creation in 1975," they write, "the Earned Income Tax Credit has played a major role in the U.S. safety net." Earlier this year, Harris presented EITC take-up using IRS data from 2007. Compare that to the new list of ten counties with the highest share of EITC recipients below:

"The regional variation EITC claiming is stark," Harris and Parker conclude. "The counties with the highest share of taxpayers claiming the EITC are overwhelming located in the Southeast. ... [O]ver half the taxpayers in a large share of counties in Alabama, Georgia, and Mississippi claim the EITC. With few exceptions, almost all counties with high EITC claiming are located in the South. Relative to the South, the Northeast and the Midwest have much lower claiming rates. Moreover, average EITC benefit closely follows the pattern for share of taxpayers taking up the credit: in counties where more taxpayers claim the credit, the credit is larger on the whole."

Visit this U.S. map interactive to get county level data on share of taxpayers claiming EITC as well as average EITC amount, in dollars, per county.

In his state of the union and his budget, the President spoke of the stagnation of middle class incomes. Whatever growth we have had has not been broadly shared.  More than 78% of the growth in GDP between 1979 and 2013 has gone to the top one percent. Even Republicans are beginning to worry about this issue although they have yet to develop concrete proposals to address it.

Slow Growth in Incomes

Middle class incomes were growing slowly before the recession and have actually declined over the past decade.   In addition, according to the New York Times, the proportion of the population with incomes between $35,000 and $100,000 in inflation-adjusted terms fell from 53% in 1967 to 43% in 2013.  During the first four decades this was primarily because more people were moving into higher income groups, but more recently it was because they have moved down the ladder, not up.  One can define the middle class in many different ways or torture the data in various ways, but there is plenty of evidence that we have a problem.

What to Do

The most promising approach is what I call “the second earner solution.”  For many decades now, the labor force participation rate of prime age men has been falling while that of women has been rising.  The entry of so many women into the labor force was the major force propelling whatever growth in middle class incomes occurred up until about 2000. That growth in women’s work has now levelled off.  Getting it back on an upward track would do more than any policy I can think of to help the middle class.

Imagine a household with one earner making the average wage of today’s worker and spending full-time in the job market.  That household will have an income of around $34,000. But if he (or she) has a spouse making a similar amount, the household’s income will double to $68,000. That is why the President’s focus on a second-earner credit of $500, a tripling of the child care tax credit, expanding the Earned Income Tax Credit, and providing paid leave are so important. These policies are all pro-work and research shows they would increase employment.

No Marriage = No Second Earner

One problem, of course, is that fewer and fewer households contain two potential workers.  So it would also help to bring back marriage or at least its first cousin, a stable cohabiting relationship.  My ideas on this front are spelled out in my new book, Generation Unbound. In a nutshell, we need to empower women to not have children before they have found a committed partner with whom to raise children in a stable, two-parent family. Whatever the other benefits of two parents, they have twice as much time and potentially twice as much income.    

Other Needed Responses

Shouldn’t we also worry about the wages or the employment of men?  Of course.  But an increase in, say, the minimum wage or a better collective bargaining environment or more job training will have far smaller effects than “the second earner solution.”  In addition, the decline in male employment is related to still more difficult problems such as high rates of incarceration and the failure of men to take advantage of postsecondary education as much as women have. 

Still the two-earner solution should not be pursued in isolation. In the short-term, a stronger recovery from the recession is needed and in the longer-term, more effective investments in education, research, infrastructure, and in labor market institutions that produce more widely-shared growth, as argued by the Commission on Inclusive Prosperity. But do we really expect families to wait for these long-term policies to pay off?  It could be decades. 

In the meantime, the President’s proposals to make work more appealing to existing or potential second earners deserves more attention.  

Each year millions of low- to moderate-income Americans supplement their income by claiming the Earned Income Tax Credit (EITC) during tax season. Last year, 1 in 5 taxpayers claimed the credit and earned an average of nearly $2,400.

This tax season, some of those eligible for the EITC may also be able to claim, for the first time, a new credit created by the Affordable Care Act (ACA) to offset the cost of purchasing health insurance for lower-income Americans. It’s called the ACA premium tax credit.

To qualify for the ACA premium tax credit, filers need first to have an annual income that falls between 100 and 400 percent of the federal poverty line (between $11,670 and $46,680 for a single-person household in 2014). Beyond the income requirements, however, filers must also be ineligible for other public or private insurance options like Medicaid or an employer-provided plan.

Why the tax credit overlap matters

Identifying the Americans eligible for both credits is important because it sheds light on how many still need help paying for health insurance even after the ACA extended coverage options.

In a recent study of the EITC-eligible population, Elizabeth Kneebone, Jane R. Williams, and Natalie Holmes estimated what share of EITC-eligible filers might also qualify for the ACA premium tax credit this year.

Below, see a list of the top 10 states with the largest overlap between filers eligible for the EITC and those estimated to qualify for the ACA premium tax credit.* Notably, none of these states has expanded Medicaid coverage to low-income families after the passage of the ACA.

Nationally, an estimated 7.5 million people (4.2 million “tax units”) are likely eligible for both the ACA premium tax credit and the EITC. Nearly 1.3 million of those tax units are from the following ten states.

1. Florida

Overlap: 22.5 percent / 405,924 tax units
State-based exchange? No Expanded Medicaid coverage? No

2. Texas

Overlap: 21.4 percent / 513,061 tax units
State-based exchange? No Expanded Medicaid coverage? No

3. South Dakota

Overlap: 20.5 percent / 15,124 tax units
State-based exchange? No Expanded Medicaid coverage? No

4. Georgia

Overlap: 19.8 percent / 186,020 tax units
State-based exchange? No Expanded Medicaid coverage? No

5. Louisiana

Overlap: 19.6 percent / 86,512 tax units
State-based exchange? No Expanded Medicaid coverage? No

6. Idaho

Overlap: 19.3 percent / 28,855 tax units
State-based exchange? Yes Expanded Medicaid coverage? No

7. Montana

Overlap: 18.9 percent / 18,138 tax units
State-based exchange? No Expanded Medicaid coverage? No

8. Wyoming

Overlap: 18.4 percent / 7,276 tax units
State-based exchange? No Expanded Medicaid coverage? No

9. Utah

Overlap: 18.1 percent / 42,284
State-based exchange? No (Utah runs a small businesses marketplace, but it relies on the federal government for an individual marketplace) Expanded Medicaid coverage? No

10. Oklahoma

Overlap: 18.0% / 63,045 tax units
State-based exchange? No Expanded Medicaid coverage? No

* For the purposes of this list, we measured the overlap in “tax units,” not people. One tax unit equals a single tax return. If a family of four together qualifies for the ACA premium tax credit, they would be counted as one tax unit, not four, since they filed jointly with one tax return.

Interpreting employment stats among young people can be tricky. No one expects employment rates among teens or people in their early 20s to reach those of prime-age workers. These are prime years for what economists call “investing in human capital,” an activity most people would describe as “going to school.”

Education requirements for good jobs are getting higher, so finishing high school and earning a post-secondary credential like two or four-year college degrees, apprenticeships, or certifications are top priorities. But early work experiences can allow young people to learn new skills, gain experience, and expand networks. Evidence suggests that it can improve employment prospects down the line. And the earlier that people are exposed to the workplace, the earlier they learn such skills as teamwork, communication, and dependability—skills that employers say are in short supply. 

The employment rate for teens fell from 43 percent in 2000 to 26 percent in 2014, and for young adults aged 20 to 24, it fell from 70 to 62 percent. These are big drops. In a new analysis, I take a deeper look at employment trends among young people. When employment rates are broken out by age and race/ethnicity, you see the same downward pattern, but also substantial variation among whites, blacks, Latinos, and Asians.

Do these declines spell trouble? The answer is, it depends:  on how young people spend their time, what resources and support are available to them, and how the person making the judgement values academics and enrichment relative to employment.

Some argue that workplace experience provides key developmental opportunities that benefit all young people. Robert Halpern, for example, wryly notes that high school students are isolated from the adult world “at just the moment when [they] need to begin learning about participating in it.” 

Others say that employment matters more for some young people than others. For example, disadvantaged youth—those not on track to earn a post-secondary credential and without strong family or community  networks to help them find jobs—can particularly benefit from formal programs that connect them to the labor market. As Jeylan Mortimer concluded about “low academic promise” high school students (those with poor grades and low educational goals): “[H]aving a positive work experience can help to turn you around.  For those who have a lot of disadvantages, any positive experience is likely to have a greater impact than on people with a lot of advantages already.” Research on Career Academies, high schools that combine academics with career development, support this view. Career Academy students, disproportionately low-income, black, and Latino, posted significant earnings gains eight years after graduation, and young male graduates also had higher rates of marriage and custodial parenthood.

And some would say that it’s appropriate to prioritize education over employment, especially for teens, who are typically not responsible for supporting themselves and their families.

So what do the data tell us? Voluntarily dropping out of the labor force to concentrate on academics as a young person can pay off when people enter their prime working years, generally considered to be 25 to 54. Though education and work are not necessarily incompatible, employment rates are generally lower among students than among those not enrolled in school. Among teens and young adults, Asians have the lowest employment rates, but they also have the highest school enrollment rates. 92 percent of Asian 16- to 19-year-olds and 63 percent of Asian 20- to 24-year-olds are in school, compared to 80 percent and 38 percent among all races. It follows, then, that Asians have high levels of educational attainment. In fact, 50 percent of 23- to 24-year-old Asians have a Bachelor’s degree, double the average rate. Given the strong correlation between education and employment, it is not a coincidence that prime-age Asians have high employment rates and low unemployment rates. Their low employment rates as young people do not, on the whole, seem to lead to problems as adults. (Of course, this is not to downplay the diversity of the Asian population and to suggest that all Asians are doing well economically.)

On the other hand, blacks have the second lowest employment rates as teens and young adults, and the lowest rate as prime age workers. They also have the highest unemployment rates, showing an active desire to work. Among black teens in 2014, the unemployment rate was 38 percent, compared to 23 percent overall, and it was 22 percent among black young adults, compared to 13 percent overall. The trend continues into prime working years: blacks have an unemployment rate of 11.4 percent, nearly double the overall rate of 6.2 percent.  The low employment rate among young black people is not driven by school enrollment. Latinos have similar (below-average) enrollment levels but higher employment rates, and whites have much higher employment rates but only slightly higher enrollment levels. The weaker employment outcomes of blacks at all ages is probably related to multiple factors: relatively low levels of educational attainment, discrimination, and the neighborhood effects of living in concentrated poverty.

Blacks and Latinos are disproportionately represented among so-called “disconnected youth,” young people aged 16 to 24 who are neither working nor in school. 17 percent of black young adults aged 20 to 24 are disconnected, as are 13 percent of Latinos, 7 percent of whites, and 4 percent of Asians. Half of disconnected young adults have a high school credential and another 20 percent have taken some college courses, suggesting that getting these young people on a better path involves not only reducing the high school dropout rate, but also strengthening the transition from high school to post-secondary education and the labor market. 

In short, employment rates among young people tell different stories that often track by race and ethnicity. Some voluntarily withdraw from the labor market to focus on academics and extra-curricular activities, others would really like a job but can’t find one, and some—the most disadvantaged—are alienated from both school and the labor market.

Over the past two decades, Ghana’s economy experienced an average annual growth rate of 5.8 percent, and became a low-middle income country in 2007. Though Ghana’s average annual employment growth between 1993 and 2013 has been higher than sub-Saharan Africa’s—3.7 percent versus 3.0 percent—its overall employment growth has not kept up with its economic growth. Notably, Ghana’s impressive economic growth has largely stemmed from crude oil exports, mining, and financial intermediation—all sectors and subsectors in which labor absorption is low. Given these trends, Ghana’s ability to transform its growth gains into better livelihoods for its citizens is being challenged.

In their paper, Understanding Ghana’s growth success story and job creation challenges, Ernest Aryeetey and William Baah-Boateng examine the sustainability of the high growth Ghana has experienced over the last two decades and advise Ghanaian policymakers to rethink their growth strategy.

For a more in-depth look at these and related topics, such as labor productivity, you can read the full paper here.

Like in many other sub-Saharan African countries, the agriculture sector is the largest employer in Ghana, though its employment share is decreasing from 61.1 percent in 1984 to 44.7 percent in 2013. In addition, while industry’s employment share has slightly grown from 13.7 percent to 14.6 percent over the same period (and the manufacturing subsector has decreased from 10.9 percent to 9.1 percent), services has grown from 25 percent to 40.9 percent—leading to what the authors refer as a “missing middle.”

As noted above, the authors emphasize that the sectors that have been driving Ghana’s growth are not labor-intensive, namely mining, oil extraction, and finance. While labor has been moving from agriculture to services, the authors note that the trend “may not reflect a structural and productive transformation,” largely because the jobs created in the services sector are mostly informal and have low productivity. Indeed, services sector maintained the lowest annual average growth of labor productivity between 1992 and 2013. As part of these shifts, informal employment—which represented 88 percent of Ghanaian employment in 2013—grew by 3.7 percent on average while formal employment grew by only 2.6 percent during this period.

Unemployment in Ghana remains low, at 5.2 percent, though has experienced significant swings from 2.8 percent in 1984 to 10.4 percent in 2000 to 3.1 percent in 2006. The authors note, though, that these numbers might be deceptive due to the high numbers of informal, vulnerable, and “discouraged workers” (those who are jobless and available for work but fail to make the effort to seek work for various reasons) in Ghana. In fact, they state that, in 2006, after accounting for discouraged workers the unemployment rate more than doubled from 3.1 percent to 6.5 percent.

Despite Ghana’s relatively low unemployment rate, many laborers still live in poverty: According to the authors, 22 percent of working people are poor. Many others work in “vulnerable employment”—which the authors define as “a measure of people employed under relatively precarious circumstances indicated by their status in employment. It consists of own account and contributing family work that are less likely to have formal work arrangements, access to benefit or social protection programs, and are more ‘at risk’ to economic cycles (ILO 2009).” This definition is opposed to “productive employment,” or “paid employment and self-employed with employees.” Vulnerable workers are usually found in the informal sector and tend to have lower earnings—a situation exacerbating the ever-widening earnings gap and growing income inequality.

According to the authors, working poverty is closely linked with vulnerable employment, for which seven of 10 jobs in Ghana qualify (Table 1).  Some policies, which could combat working poverty, have been somewhat ineffective in reducing poverty: For example, Ghana has been consistent in raising its minimum wage, keeping it largely above the rate of inflation, but this policy tends to only affect those in the formal sector, leaving out workers in the informal sector. This trend has also increased Ghana’s inequality: The Gini coefficient increased from 35.4 percent in 1987/88 to 42.3 percent in 2013.

Table 1: Quantity and quality of employment (percent of employed)

Notes: * Gainful/productive employment comprises paid employment and self-employed with employees.

** Vulnerable employment comprises own account and contribution family work.

Source: Computed from Ghana Living Standards Survey (GLSS) 3, 4, 5, and 6; Population Census 1984, 2000, and 2010.

Overall, though, Ghana has made great strides. Vulnerable employment has been declining, and productive employment has risen, gains the author attributes to the drop in working poverty—down from 48.7 percent in 1992 to 22.3 percent two decades later (Table 1). However, they also hint that these improvements could have been even larger had job growth been concentrated in paid employment and self-employed with employees.

In their paper, the authors posit that job creation has occurred in less productive sectors due to a lack of skills and education in the workforce—and skill-intensive jobs/vacancies are instead getting filled by foreign laborers. While the proportion of the labor force with no formal education has significantly fallen from 44.1 percent in 1992 to 25.6 percent in 2013, post-primary education rates have barely risen—from 5.7 percent to 12.1 percent during that same period for secondary, vocational, and technical education. Tertiary is even less—from 2 percent to 5.4 percent. Ghanaian universities have not been training engineers, scientists, and technical workers that could increase the productivity and grow the industrial sector. A shortage of technical and vocational skills also limits this sector. Thus, the authors note, employers are forced to look outside of the country to find the workers with the skills required to do the job. The authors emphasize:

[P]roductive structural economic transformation hinges on the level and quality of education and labour skills. A highly skilled, innovative, and knowledgeable workforce constitutes a key ingredient in the process of structural economic transformation, and as productive sectors apply more complex production technologies and research and development activities increase the demand for education and skills. However, the observed weak human capital base does not provide a strong foundation for structural economic transformation of Ghana.

At the same time, the more educated in Ghana also tend to be more likely to be unemployed due to limited job creation for them in the formal sector. In 2013, the unemployment rates for those with secondary education and above (including tertiary) was over 6 percent. The unemployment rate for those with basic education or less was under 3.3 percent. The authors suggest that this trend is due to the fact that those with less education are more likely to take an informal job, while more educated laborers struggle to find jobs in the small formal sector.

Though Ghana has outperformed many of its sub-Saharan neighbors in terms of job creation and growth, its challenges with declining manufacturing, high informal employment, and low education attainment endanger its momentum. To tackle these obstacles, the authors recommend:

1. Adjust the priorities of the growth strategy to promote manufacturing, and reconsider the goal of economic growth for growth’s sake by acknowledging that sustainable growth must be coupled with generation of productive and high-earning jobs for all.
2. Create a manufacturing and business-friendly environment by addressing the country’s high interest rates, high taxes, and chronic energy problems, among others.
3. Enact policies to enhance the high-productivity, high-labor-absorbing agricultural sector, such as improving agricultural extension, develop irrigation plans, among others.
4. Develop policies to increase the number of secondary school graduates as well as students studying science, technology, engineering, and math.

For further discussion and recommendations, read the full paper here.

Note: The African Lions project is a collaboration among United Nations University-World Institute for Development Economics Research (UNU-WIDER), the University of Cape Town’s Development Policy Research Unit (DPRU), and the Brookings Africa Growth Initiative, that provides an analytical basis for policy recommendations and value-added guidance to domestic policymakers in the fast-growing economies of Africa, as well as for the broader global community interested in the development of the region. The six papers, covering Mozambique, Kenya, Ghana, South Africa, Ethiopia, and Nigeria, explore the key constraints facing African economies as they attempt to maintain a long-run economic growth and development trajectory.

Editor’s Note: This piece originally was published on the Guardian’s Sustainable Business website.

I recently returned from Copenhagen, my first time to the Danish capital. Even a three day visit affirms why this city of more than 540,000 residents has received global recognition as a beacon of sustainable development. An incredible 36 percent of all commuting trips to work or school are made by bike along, in many cases, secure bike lanes that protect cyclists from cars and buses. Another 32 percent of city residents either walk or utilize the region's highly-efficient public transportation network of buses and trains.

This kind of sustainable development clearly yields significant environmental benefits. Copenhagen achieved the highest ranking in the 2009 European Green City Index, scoring in the top 10 in all eight categories, from energy efficiency to transport and environmental governance.

Growing green is obviously an environmental imperative. Yet the Copenhagen experience shows that it can be a market proposition as well, with a diverse set of economic and fiscal benefits accruing to cities that are at the vanguard of sustainable development. Cities like Copenhagen, in short, may be inventing a clean economy of place.

Monday Morning, the respected Scandinavian thinktank, recently released a report detailing the effect of building a city that is high in spatial efficiency and rich in transport choices. Some of the benefits are direct and local. Residents who cycle to work or school are healthier, so health care costs decline (by an estimated $380 million a year). Fewer cars on the road means less congestion and fewer accidents, so additional savings are realized.

Yet the big effect from sustainable development may be indirect and global, as specialized firms naturally rise and expand to meet the growing demand for clean services and clean products. Monday Morning's report finds that Copenhagen's clean sector has been a critical contributor to the region's economy in the past decade, with green exports outpacing all other sectors by growing at an astounding 77 percent between 2004 and 2009.

Cities in the U.S. are following suit. Portland, Oregon, is also internationally renowned for its commitment to sustainable development. The Portland metropolis has an expansive public transit system and an urban growth boundary to control development at the urban periphery. The city boasts a green investment fund to provide grants for residential and commercial building projects.

Now the city is striving, like Copenhagen, to reap the economic rewards of sustainable development through business formation, firm expansion, job growth and private investment. In February, Portland released its first regional export plan to double exports over five years by building on the region's distinctive economic and physical attributes. A critical pillar of this strategy involves increasing the export orientation of firms in the burgeoning clean technology sector to serve growing markets in Asia, Latin America and elsewhere.

Both Copenhagen and Portland recognize that urbanization is the dominant market-shaping trend of the century. By 2030 it is estimated that China will have one billion residents while India will have 590 million. These nations and others will demand products and services that enable development that is economically supportive, environmentally sensitive and spatially efficient. And those products and services may disproportionately emerge from firms located in cities, in mature economies and rising nations alike, which are first movers on sustainable development.

The economic benefits of sustainable development could be substantial. Last year, my program at Brookings measured the U.S. clean economy at 2.7 million jobs. That means the clean economy has more jobs than fossil-fuel related industries and is nearly twice the size of the biosciences field and 60 percent of the 4.8 million strong IT sector.

The U.S. clean economy is also incredibly diverse (sweeping across five broad categories and 39 separate clusters) and disproportionately located in the nation's top 100 cities and metropolitan areas.

Green architecture and construction services cluster illustrates the potential for growth and the reality of metropolitan concentration. This segment already employs over 56,000 people in the U.S. Some 90 percent of these jobs are located in the top 100 cities and towns (although those communities house only two-thirds of the population). The segment grew by a healthy annual average of 6.4 percent between 2003 and 2010 and includes firms such as Burns and McDonnell Engineering in Kansas City, McKinstry and Co. in Seattle, and Gensler in San Francisco. Conclusion: the clean economy of place constitutes a virtuous cycle between cities, companies, consumers and clusters.

Let me end where I began, in Copenhagen. The city is not resting on its cycling laurels but setting its sights higher, towards achieving a goal of carbon neutrality by 2025. Shakespeare was wrong: all is not rotten in the state of Denmark. Nurturing what is good — and green — embracing it and extending it could provide a platform for economic growth for decades to come.

What if I told you I’d found a surefire way to decrease community involvement in our local schools while at the same time increasing the costs of providing education for taxpayers? Probably not a political winner, eh? And yet, for well over 100 years we’ve adopted such an approach to governing America’s public schools.

I’m talking of course, about the widespread and increasingly questionable practice of local school district governments holding their school board elections “off-cycle” so that they are contested apart from regular national elections.

Just how significant and widespread are “off-cycle” school board elections? And what are the consequences of using off-cycle elections for the tone and direction of education policy? UC Berkeley Political Scientist Sarah Anzia recently penned a terrific book examining the causes and consequences of off-cycle elections in American politics in which she finds that 90 percent of states hold at least some municipal races apart from major national elections and three quarters of states do so for school board elections. Data from the National School Boards Association seem to confirm Anzia’s descriptive account on the prevalence of these elections.

By exploiting the occasional episode in which a change in state law forced localities to move their elections “on cycle,” Anzia is able to provide some pretty rigorous causal evidence that off-cycle elections decrease voter turnout and equip organized interests (e.g. teachers unions) to obtain more favorable policy outcomes. Anzia’s findings mesh nicely with other work done by University of Pennsylvania Political Scientist, Marc Meredith, who found that when school boards are given the authority to choose election dates for raising revenue (e.g. bond elections) boards will “manipulate” the timing of elections in predictable ways to ensure an electorate that is most favorable to increased school spending.

"While most citizens are tuned into the presidential primary contests this year, the important reality is that thousands of school board members will be 'elected' by tiny and unrepresentative electorates prior to next November’s general election."

While most citizens are tuned into the presidential primary contests this year, the important reality is that thousands of school board members will be “elected” by tiny and unrepresentative electorates prior to next November’s general election. This isn’t an accident or an oversight. The helpless position of today’s “education voter” is a predictable consequence of Progressive era reforms that sought to “take politics out of education.” As Columbia Professor, Jeffrey Henig, explains in his insightful and wide-ranging book, The End of Exceptionalism in American Education, the widespread use of single-purpose governments that are insulated from the electorate has been a hallmark of American school governance that is only recently beginning to come undone.

Advocates of off-cycle elections sometimes contend that holding school elections apart from major federal elections helps foster a more informed electorate. But shouldn’t the onus be on those who defend off-cycle elections to demonstrate better outcomes in districts that cling to a policy that often results in higher costs to taxpayers and diminishes small-d democracy. Of course it’s fair and important to ask, “How much democracy is good for our schools?” However, there are at least three reasons to be skeptical that the benefits of using “off-cycle” elections outweigh the costs:

First, I’m unaware of any scholarly evidence that the voters who participate in off-cycle elections are significantly more informed than the electorates participating in on-cycle elections. More importantly, I am not aware of any scholarly research that demonstrates a linkage between off-cycle elections and better student achievement outcomes. To the contrary, my friend and collaborator Arnie Shober (Lawrence University) and I found a strong association between a district’s relative academic performance and the use of on-cycle elections in a 2014 analysis that we undertook for the Fordham Institute. Although that report could not establish any causal relationship between on-cycle elections and better student achievement (clearly we could not randomly assign on-cycle elections), the fact that we found a positive correlation between on-cycle school board elections and a district’s academic performance arguably puts the ball back in the court of those who would prefer diminished citizen participation and higher fiscal costs.

Second, on the subject of higher costs, consider the takeaway from a recent piece in Governing Magazine that quotes Rice University Political Scientist and local elections expert, Melissa Marschall.  It paraphrases Marschall, saying “There's no doubt about it. Holding concurrent elections is bound to increase turnout…Holding elections less frequently should save them [local governments] money.” In short, even if some benefits (a marginally more informed electorate?) could in theory be demonstrated, one would also need to account for known costs: lower citizen participation and more frequent elections that school districts cannot piggyback onto national or statewide elections.

Third and finally, as Eitan Hersh explains in a hard-hitting recent post on FiveThirtyEight, there’s more than a tinge of hypocrisy when it comes to those who defend off-cycle elections. Ironically, while the Democratic Party and organized labor often advocate for policies that enhance workplace democracy and reduce barriers to voter participation (i.e., opposing voter ID laws, supporting same day registration and vote by mail), these two groups have, according to Hersh, led the charge to retain off-cycle school board elections that all but assure lower and more unrepresentative turnout.  

Admittedly, there’s no perfect approach to governing American K-12 education. And, governance “reform” is hardly a panacea for improving our schools. Nonetheless, as Noel Epstein wisely observed in her 2004 volume, Who’s in Charge Here?, when education governance is fragmented ordinary citizens are challenged to hold policy-makers accountable because it is difficult for the public to mobilize and readily identify which political authority or authorities are responsible. The bottom line: we don’t do the electorate any additional favors by purposefully staggering school board races across multiple off-year election cycles. Consolidating the school election calendar is a small, but nonetheless sensible step in the right direction.  

It’s easy to imagine a future in a decade or less when most people will have a smartphone. In our recent paper Pathways to Smarter Digital Financial Inclusion, we explore the benefits of extending financial services to the mass of lower-income people in developing countries who are currently dubious of the value that financial services can bring to them, distrustful of formal financial institutions, or uncomfortable with the treatment they expect to receive.

The report analyzes six inherent characteristics of smartphones that have the potential to change market dynamics relative to the status quo of simple mobile phones and cards. 

Customer-Facing Changes:

1. The graphical user interface.
2. The ability to attach a variety of peripheral devices to it (such as a card reader or a small printer issuing receipts).
3. The lower marginal cost of mobile data communications relative to traditional mobile channels (such as SMS or USSD).

Service Provider Changes:

4. Greater freedom to program services without requiring the acquiescence or active participation of the telco.
5. Greater flexibility to distribute service logic between the handset (apps) and the network (servers).
6. More opportunities to capture more customer data with which to enhance customer value and stickiness.

Taken together, these changes may lower the costs of designing for lower-income people dramatically, and the designs ought to take advantage of continuous feedback from users. This should give low-end customers a stronger sense of choice over the services that are relevant to them, and voice over how they wish to be served and treated.

Traditionally poor people have been invisible to service providers because so little was known about their preferences that it was not possible build a service proposition or business case around them. The paper describes three pathways that will allow providers to design services on smartphones that will enable an increasingly granular understanding of their customers. Each of the three pathways offers providers a different approach to discover what they need to know about prospective customers in order to begin engaging with them. 

Pathway One: Through Big Data

Providers will piece together information on potential low-income customers directly, by assembling available data from disparate sources (e.g. history of airtime top-ups and bill payment, activity on online social networks, neighborhood or village-level socio-demographic data, etc.) and by accelerating data acquisition cycles (e.g. inferring behavior from granting of small loans in rapid succession, administering selected psychometric questions, or conducting A/B tests with special offers). There is a growing number of data analytics companies that are applying big data in this way to benefit the poor.

Pathway Two: Through local Businesses

Smartphones will have a special impact on micro and small enterprises, which will see increasing business benefits from recording and transacting more of their business digitally. As their business data becomes more visible to financial institutions, local firms will increasingly channel financial services, and particularly credit, to their customers, employees, and suppliers. Financial institutions will backstop their credit, which in effect turns smaller businesses into front-line distribution partners into local communities.

Pathway Three: Through Socio-Financial Networks

Firms view individuals primarily as managers of a web of socio-financial relationships that may or may not allow them access to formal financial services. Beyond providing loans to “creditworthy” people, financial institutions can provide transactional engines, similar to the crowdfunding platforms that enable all people to locate potential funding sources within their existing social networks. A provider equipped with appropriate network analysis tools could then promote rather than displace people´s own funding relationships and activities. This would provide financial service firms valuable insight into how people manage their financial needs.

The pathways are intended as an exploration of how smartphones could support the development of a healthier and more inclusive digital financial service ecosystem, by addressing the two critical deficiencies of the current mass-market digital finance systems. Smartphones could enable stronger customer value propositions, leading to much higher levels of customer engagement, leading to more revelation of customer data and more robust business cases for the providers involved. Mobile technology could also lead to a broader diversity of players coming into the space, each playing to their specific interests and contributing their specific set of skills, but together delivering customer value through the right combination of collaboration and competition.

Recent reports have highlighted how mobile-based financial services are transforming banking and payments in Kenya, Bangladesh, and Peru, and all the hype about how they are about to explode everywhere else. For all of the promise that digital financial systems have for lowering costs and helping people all over the globe, it is unfortunate that their development is hampered by regulation that protects the interests of the largest providers. These regulations create significant barriers and raise the total costs to achieve universal financial inclusion.

It is indeed conceivable that purely digital financial transactions could be handled at vanishingly small unit costs, from anywhere. But the cost that won´t go away is that at the interface between the new digital payment system and the legacy payment system – hard cash. Cash in/cash out (CICO) points are like tollgates at the edge of the digital payments cloud.

Cash is Still King

Even in areas with flourishing mobile banking usage, people tend to cash in every time they want to make a mobile payment, and to cash out immediately and in full every time they receive digital money. Rather than displacing cash, digital platforms have made local cash ecosystems more efficient. Without full backward compatibility with cash, digital payment systems could not take root.

The bigger issue is not the size of the CICO toll, but the fact that small players cannot expect to have the transaction volume to sustain a widespread CICO network. The incumbent banks and telecommunications firms have built in competitive advantages. They can quickly form agreements with brick and mortar shops, attract users from the current customer base, threaten new entrants, and aggregate enough transactions to induce CICO outlets to maintain sufficient liquidity on hand.

Therefore, the competition in digital financial services will not be determined primarily by what happens within the digital payments market itself, but rather by what happens in the contiguous cash market. The power of digital services is their ability to transcend geography, and yet success in the digital payments space will go to whoever has the best physical CICO footprint.

Regulators treat the digital payments service and the CICO service as conjoined twins: each digital financial service provider must have its own base of contractually bound CICO outlets. When the two services are bundled it is not surprising that the tough economics of CICO —and, therefore, the incumbent— dominates.

A Two Market Regulatory Approach

In a recent paper, I argue it is necessary to split up these two markets, from a regulatory point of view. The market for effecting electronic payments (issuing payment instructions and debiting and crediting electronic accounts accordingly) is logically distinct from the market for exchanging two forms of money (hard cash versus electronic value).

Most regulators approve of stores receiving electronic money from customers in exchange for packs of rice on a store shelf. But, if that same electronic money was exchanged for cash then it would violate the law in many countries.

In the latter case, the store is presumed to be an agent of the customer’s financial service provider, and the store cannot offer the CICO service without an agency contract from that provider. But why? The cash that was offered was the store’s as is the account that would receive the electronic payment, and the transaction would have occurred entirely through a secure, real-time technology platform that banks offer all their clients.

A Regulatory Fix

Of course, purely financial transactions are usually held to higher consumer protection standards than normal commercial transactions. My proposal is not to deregulate CICO, but to create a new license type for CICO network managers. Holders of this license would carry certain consumer protection obligations (such as ensuring that tariffs are explicitly posted at all CICO outlets, and that they have a call center to handle any complaints that customers may have on individual CICO outlets) – entirely reasonable expectations for retailers, even if we normally don´t ask them of rice sellers.

But once you have a CICO license, then you could sign up any store you wanted and crucially, offer CICO services on the platform of any financial institution in which you have an account. In other words, you wouldn’t have to beg the incumbent to give you a special agent contract. All you would need to do is to open a normal customer account with them, which the incumbent couldn´t deny you.

This one little change would completely shift the competitive dynamics of digital financial services. Under the current direct agency model, incumbent firms have no incentive to make it easier for competitors to create CICO outlets. Whereas under the independent CICO network manager model, all licensed CICO networks would have the incentive to offer CICO services for all providers, no matter their size: with a full suite of available services, they will find it easier to sign up stores to work for them, and these stores will find it easier to convince more users to walk into their stores.

Incumbents would still be free to establish their own proprietary CICO networks, as today. But they would have to compete with independent CICO networks that are now able to aggregate business from all financial service providers, creating true competition.

All players could then claim a comparable physical presence as the incumbent. They would all benefit from the same branded competition between CICO networks. They could compete strictly on the basis of the quality of their digital financial services offering.

Unbundling the regulatory treatment of digital financial services would help competition reach every segment of the business; the current integrated model only serves the interests of the largest telecommunication companies and banks in the land.

We tend to think of having a formal identity as an enabler for social and economic inclusion, but in fact identity can have entirely the opposite effect. Once socioeconomic interactions are based on a standardized notion of identity, it is likely that social status based on past achievements, family histories, personal connections, political backing, wealth and education levels will influence socioeconomic outcomes — thereby potentially reinforcing the established class hierarchy. Systems that are based on anonymity might in fact be the most equitable and inclusive, in the sense of ensuring equal participation by all, by systematically stripping out social status.

But anonymous systems carry a high cost in terms of efficiency. Reputations would be impossible to establish, contracts would be hard to enforce, and there would be more insecurity as it would be much harder to track and clamp down on illicit activities. It is therefore not at all certain that the poorer segments of the population would be better off in absolute terms if the economy worked on the basis of anonymity.

The need for digital identities for inclusive access

In fact, giving lower-income people digital identities would make it possible for them to participate in the modern digital economy in many ways: to open accounts and receive moneys from anyone, assert their rights over digital services they have contracted and digital assets they have purchased, settle disputes, etc. But establishing a formally recognized identity can be a major hurdle in itself, especially in countries that do not have digitized national ID schemes.

It is ironic that the difficulty of establishing formal identity in the first place often prevents so many lower-income, and especially rural, people from accessing digital services. Identity systems with selective coverage of the population create a double whammy of inequality: on the one hand, these partial systems help the haves to carry their social and economic status symbols and reputations into every market interaction they are engaged in, and on the other they negate digital visibility and access to digital services for the have not´s.

We argue in a new research paper that it should be the government´s responsibility to ensure that every citizen in fact has a digital identity, not merely to create a platform that enables people to have digital identities. The Indian government´s Aadhar push to provide everyone in India with a unique number ID linked to biometrics is a good example of such a policy.

The demands of identity verification systems

The problem is that different policy agendas converge on the issue of identity and have different requirements for a digital identity platform. What works as an identify standard for financial systems may not be good enough for law enforcement agencies. The risk is that governments adopt the highest standard, with the result that the inclusion agenda and the needs of the poor are ignored.

If there is no centralized government system for identity, then what we need is a system that:

1. Lets the issue of identity be resolved in the first instance within the communities where poor people live, shop and work (e.g. through attestation by known local figures)
2. Draws people into seeking and improving their digital identities over time, much in the way that they develop their social network over time.

This is the notion of social identity. Let people with meager resources help each other overcome their limitations: each may have very little voice, but collectively they represent a potentially vast information system for official identification purposes. That is hard to reconcile with the way governments and formal institutions tend to handle identity verification: in silos, contained within databases and cards. We need more flexible notions of identity, which build layers of identity information and verification through social networks – as well as bureaucratized ID-seeking processes.

One of the foundational notions of digital financial services has been the distinction between payment rails and services running on the rails. This is a logical distinction to make, one easily understood by engineers who tend to think in terms of hierarchies (or stacks) of functionalities, capabilities, and protocols that need to be brought together. But this distinction makes less sense when it is taken to represent a logical temporal sequencing of those layers.

It is not too much of a caricature to portray the argument —and, alas, much common practice— like this: I’ll first build a state-of-the art digital payments platform, and then I’ll secure a great agent network to acquire customers and offer them cash services. Once I have mastered all that, then I’ll focus on bringing new services to delight more of my customers. The result is that research on customer preferences gets postponed, and product design projects are outsourced to external consultants who run innovation projects in a way that is disconnected from the rest of the business.

This mindset is understandable given limited organizational, financial and human resource capabilities. But the problem with such narrow sequencing is that all these elements reinforce each other. Without adequate services (a.k.a. customer proposition), the rails will not bed down (a.k.a. no business case for the provider or the agents). In businesses such as digital payments that exhibit strong network effects, it’s a race to reach a critical mass of users. You need to drive the entire stack to get there, as quickly as possible. Unless, you develop a killer app early on, as M-PESA seems to have done with the send money home use case in the Kenyan environment.

It is tough for any organization to advance on all these fronts simultaneously. Only superhero organizations can get this complex job done. I have argued in a previous post that the piece that needs to be parceled off is not the service creation but rather cash management: that can be handled by independently licensed organizations working at arms length from the digital rails-and-products providers.

What are payment rails?

Payment rails are a collection of capabilities that allow value to be passed around digitally. This could include sending money home, paying for a good or a bill, pushing money into my or someone else’s savings account, funding a withdrawal at an agent, or repaying a loan. The first set of capabilities relates to identity: being able to establish you are the rightful owner of the funds in your account, and to designate the intended recipient in a money transfer. The second set of capabilities relates to the accounting or ledger system: keeping track of balances held and owed, and authorizing transactions when there are sufficient funds per the account rules. The third set of capabilities relates to messaging: collecting the necessary transaction details from the payment initiator, conveying that information securely to the authorizing entity, and providing confirmations.

Only the third piece has been transformed by the rise of mobile phones: we now have an increasingly inclusive and ubiquitous real-time messaging fabric. Impressive as that is, this messaging capability is still linked to legacy approaches on identity and accounting. Which is why mobile money is still more an evolution than a revolution in the quest for financial inclusion.

The keepers of the accounts —traditionally, the banks— are, of course, the guardians of the system’s choke points. There is now recognition in financial inclusion circles that to expand access to finance it is not enough to proliferate the world with mobile phones and agents: you need to increase the number and type of account keepers, under the guise of mobile money operators, e-money issuers or payment banks. But that doesn’t change the fundamental dynamics, which is that there still are choke point guardians who need to be convinced that there is a business case in order to invest in marketing to poor people, that there are opportunities to innovate to meet their needs, and that perhaps all players can be better off if only they interoperated. A true transformation would be to open up these ledgers, so anyone can check the validity of any transaction and write them into the ledger.

That’s what crypto-currencies are after: decentralizing the accounting and transaction authorization piece, much in the same way as mobile phones have decentralized the transaction origination piece. Banks seek to protect the integrity of their accounting and authorizations systems —and hence their role as arbiters of financial transactions— by hiding them behind huge IT walls; crypto-currencies such as Bitcoin and Ripple do the opposite: they use sophisticated protocols to create a shared consensus for all to see and use.

The other set of capabilities in the digital rails, identity, is also still in the dark ages. Let me convince you of that through a personal experience. My wallet was stolen recently, and it contained my credit card. I can understand the bank wanting to know my name, but why is the bank announcing my name to the thief by printing it on the credit card, thereby making it easier for him to impersonate me? The reason is, of course, that the bank wants merchants to be able to cross check the name on the card with a piece of customer ID. But as you can imagine, my national ID got stolen along with my credit card, and because of that the thief knows not only my name but also my address. That was an issue because I also kept a key to my house in the wallet. None of this makes sense: why are these “trusted” institutions subverting my sense of personal security, not to mention privacy?

The problem is that the current financial regulatory framework is premised on a direct binding of every transaction to my full legal identity. As David Porteous and I argue in a recent paper, what we need is a more nuanced digital identity system that allows me to present different personas to different identity-requesting entities and choose precisely which attributes of myself get revealed in each case, while still allowing the authorities to trace the identity unequivocally back to me in case I break the law.

The much-celebrated success of mobile money has so far really only transformed one third (messaging) of one half (payment rails) of the financial inclusion agenda. We ain’t seen nothin’ yet.

Editor’s Note: Brookings will hold an event and live webcast on Wednesday, August 26 to discuss the findings of the 2015 Financial and Digital Inclusion (FDIP) Report and Scorecard. Follow the conversation on Twitter using #FinancialInclusion 

Access to affordable, quality financial services is vital both for ensuring the financial well-being of individuals and for fostering broader economic development. Yet about 2 billion adults around the world still do not have formal financial accounts.

The Financial and Digital Inclusion Project (FDIP), launched within the Center for Technology Innovation at Brookings, set out to answer three key questions:

• Do country commitments make a difference in progress toward financial inclusion?
• To what extent do mobile and other digital technologies advance financial inclusion?
• What legal, policy, and regulatory approaches promote financial inclusion?

To answer these questions, the FDIP team spent the past year examining how governments, private sector entities, non-government organizations, and the general public across 21 diverse countries have worked together to advance access to and usage of formal financial services. This research informed the development of the 2015 Report and Scorecard — the first in a 3-year series of research on the topic.

For the 2015 Scorecard, FDIP researchers assessed 33 indicators across four dimensions of financial inclusion: Country commitment, mobile capacity, regulatory environment, and adoption of selected basic traditional and digital financial services.

The 2015 FDIP Report and Scorecard provide detailed profiles of the financial inclusion landscape in 21 countries, focusing on mobile money and other digital financial services.

On August 26, the Center for Technology Innovation will discuss the findings of the 2015 Report and Scorecard and host a conversation about key trends, opportunities, and obstacles surrounding financial inclusion among authorities from the public and private sectors.

Register to attend the event in-person or by webcast, and join the conversation on Twitter at #FinancialInclusion.

The 2015 Brookings Financial and Digital Inclusion Project (FDIP) Report and Scorecard evaluates access to and usage of affordable financial services across 21 geographically and economically diverse countries.

The FDIP Report and Scorecard seek to answer a set of fundamental questions about today’s global financial inclusion efforts, including: 1) Do country commitments make a difference in progress toward financial inclusion?; 2) To what extent do mobile and other digital technologies advance financial inclusion?; and 3) What legal, policy, and regulatory approaches promote financial inclusion?

John D. Villasenor, Darrell M. West, and Robin J. Lewis analyzed the financial inclusion landscape in Afghanistan, Bangladesh, Brazil, Chile, Colombia, Ethiopia, India, Indonesia, Kenya, Malawi, Mexico, Nigeria, Pakistan, Peru, the Philippines, Rwanda, South Africa, Tanzania, Turkey, Uganda, and Zambia. Countries received scores and rankings based on 33 indicators spanning four dimensions: country commitment, mobile capacity, regulatory environment, and adoption.

The authors’ analysis also provides several takeaways about how to best expand financial inclusion across the world:

• Country commitment is fundamental.
• The movement toward digital financial services will accelerate financial inclusion.
• Geography generally matters less than policy, legal, and regulatory changes, although some regional trends in terms of financial services provision are evident.
• Central banks, ministries of finance, ministries of communications, banks, nonbank financial providers, and mobile network operators play major roles in achieving greater financial inclusion.
• Full financial inclusion cannot be achieved without addressing the financial inclusion gender gap.

This year’s Report and Scorecard is the first of a series of annual reports examining financial inclusion activities around the world.

View the full report and a full compendium of the country rankings here.

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Event Information

Approximately two billion adults across the world lack access to formal financial services. To address this particular economic challenge, many developing countries have made significant efforts to expand access to and use of affordable financial services for the world’s poor. Financial inclusion can be achieved via traditional banking offerings, but also through digital financial services such as mobile money, among other innovative approaches.

The Brookings Financial and Digital Inclu­sion Project (FDIP) Report and Scorecard seeks to help answer a set of fundamental questions about today’s global financial inclusion efforts, including;

1. Do country commitments make a difference in progress toward financial inclusion?
2. To what extent do mobile and other digital technologies advance finan­cial inclusion?
3. What legal, policy, and regulatory approaches promote financial inclusion? 

To answer these questions, Brookings experts John D. Villasenor, Darrell M. West, and Robin J. Lewis analyzed finan­cial inclusion in 21 geographically, economically, and politically diverse countries. This year’s report and scorecard is the first of a series of annual reports examining financial inclusion activities and assessing usage of financial services in selected countries around the world. 

On August 26, the Center for Technology Innovation at Brookings held a forum to launch the 2015 FDIP Report and discuss key research findings and recommendations. Financial inclusion experts from the public and private sectors also joined the discussion.

Join the conversation on Twitter at #FinancialInclusion and @BrookingsGov

Video

• Measuring progress on financial and digital inclusion

Audio

• Measuring progress on financial and digital inclusion

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20150826_financial_inclusion_transcript

Editors Note: On August 23, the Center for Technology Innovation (CTI) released the 2015 Financial and Digital Inclusion Project Report and Scorecard. Brookings will hold an event and live webcast on Wednesday, August 26 to discuss the report’s findings. Follow the conversation on Twitter using #FinancialInclusion and submit comments on the report to FDIPComments@brookings.edu.

Around the world, some two billion adults lack access to an account at a formal financial institution. In order to shrink that number, many countries have made commitments to expanding financial services to the poor. These commitments include recognizing the importance of financial inclusion, developing an inclusion policy, and using data to measure progress toward inclusion goals. The Brookings Financial and Digital Inclusion Project (FDIP) evaluates access to and usage of affordable financial services by underserved people across 21 countries. Of these countries, Kenya, South Africa, Brazil, Rwanda and Uganda were the top scorers.

The 2015 FDIP Report and Scorecard rank these countries based on four dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services. The findings indicate that country commitments do matter for achieving financial inclusion. Some regional trends are present, such as the relatively higher amount of money stored on mobile accounts in Africa. Mobile technology accelerates financial inclusion in places that lack legacy financial institutions. Additionally, a gender gap persists in ownership of financial accounts that could be reversed with greater access to mobile money services. The 2015 Report and Scorecard are the first in a series of publications intended to provide policymakers, the private sector, nongovernmental organizations, and the general public with information that can help improve financial inclusion in these countries and around the world.

 View the 2015 Brookings FDIP Report and Scorecard, watch the webcast of the live event, and send feedback on the report to FDIPcomments@brookings.edu.

On August 26, the Brookings Institution hosted a panel discussion of the findings of the 2015 Financial and Digital Inclusion Project Report and Scorecard. Chief among the report’s findings was the rapid growth of financial products and services targeted at the world’s unbanked population.  Much of the growth stems from innovations in digital payments systems and non-bank financial services.  For example, systems like M-Pesa in Kenya allow customers to store money on their mobile phones and easily transfer it to other M-Pesa users.  Advancing financial inclusion will greatly benefit the two billion people worldwide that still lack access to any financial services.

The report itself ranks a set of 21 countries on four continents chosen for their efforts to promote financial inclusion.  The criteria used to score each country include country commitment, mobile capacity, regulatory environment, and adoption.  The results show that several pathways to financial inclusion exist, from mobile payments systems to so-called “branchless” banking services.  Places that lack traditional banks have seen financial inclusion driven by mobile operators, while others have experimented with third-party agent banking in areas that lack bank branches.   

The panel drew financial inclusion and mobile payments experts from the government, industry, and non-profit groups.  Each panelist touted the benefits of financial inclusion from their own perspective.  Women especially have much to gain from financial inclusion since they have historically faced the most obstacles to opening financial accounts.  In developing countries, a mobile payments system grants women greater privacy, control, and safety compared to cash payments.  Traceable digital payments also make it easier to combat corruption and money laundering.  Salaries paid to government employees and transfer payments to low-income households can be sent straight to a mobile payment account, eliminating opportunities for bribe seeking and theft. 

According to the panelists, financial inclusion can also drive economic growth in developing countries.  As financial services expand, they will also increase in sophistication, allowing customers to do more with their money.  For example, a payments record can be used to establish a credit history for loan applications, and digital savings accounts with interest can help customers protect their wealth against inflation.  These same systems can also be used to provide insurance coverage, reducing financial uncertainty for low-income populations.

The proliferation of financial services has many benefits, but it will also create policy challenges if regulations do not keep up with financial innovation.  Requiring several forms of identification to purchase a mobile phone or open a bank account presents an obstacle to low income and rural customers that live far away from government offices that issue identification. Broad coordination between telecom regulators, ID issuers, banking authorities, and other government agencies is often necessary for lowering barriers to accessing financial services.

It is telling that many countries included in the report are looking to other developing countries for policies to promote financial inclusion.  The scarcity of traditional banks combined with new methods of accessing financial services opens avenues to financial inclusion not seen in most developed countries. Established banking industries and the accompanying regulations leave fewer opportunities for financial innovation, but countries with large unbanked populations can start with a clean slate. Over the next two years, FDIP will continue to monitor and report on developments in financial inclusion around the world.

Send comments on the 2015 FDIP Report and Scorecard and suggestions for future reporting to FDIPComments@brookings.edu.

Editor’s note: This post is part of a series on the Brookings Financial and Digital Inclusion Project, which aims to measure access to and usage of financial services among individuals who have historically been disproportionately excluded from the formal financial system. To read the first annual FDIP report, learn more about the methodology, and watch the 2015 launch event, visit the 2015 Report and Scorecard webpage.

Convenient access to banking infrastructure is something many people around the world take for granted. Yet while the number of people outside the formal financial system has substantially decreased in recent years, 2 billion adults still do not have an account with a formal financial institution or mobile money provider.¹

This means that significant opportunities remain to provide access to and promote use of affordable financial services that can help people manage their financial lives more safely and efficiently.

To learn more about how countries can facilitate greater financial inclusion among underserved groups, the Brookings Financial and Digital Inclusion Project (FDIP) sought to answer the following questions: (1) Do country commitments make a difference in progress toward financial inclusion?; (2) To what extent do mobile and other digital technologies advance financial inclusion; and (3) What legal, policy, and regulatory approaches promote financial inclusion?

To address these questions, the FDIP team assessed 33 indicators of financial inclusion across 21 economically, geographically, and politically diverse countries that have all made recent commitments to advancing financial inclusion. Indicators fell within four key dimensions of financial inclusion: country commitment, mobile capacity, regulatory commitment, and adoption of selected traditional and digital financial services.

In an effort to obtain the most accurate and up-to-date understanding of the financial inclusion landscape possible, the FDIP team engaged with a wide range of experts — including financial inclusion authorities in the FDIP focus countries — and also consulted international non-governmental organization publications, government documents, news sources, and supply and demand-side data sets.

Our research led to 5 overarching findings.

1. Country commitments matter.

   Not only did our 21 focus countries make commitments toward financial inclusion, but countries generally took these commitments seriously and made progress toward their goals. For example, the top five countries within the scorecard each completed at least one of their national-level financial inclusion targets. While correlation does not necessarily equal causation, our research supports findings by other financial inclusion experts that national-level country commitments are associated with greater financial inclusion progress. For example, the World Bank has noted that countries with national financial inclusion strategies have twice the average increase in the number of account holders as countries that do not have these strategies in place.

2. The movement toward digital financial services will accelerate financial inclusion.

   Digital financial services can provide customers with greater security, privacy, and convenience than transacting via traditional “brick-and-mortar” banks. We predict that digital financial services such as mobile money will become increasingly prevalent across demographics, particularly as user-friendly smartphones become cheaper² and more widespread.³

   Mobile money has already driven financial inclusion, particularly in countries where traditional banking infrastructure is limited. For example, mobile money offerings in Kenya (particularly the widely popular M-Pesa service) are credited with advancing financial inclusion: The Global Financial Inclusion (Global Findex) database found that the percentage of adults with a formal account in Kenya increased from about 42 percent in 2011 to about 75 percent in 2014, with around 58 percent of adults in Kenya having used mobile money within the preceding 12 months as of 2014.

3. Geography generally matters less than policy, legal, and regulatory changes, although some regional trends in terms of financial services provision are evident.

   Regional trends include the widespread use of banking agents (sometimes known as correspondents)⁴ in Latin America, in which retail outlets and other third parties are able to offer some financial services on behalf of banks,⁵ and the prevalence of mobile money in sub-Saharan Africa. However, these regional trends aren’t absolute: For example, post office branches have served as popular financial access points in South Africa,⁶ and the GSMA’s “2014 State of the Industry” report found that the highest growth in the number of mobile money accounts between December 2013 and December 2014 was in Latin America. Overall, we found high-performing countries across multiple regions and using multiple approaches, demonstrating that there are diverse pathways to achieving greater financial inclusion.

4. Central banks, ministries of finance, ministries of communications, banks, non-bank financial providers, and mobile network operators have major roles in achieving greater financial inclusion. These entities should closely coordinate with respect to policy, regulatory, and technological advances.

   With the roles of public and private sector entities within the financial sector becoming increasingly intertwined, coordination across sectors is critical to developing coherent and effective policies. Countries that performed strongly on the country commitment and regulatory environment components of the FDIP Scorecard generally demonstrated close coordination among public and private sector entities that informed the emergence of an enabling regulatory framework. For example, Tanzania’s National Financial Inclusion Framework⁷ promotes competition and innovation within the financial services sector by reflecting both public and private sector voices.⁸

5. Full financial inclusion cannot be achieved without addressing the financial inclusion gender gap and accounting for diverse cultural contexts with respect to financial services.

   Persistent gender disparities in terms of access to and usage of formal financial services must be addressed in order to achieve financial inclusion. For example, Middle Eastern countries such as Afghanistan and Pakistan have demonstrated a significant gap in formal account ownership between men and women. Guardianship and inheritance laws concerning account opening and property ownership present cultural and legal barriers that contribute to this gender gap.⁹

   Understanding diverse cultural contexts is also critical to advancing financial inclusion sustainably. In the Philippines, non-bank financial service providers such as pawn shops are popular venues for accessing financial services.¹⁰ Leveraging these providers as agents can therefore be a useful way to harness trust in these systems to increase financial inclusion.

To dive deeper into the report’s findings and compare country rankings, visit the FDIP interactive. We also welcome feedback about the 2015 Report and Scorecard at FDIPComments@brookings.edu.

¹ Asli Demirguc-Kunt, Leora Klapper, Dorothe Singer, and Peter Van Oudheusden, “The Global Findex Database 2014: Measuring Financial Inclusion around the World,” World Bank Policy Research Working Paper 7255, April 2015, VI, http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/04/15/090224b082dca3aa/1_0/Rendered/PDF/The0Global0Fin0ion0around0the0world.pdf#page=3.

² Claire Scharwatt, Arunjay Katakam, Jennifer Frydrych, Alix Murphy, and Nika Naghavi, “2014 State of the Industry: Mobile Financial Services for the Unbanked,” GSMA, 2015, p. 24, http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2015/03/SOTIR_2014.pdf.

³ GSMA Intelligence, “The Mobile Economy 2015,” 2015, pgs. 13-14, http://www.gsmamobileeconomy.com/GSMA_Global_Mobile_Economy_Report_2015.pdf.

⁴ Caitlin Sanford, “Do agents improve financial inclusion? Evidence from a national survey in Brazil,” Bankable Frontier Associates, November 2013, pg. 1, http://bankablefrontier.com/wp-content/uploads/documents/BFA-Focus-Note-Do-agents-improve-financial-inclusion-Brazil.pdf.

⁵ Alliance for Financial Inclusion, “Discussion paper: Agent banking in Latin America,” 2012, pg. 3, http://www.afi-global.org/sites/default/files/discussion_paper_-_agent_banking_latin_america.pdf.

⁶ The National Treasury, South Africa and the AFI Financial Inclusion Data Working Group, “The Use of Financial Inclusion Data Country Case Study: South Africa – The Mzansi Story and Beyond,” January 2014, http://www.afi-global.org/sites/default/files/publications/the_use_of_financial_inclusion_data_country_case_study_south_africa.pdf.

⁷ Tanzania National Council for Financial Inclusion, “National Financial Inclusion Framework: A Public-Private Stakeholders’ Initiative (2014-2016),” 2013, pgs. 19-22, http://www.afi-global.org/sites/default/files/publications/tanzania-national-financial-inclusion-framework-2014-2016.pdf.

⁸ Simone di Castri and Lara Gidvani, “Enabling Mobile Money Policies in Tanzania,” GSMA, February 2014, http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/03/Tanzania-Enabling-Mobile-Money-Policies.pdf.

⁹ Mayada El-Zoghbi, “Mind the Gap: women and Access to Finance,” Consultative Group to Assist the Poor, 13 May 2015, http://www.cgap.org/blog/mind-gap-women-and-access-finance.

¹⁰ Xavier Martin and Amarnath Samarapally, “The Philippines: Marshalling Data, Policy, and a Diverse Industry for Financial Inclusion,” FINclusion Lab by MIX, June 2014, http://finclusionlab.org/blog/philippines-marshalling-data-policy-and-diverse-industry-financial-inclusion.

Editor’s Note: The Center for Technology Innovation released the 2015 Financial and Digital Inclusion Project (FDIP) Report on August 26^th. TechTank has previously covered the FDIP launch event and outlined the report’s overall findings. Over the next two months, TechTank will take a closer look at the report’s findings by country and by region, beginning with today’s post on India. 

With about 21 percent of the world’s entire unbanked adult population residing in India as of 2014, the country has tremendous opportunities for growth in terms of advancing access to and use of formal financial services.

In the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, we detail the progress achieved and possibilities remaining for India’s financial services ecosystem as it moves from a heavy reliance on cash to an array of traditional and digital financial services offered by diverse financial providers.

As noted in the 2015 FDIP Report, government-led initiatives to promote financial inclusion have advanced access to financial services in India. Ownership of formal financial institution and mobile money accounts among adults in India increased about 18 percentage points between 2011 and 2014. Recent regulatory changes and public and private sector initiatives are expected to further promote use of these services.

In this post, we unpack the four components of the 2015 FDIP Scorecard — country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services — to highlight India’s achievements and possible next steps toward greater financial inclusion.

Country commitment: An unprecedented year with no sign of slowing

India’s national-level commitment to promoting financial inclusion earned it a “country commitment” score of 100 percent. A historic government initiative helped India garner a top score: In August 2014, Prime Minister Narendra Modi launched the “Pradhan Mantri Jan-Dhan Yojana,” the Prime Minister’s People’s Wealth Scheme (PMJDY). This effort — arguably the largest financial inclusion initiative in the world — “envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility,” in addition to providing beneficiaries with an RuPay debit card.

As part of this effort, the program aimed to provide 75 million unbanked adults in India with accounts by late January 2015. As of September 2015, about 180 million accounts had been opened; about 44 percent of these accounts did not carry a balance, down from about 76 percent in September 2014.

The PMJDY initiative is a component of the JAM Trinity, or “Jan-Dhan, Aadhaar and Mobile.” Under this approach, government transfers (also known as Direct Benefit Transfers, or DBT) will be channeled through bank accounts provided under Jan-Dhan, Aadhaar identification numbers or biometric IDs, and mobile phone numbers.

The Pratyaksh Hanstantrit Labh (PaHaL) program is a major DBT initiative in which subsidies for liquefied petroleum gas can be linked to an Aadhaar number that is connected to a bank account or the consumer’s bank details. As of July 2015, about $2 billion had been channeled to beneficiaries in 130 million households across the country.

Mobile capacity: Ample opportunity for digital services, but limited awareness and use

India received 16^th place (out of the 21 countries considered) in the 2015 FDIP Report and Scorecard’s mobile capacity ranking. India’s mobile money landscape features an extensive array of services, and the licensing of new payments banks (discussed below) may drive the entry of new players and products that can improve low levels of awareness and adoption of digital financial services.

An InterMedia survey conducted from September to December 2014 found that while 86 percent of adults owned or could borrow a mobile phone, only about 13 percent of adults were aware of mobile money. Awareness of mobile money is increasing — the 13 percent figure is double that of the first wave of the survey, which concluded in January 2014 — but uptake remains low. The Global Financial Inclusion (Global Findex) database found only 2 percent of adults in India had a mobile money account in 2014.

Implementing interoperability across mobile money offerings, increasing 3G network coverage by population, and enhancing unique mobile subscribership could boost India’s mobile capacity score in future editions of the FDIP report.

Regulatory environment: Opening up the playing field to non-bank entities

India tied for 7^th place on the regulatory environment component of the 2015 Scorecard. The country’s recent shift to a more open financial landscape contributed to its strong score, although more time is needed to see how recent regulations will be operationalized.

India has traditionally maintained tight restrictions with respect to which entities are involved in financial service provision. Non-banks could manage an agent network on behalf of a bank as business correspondents or issue “semi-closed” wallets that did not permit customers to withdraw funds without transferring them to a full-service bank account. These restrictions likely contributed to the country’s slow and limited adoption of mobile money services.

However, 2014 brought significant changes to India’s regulatory landscape. The Reserve Bank of India’s November 2014 Payments Banks guidelines were heralded as a major step forward for increasing diversity in the financial services ecosystem. These guidelines marked a significant shift from India’s “bank-led” approach by providing opportunities for non-banks such as mobile network operators to leverage their distribution expertise to advance financial access and use among underserved groups.

While these institutions cannot offer credit, they can distribute credit on behalf of a financial services provider. They may also distribute insurance and pension products, in addition to offering interest-bearing deposit accounts.

We noted in the 2015 FDIP Report that timely approval of license applications for prospective payments banks, particularly mobile network operators, would be a valuable next step for India’s financial inclusion path. In August 2015, the Reserve Bank of India approved 11 applicants, including five mobile network operators, to launch payments banks within the next 18 months. As noted in Quartz India, the “underlying objective is to use these new banks to push for greater financial inclusion.” India has also made strides in terms of establishing proportionate “know-your-customer” requirements for financial entities, including payments banks.

While India has made significant progress in terms of promoting a more enabling regulatory environment, room for improvement remains. For example, concerns have been raised regarding the low commission rate for banks distributing DBT, with many experts noting that a higher commission would enhance the ability of these banks to operate sustainably.

Adoption: Access is improving, but promoting use is key

India ranked 9^th for the adoption component of the 2015 Scorecard. Recent studies have demonstrated that adoption of formal financial services among traditionally underserved groups is improving. For example, InterMedia surveys conducted in October 2013 to January 2014 and September to December 2014 found that the most significant increase in bank account ownership was among women, particularly women living below the poverty line. Still, further work is needed to close the gender gap in account ownership.

As noted above, adoption of digital financial services such as mobile money is minimal compared with traditional bank accounts (0.3 percent compared with 55 percent, according to the September to December 2014 InterMedia survey); nonetheless, we believe that the introduction of payments banks, combined with government efforts to digitize transfers, will facilitate greater adoption of digital financial services.

While PMJDY has successfully promoted ownership of bank accounts, incentivizing use of these services is critical for achieving true financial inclusion. Dormancy rates in India are high — about 43 percent of accounts had not been deposited into or withdrawn from in the previous 12 months, according to the 2014 Global Findex.

More time may be needed for individuals to understand how their new accounts function and, equally importantly, how their new accounts are relevant to their daily lives. A February 2015 survey designed by India’s Ministry of Finance, MicroSave, and the Bill & Melinda Gates Foundation found about 86 percent of PMJDY account holders reported the account was their first bank account. While this survey is not nationally representative, it provides some context as to why efforts to promote trust in and understanding of these new accounts will be key to the success of the program.

An opportunity for promoting adoption of digital financial services was highlighted during the public launch of the 2015 Report and Scorecard: As of June 2015, it was estimated that fewer than 6 percent of merchants in India accepted digital payments. The U.S. government is partnering with the government of India to promote the shift to digitizing transactions, including at merchants.

The next annual FDIP Report will examine the outcomes of such initiatives as we assess India’s progress toward greater financial inclusion. Suggestions and other comments regarding the FDIP Report and Scorecard are welcomed at FDIPComments@brookings.edu.

Editor’s Note: This blog post is part of a series on the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, which were launched at a Brookings public event on August 26. Previous posts have highlighted five key findings from the 2015 FDIP Report and explored groundbreaking financial inclusion developments in India. Today’s post will compare financial inclusion outcomes and opportunities for growth across several Asian countries included in the 2015 Report and Scorecard.

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Of the 21 countries ranked in the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, no countries in Asia placed in the top 5 in the overall ranking. However, all of the FDIP Asian countries have demonstrated progress within at least one of the four dimensions of the 2015 Scorecard: country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services.

This blog post will dive into a few of the obstacles and opportunities facing FDIP countries in central Asia, the Middle East, and southeast Asia as they move toward greater access to and usage of financial services among marginalized groups. We explore these countries in order of their overall score: Turkey (74 percent), Indonesia (70 percent), the Philippines (68 percent), Bangladesh (67 percent), Pakistan (65 percent), and Afghanistan (58 percent). You can also read our separate post on financial inclusion in India, available here.

Turkey: Clear economic advantages, but opportunities for enabling regulation and greater equity remain

Turkey is one of the few upper-middle income countries in the FDIP sample, ranking in the top 5 in terms of gross domestic product (GDP) measured in US dollars. Turkey’s fairly robust banking infrastructure contributed to its relatively strong adoption rates: As of 2013, the International Monetary Fund’s Financial Access Survey found that Turkey had about 20 bank branches per 100,000 adults (the 4^th highest density rate among the 21 FDIP countries) and about 73 ATMs per 100,000 adults (the 2^nd highest density rate among the FDIP countries).

According to the World Bank’s Global Financial Inclusion (Global Findex) database, about 57 percent of adults in Turkey had an account with a mobile money provider or formal financial institution as of 2014. Turkey’s performance on the adoption dimension of the 2015 Scorecard contributed to its tie with Colombia and Chile for 6^th place on the overall scorecard.

With that said, Turkey received lower mobile capacity and regulatory environment scores, ranking 16^th and 17^th respectively. Although Turkey’s smartphone and mobile penetration levels are quite robust, a limited mobile money provider landscape, combined with a lack of regulatory clarity surrounding branchless banking regulations (particularly agent banking), constrained Turkey’s scores in those categories.

Nonetheless, there is promising news for Turkey’s financial inclusion environment. In 2015, Turkey assumed the G20 presidency and has renewed its focus on financial inclusion in association with this transition. Turkey’s 2014 financial inclusion strategy is one example of the country’s commitment to advancing inclusion.

To date, financial inclusion growth in Turkey has been limited, as evidenced by the results of the 2011 and 2014 Global Findex. However, if the country’s stated commitment translates into concrete initiatives moving forward, we can expect to see accelerated financial inclusion growth. This will be critical for facilitating access to and usage of quality financial services among the nearly 60 percent of women in Turkey without formal financial accounts. Reducing the approximately 25 percentage point gap in account ownership between men and women — one of the highest gender gaps among the 21 FDIP countries — should be a key priority for the country moving forward.

Indonesia: High mobile money potential, but enhanced awareness needed to drive adoption

Recent changes to Indonesia’s regulatory environment have facilitated a more enabling digital financial services ecosystem, although there is still room for improvement in terms of reducing supply-side barriers. Increasing mobile money awareness could help leverage Indonesia’s strong mobile capacity rates to increase access to and usage of formal financial services. However, moving from a heavily cash-based environment to greater use of digital financial services will take time: A 2014 InterMedia survey in Indonesia found that although 93 percent of bank account holders could access their accounts digitally, 73 percent preferred to access their accounts via an agent at a bank branch.

The differing mandates of Indonesia’s new financial services authority, Otoritas Jasa Keuangan (OJK), which focuses on branchless banking (specifically agent banking) and Bank Indonesia, which focuses on electronic money regulation, may have created some confusion regarding the regulatory environment. Solidifying the country’s financial inclusion strategy and clarifying the roles of the various financial inclusion stakeholders could provide opportunities for greater coherence in terms of financial inclusion objectives.

OJK’s recent branchless banking regulations have led to several positive changes within the regulatory environment. For example, these regulations enabled financial service providers to appoint individuals and business entities as agents and to provide simplified customer due diligence requirements. The 2015 FDIP Report highlights in greater detail some possible improvements to the branchless banking and e-money regulations.

On the mobile capacity side, Indonesia tied for the second-highest score on the 2015 Scorecard. Indonesia is one of the few countries where mobile money platform interoperability has been implemented, allowing different mobile money services to “talk” to one another in real time. Indonesia also boasted the third-highest 3G network coverage by population among all the FDIP Asian countries, as well as the third-highest unique subscribership rate among these countries. However, only about 3 percent of adults were aware of mobile money as of fall 2014, according to the InterMedia survey.

In terms of adoption, the 2014 Global Findex found that women in Indonesia actually had slightly higher rates of account ownership than adults in general, although there is still significant room for growth across all adoption indicators. Given Indonesia’s strong mobile capacity ranking, increasing awareness of mobile money services could drive growth in the digital finance sector. Clarifying existing regulatory frameworks and removing some remaining restrictions regarding agent exclusivity and other agent criteria could further boost financial inclusion.

Philippines: Strong commitment, but geographic barriers have inhibited scale

The Philippines tied with Bangladesh to garner 15^th place for adoption, which contributed to the country’s overall ranking (also 15^th place). In both Bangladesh and the Philippines, about 31 percent of adults had an account with a mobile money provider or formal financial institution as of 2014. According to the 2014 Global Findex, the percentage of women with formal financial accounts was about 7 percentage points higher than the overall percentage of adults with accounts — a rarity among the 21 FDIP countries, which generally exhibit a “gender gap” in which women are less likely to have formal financial accounts than men.

The Philippines’ efforts to foster financial inclusion earned it the second-highest country commitment and regulatory environment rankings among the FDIP Asian countries. The Bangko Sentral ng Pilipinas (BSP), the Philippines’ central bank, has issued a number of circulars providing guidance regarding electronic money and allowing non-bank institutions to become e-money issuers. The BSP also has the distinction of being the first central bank in the world to create an office dedicated to financial inclusion. Most recently, the BSP launched a national financial inclusion strategy in July 2015.

On the mobile side, according to the GSMA Intelligence database, as of the end of the first quarter of 2015 the Philippines had the highest unique mobile subscribership rate among the FDIP Asian countries, as well as the second-highest rate of 3G network coverage by population among these countries.

In terms of mobile money, the Philippines is home to two of the earliest mobile financial services products, Smart’s Smart Money and Globe’s GCash. It also boasts the second-highest rate of mobile money accounts among adults in all the FDIP Asian countries, according to the 2014 Global Findex.

There is still significant room for improvement in adoption of traditional and digital financial services in the Philippines. The country’s geography has posed a challenge with respect to advancing access to financial services among the dispersed population. While the extent of banking infrastructure has improved over time, as of 2013 610 out of 1,634 cities and municipalities did not have a banking office, and financial access points remained concentrated in larger cities. Expanding agent locations and facilitating interoperability could enhance mobile money adoption, mitigating the consequences of these geographic barriers.  

Bangladesh: Rapid growth, but high unregistered use and low adoption overall

While Bangladesh performed strongly on the country commitment and mobile capacity dimensions of the 2015 FDIP Scorecard, it received one of the lowest adoption rankings among the FDIP Asian countries. According to the Global Findex, about 31 percent of adults age 15 and older had an account with a formal financial institution or mobile money provider as of 2014. Indicators pertaining to the country’s rates of formal saving, credit card use, and debit card use all received the lowest score.

Bangladesh has a robust mobile landscape, with fairly strong unique mobile subscription rates — as of the first quarter of 2015, it was tied with Indonesia for the third-highest unique mobile subscribership rates among the FDIP Asian countries, after the Philippines and Turkey. This mobile coverage is combined with a multiplicity of mobile money providers (although a 2014 InterMedia survey noted that nearly 90 percent of active mobile money customers used the bKash mobile money service).

Awareness of mobile money as a service in Bangladesh is very high, although understanding of the concept is less prevalent — in 2014, about 91 percent of respondents in an InterMedia survey were aware of at least one mobile money provider, although only about 36 percent were aware of mobile money as a general concept.

Unregistered use of mobile money accounts is high. While about 37 percent of adults had a mobile money account or bank account or both as of 2014, according to the InterMedia survey, only about 5 percent had registered mobile money accounts, while 4 percent had active, registered mobile money accounts (meaning an account that is registered and has been used in the previous 90 days).Transitioning to registered accounts will help enable individuals to connect with more extensive financial services, such as receipt of government payments.

Overall, adoption of mobile money and the expansion of agent locations have been increasingly rapid in Bangladesh — as of 2014 Bangladesh was one of the fastest growing markets in terms of total accounts globally. Over 60 percent of respondents in a 2013 InterMedia survey stated that they “fully” or “rather” trusted mobile money. Moving forward, increasing financial capability might help individuals feel more at ease registering their accounts and using them independently of an agent.

Pakistan: Public and private sector initiatives advance inclusion

Pakistan ranked 7^th in terms of the percentage of adults with mobile money accounts among the 21 countries, achieving the highest percentage of all of the Asian FDIP countries. Yet there is significant room for growth — as of 2014, only about 6 percent of adults had a mobile money account.

The State Bank of Pakistan (SBP) has clearly expressed its commitment to advancing financial inclusion, which earned the country a commitment score of 100 percent. The SBP developed Branchless Banking regulations in 2008, with revisions in 2011. These regulations were explicitly intended to promote financial inclusion. More recently, the country’s National Financial Inclusion Strategy was launched in May 2015. In terms of quantitative assessments of financial inclusion, the SBP tracks supply-side information on branchless banking in its quarterly newsletters.

Recent public and private sector initiatives may help advance mobile money adoption. For example, a re-verification initiative for SIM cards was mandated by the government and initiated earlier in 2015. Mobile network operators have been promoting registration of mobile money accounts since the biometric re-verification process is more intensive than the identification requirements needed to register a mobile money account.

Earlier, in September 2014, the EasyPaisa mobile money service decided to eliminate fees related to money transfers between Easypaisa account customers and cash-out transactions for a set period. As of April 2015, the number of person-to-person money transfers had increased by about 2500 percent.

Still, barriers to financial inclusion remain. A 2014 InterMedia survey noted that while distance was less of a barrier to registration than previously, distance did affect the frequency with which users engaged with mobile money services. Therefore, expanding access points could further facilitate use of mobile money. Increasing the number of registered accounts could also provide individuals with more opportunities to engage with financial services beyond basic transfers — the InterMedia survey found that as of 2014, about 8 percent of adults were over-the-counter mobile money users, while 0.3 percent were registered users.

Afghanistan: Commitment to improving infrastructure and adoption

Instability and systemic corruption in Afghanistan over the past several decades have damaged trust in formal financial services and limited the development of traditional banking infrastructure. In addition to having one of the lowest levels of GDP among the 21 FDIP countries, as of 2013 the Financial Access Survey found Afghanistan had the lowest reported density of commercial banks per 100,000 adults. Even among individuals who can access banks, adoption of formal accounts is constrained by a lack of trust in formal financial services.

On the mobile side, Afghanistan has fairly widespread 3G network coverage (over 80 percent of the population, according to the GSMA Intelligence database), which helped boost its mobile capacity ranking to 2^nd place. However, Afghanistan received the lowest score possible for each of the 15 adoption indicators. According to the 2014 Global Findex, financial account ownership as of 2014 was at about 10 percent of adults, and financial account ownership among women was at only 4 percent. Tracking gender-disaggregated data at the national level could help the government better identify underserved populations and target financial solutions toward their needs.

The government has made an effort to promote financial inclusion and digital financial services. For example, Da Afghanistan Bank committed to the Alliance for Financial Inclusion in 2009, and the Republic of Afghanistan is a member of the Better Than Cash Alliance. In 2008, the Money Service Providers Regulation was issued, with amendments instituted a few years later pertaining to e-money. The Afghanistan Payments Systems, which is still being fully operationalized, aims to allow payment service providers such as mobile network operators to connect their mobile money systems.

While several mobile money options are available, adoption of these services is low. According to the 2014 Global Findex, about 0.3 percent of adults had a mobile money account. Implementing interoperability across platforms might help increase the utility of mobile money services for consumers, and as in Turkey, developing specific agent banking regulations could provide clarity to the sector and drive innovation.

By expanding financial access points, educating consumers about traditional and digital financial services, and monitoring providers to ensure consumer protection, Afghanistan’s regulatory entities and financial service providers may be able to better reach underserved populations and inculcate trust in formal financial services.

Editor’s Note: This post is part of a series on the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, which were launched at a Brookings public event, “Measuring Progress on Financial and Digital Inclusion,” on August 26^th. Previous posts have highlighted five key findings from the 2015 FDIP Report, explored groundbreaking financial inclusion developments in India, and examined the financial inclusion landscape among FDIP countries in Southeast Asia, Central Asia, and the Middle East.

Today’s post highlights the 2015 Scorecard findings for five of FDIP’s nine African countries: Rwanda, Uganda, Tanzania, Zambia, and Malawi. To learn more about the remaining FDIP African countries, read Amy Copley and Amadou Sy’s recent post on Brookings’s “Africa in Focus” blog.

Rwanda: Significant financial inclusion progress over time, but room for expansion remains

• While Rwanda and Uganda were among the bottom four FDIP countries in terms of GDP in current US dollars as of 2013, both countries tied for 4th place on the overall FDIP scorecard, buoyed by their national commitment to and progress toward financial inclusion. For example, Rwanda has a comprehensive action plan for financial inclusion featured in the country’s Financial Sector Development Program (now in its second phase) and, as noted in the 2014 Maya Declaration, set up a working group to monitor the implementation of the program. As part of its commitment to promoting financial inclusion, Rwanda set a numeric target to increase access to formal financial services from 21 percent of the country’s adult population (as benchmarked in the 2008 FinScope survey) to 80 percent by 2017; it has since increased its goal to 90 percent by 2020. The National Bank of Rwanda serves as the country’s Maya Declaration signatory.
• On the mobile side, Rwanda received a higher score than Uganda for the percentage of unique mobile subscribers, achieving a score of “2” (out of 3 possible points), rather than Uganda’s “1.” Rwanda also scored higher than Uganda in terms of 3G mobile network coverage by population, receiving a “3” rather than Uganda’s “2.” Both countries received the highest scores possible for the mobile money deployment and offerings indicators in the scorecard (e.g., existence of bill payment and international remittance options through mobile money). Rwanda was one of the first countries in Africa to support mobile money cross-border remittances, enabling Tigo subscribers to transfer funds to counterparts in Tanzania.
• Rwanda performed strongly on the regulatory environment dimension of the 2015 FDIP Scorecard, ranking third. A 2012 International Finance Corporation (IFC) Mobile Money Scoping report praised Rwanda for its “highly proactive government” that instituted a comprehensive framework for e-payments, driven by its aim to facilitate a cashless financial ecosystem by 2017. Rwanda’s regulatory environment facilitates both mobile operator-led mobile money services and bank-led mobile banking models. As noted in the 2015 FDIP Report, a national ID is widely available, and specific provisions catering for tiered KYC requirements are underway as part of the draft e-payments legislation for non-bank entities.
• On the adoption front, Uganda received higher scores than Rwanda, ranking 6th in contrast to Rwanda (10th). Among the FDIP countries, Rwanda tied for the highest score in terms of the savings at a formal financial institution but did not receive top scores for any of the other 14 adoption indicators. The relatively low levels of formal financial services adoption should not discount the progress that has been made — as of 2014, the World Bank’s Global Financial Inclusion (Global Findex) database found that takeup of formal accounts had increased to about 42 percent of adults  — but in an absolute sense, Rwanda still has room for growth.
• With respect to further opportunities for improvement, the Economist Intelligence Unit (EIU)’s “Global Microscope 2014: The enabling environment for financial inclusion” report noted that some existing consumer protection issues in Rwanda are expected to be addressed in part by a financial consumer protection law expected to be fully implemented by 2016. Advancing platform interoperability could further incentivize adoption of digital financial services: According to the National Bank of Rwanda, interoperability across mobile money transfer services is in process, but not yet complete.

Uganda:Fairly robust mobile money adoption, but improvements regarding consumer protection and usage are key

• As noted above, Uganda tied with Rwanda for 4th place overall on the 2015 FDIP scorecard. A 2014 financial inclusion report by the Bank of Uganda (Uganda’s Maya Declaration signatory) noted on page iv that in 2011, the Bank of Uganda “adopted a new strategy for financial inclusion based on four pillars: financial literacy, financial consumer protection, financial innovations, and financial services data and measurement.” Like Rwanda, FinScope surveys have been carried out fairly regularly in Uganda, most recently in 2013. These financial services surveys help to identify areas of strength and room for improvement in terms of access to and usage of formal financial services among different demographics.
• On the mobile side, Uganda’s mobile capacity — specifically, its percentage of unique mobile subscribers and 3G mobile network coverage by population — could be improved. Regarding the latter indicator, Uganda’s score was among the bottom five FDIP countries (along with Tanzania, Malawi, and Zambia, also featured in this post). Still, Uganda’s mobile money adoption rates are quite robust: Uganda received a score of “2” for all mobile money account-related indicators under the adoption dimension, with the exception of the percentage of adults who pay bills regularly through a mobile phone, which achieved the top score of “3.”
• On the regulatory side, mobile money guidelines were developed in 2013 to provide some clarity to the industry. However, since these guidelines are not binding in the way that more formal regulations are, developing formal regulations could help ensure greater customer protection and clarity within the market. Uganda does not have a payments law to enable the Bank of Uganda to issues licenses to electronic money institutions, and only banks and other institutions regulated under the Financial Institutions Act can provide retail payment services. As noted in the 2015 FDIP Report, amendments to the Financial Institutions Act and the Micro-Finance and Deposit-Taking Institutions Act, along with new draft agency banking guidelines, are underway to facilitate agent banking.
• In terms of availability and adoption of financial services, a Helix Institute report published in 2014 noted that the products and services offered by agents in Uganda were somewhat limited. Expanding the services offered — such as credit, savings, and insurance — could provide individuals with more opportunities to increase their wealth. These services must be offered with careful regard to consumer protection. Uganda achieved 6th place on the adoption dimension of the scorecard, boosted by its above-average takeup of mobile money compared to other FDIP countries.
• In terms of next steps, moving away from a reliance on basic deposit and withdrawals conducted “over-the-counter” to encourage a greater diversity of offerings and services could strengthen the utility of mobile money for customers. However, providers will also have to build trust in digital financial services, particularly in light of ongoing issues with service down-time and recent fraud scandals such as the recent case against several former employees of MTN charged with defrauding the compnay of over $3 million.

Tanzania: Significant strides in regulatory environment and mobile money adoption, with further growth likely to follow

• Tanzania ranked 12th overall on the FDIP scorecard. As noted in the 2015 Report, Tanzania has demonstrated strong leadership in terms of its national-level commitment to promoting financial inclusion, which has contributed to its enabling regulatory environment for digital financial services. For example, Tanzania launched a National Financial Inclusion Framework in 2013, which contains a quantified target of 50 percent financial inclusion by 2016. These factors will likely drive greater financial inclusion in the future by facilitating the development and adoption of innovative, appropriate, and accessible products for previously underserved communities. However, quantitative data available as of 2015 regarding Tanzania’s overall mobile capacity and adoption of formal financial services indicate that room for growth remains.
• In terms of mobile capacity, Tanzania’s mobile money providers have been noted for offering an array of innovative products, including mobile operator Tigo’s interest-bearing mobile money service. Tanzania’s recent (and quite rare) implementation of interoperable mobile money platforms was also highlighted in the 2015 Report and Scorecard. However, as measured by 2015 GSMA Intelligence data, Tanzania’s score for the percentage of 3G network coverage by population was among the lowest of the FDIP countries, and its rate of unique subscribership was below the FDIP average.
• Tanzania’s regulatory environment has been lauded for enabling a diverse array of entities to offer competitive formal financial services. As noted in the 2015 FDIP Report, the Bank of Tanzania Act was amended in 2006 to permit non-bank entities to offer payment services, and the 2007 Electronic Payment Schemes Guidelines were used to enable mobile network operators to offer payment services. In 2013, agent banking guidelines were issued, and in March 2015, the National Payment Systems Act was passed by Tanzania’s parliament. These various regulations have provided the space and clarity for a variety of providers to enter the digital financial services market.
• On the adoption front, Tanzania has undoubtedly made great strides in terms of advancing mobile money adoption, even outnumbering the total number of mobile money transactions made in Kenya (according to figures noted by the Consultative Group to Assist the Poor in March 2015). However, in terms of the percentage of adults with a mobile money account, there was a difference of over 25 percentage points between Kenya and Tanzania as of 2014, according to the 2014 Global Findex.
  Out of 3 possible points achievable per indicator on the adoption dimension, Tanzania received 2 points for the adoption of mobile money accounts among adults, rural individuals, women, and adults making utility bill payments. However, Tanzania received a score of “1” for the other 11 adoption indicators. As a point of reference, Kenya received a full 3 points for each of the mobile account-related indicators on the adoption dimension, and it tied or exceeded Tanzania’s scores for the other adoption indicators.
• Moving forward, we fully anticipate that Tanzania’s increasingly competitive and robust mobile money environment, combined with strong coordination and financial inclusion leadership among the public and private sectors, will drive greater adoption of formal financial services.

Zambia: Commitment to increasing equity in access to financial services, but usage of available services is limited

• Zambia was ranked 14th overall on the 2015 FDIP Scorecard. As with three of the other countries featured in this post — Rwanda, Tanzania, and Uganda — Zambia achieved a score of 100 percent for country commitment. The Bank of Zambia serves at the country’s Maya Declaration signatory and houses the secretariat for Zambia’s Financial Sector Development Plan. As one of the Bank of Zambia’s Maya Declaration commitments, the country set a goal of ensuring access to financial services for at least half of its adult population by the end of 2016. As of 2014, the “gender gap” in terms of account ownership between men and women was about 5 percentage points in Zambia, according to the Global Findex, making Zambia among the five FDIP countries with the smallest disparity in terms of access to finance by gender. Still, account ownership among women was only about 33 percent in 2014; Zambia’s first lady, Esther Lungu, has emphasized the importance of promoting financial inclusion among women.
• In terms of mobile capacity, Zambia received a score of “2” for both the percentage of unique mobile subscribers and percentage of 3G mobile network coverage by population, as measured by the 2015 GSMA Intelligence database. Zambia received top scores for the other mobile capacity indicators, which focused on the number of mobile money deployments and the type of offerings. However, while about 62 percent of adults owned a mobile phone in Zambia as of 2014, according to a 2014 country brief, only about 5 percent of adults used their mobile phone to pay bills or send or receive money — about 11 percentage points below the average for countries in Sub-Saharan Africa.
• Regarding the country’s regulatory environment, Zambia finalized a draft framework on branchless banking in 2013 and has adopted a tiered approach to KYC requirements for e-money wallets. As noted in the 2015 FDIP Report, draft e-money directives are also undergoing review and are expected to include provisions regarding interoperability. Zambia began working toward a new financial inclusion strategy in advance of expiration of the Financial Sector Development Plan in June 2015, which may inform the direction of future regulatory initiatives.
• Challenges to the formal financial services sector in Zambia include high interest rates, fees, and other costs associated with banking. Further, a 2011 report noted that low literacy rates and high poverty levels have posed challenges to takeup of formal financial services. Efforts to expand access to financial services beyond brick-and-mortar banks have been quite successful, as demonstrated by the greater density (in terms of points of service) of mobile money agents than traditional banks in Zambia as of 2013. As of 2014, mobile money agents accounted for about 45 percent of all financial access points in the country.
• In the near future, Zambia is expected to finalize and issue draft e-money directives and approve draft branchless banking regulations. Increasing usage of more extensive financial services could help individuals reap the full benefits of mobile money — as noted in the FinScope 2015 findings, mobile money customers primarily use the service to send and receive money, purchase airtime, or pay bills.

Malawi: Limited infrastructure constrains adoption, but forthcoming regulations may enhance digital financial ecosystem

• Malawi ranked 19th overall on the 2015 FDIP Scorecard. Among the 21 FDIP countries, Malawi has the lowest GDP in current US dollars, according to the 2013 World Development Indicators database. Despite economic and infrastructural barriers, Malawi has engaged in a variety of efforts to promote digital financial services such as mobile money, including through its participation in the Alliance for Financial Inclusion and the creation of its Mobile Money Coordination Group.
• Regarding the mobile capacity dimension of the 2015 Scorecard, Malawi received the highest number of possible points for its deployment offerings. However, Malawi had the second-lowest rate of unique mobile subscribership among the 21 FDIP countries and the lowest score for the extent of 3G mobile network coverage by population, as measured by data provided in the 2015 GSMA Intelligence database. Expanding mobile networks and facilitating mobile subscribership could boost Malawi’s mobile money environment by increasing access to and incentivizing use of mobile services.
• In terms of Malawi’s regulatory environment, the 2011 Mobile Payment System Guidelines were developed to permit mobile network operators to provide mobile money services. Interoperability has been identified as an objective in these Mobile Guidelines, and the recently launched National Switch may facilitate interoperability. Draft e-money regulations developed by the Reserve Bank of Malawi (the country’s Maya Declaration signatory) are expected to be officially recognized by the Ministry of Finance in 2015; these regulations are anticipated to replace the Mobile Guidelines. As noted in the 2015 FDIP Report, a Payment Systems Bill was finalized in February 2015 and expected to be enacted in December 2015. This bill is expected to help provide greater clarity regarding oversight arrangements for payment services.
• Malawi received a score of “1” for each of the adoption indicators, which placed it among the three lowest-scoring countries for the adoption dimension of the 2015 Scorecard. Financial infrastructure in Malawi is very limited, which constrains adoption of formal financial services. For example, the 2014 International Monetary Fund Financial Access Survey found that there were only about 3 commercial bank branches per 1,000 km2 and per 100,000 adults in Malawi.
• Moving forward, the new regulations described above may even the playing field between banks and non-banks, both in terms of e-money and agent banking, and will permit tiered KYC for e-money service providers. Increasing competition among providers could enhance the diversity of available financial services offerings, which may in turn drive adoption.

Editor’s Note: This post is part of a series on the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, which were launched at a Brookings public event in August. Previous posts have highlighted five key findings from the 2015 FDIP Report, explored financial inclusion developments in India, and examined the rankings for selected FDIP countries in Southeast and Central Asia, the Middle East, and Africa.

The 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard were launched in August of this year and generally reflect data current through May 2015. Since the end of the data collection period for the report, countries have continued to push forward to greater financial inclusion, and international organizations have continued to assert the importance of financial inclusion as a mechanism for promoting individual well-being and macroeconomic development. Financial inclusion is a key component of the United Nations’ Sustainable Development Goals, signaling international commitment to advancing access to and use of quality financial products among the underserved.

We discussed one recent groundbreaking financial inclusion development in a previous post. To learn more about the approval of payments banks in India, read “Inclusion in India: Unpacking the 2015 FDIP Report and Scorecard.”

Below are four other key developments among our 21-country sample since the end of the data collection period for the 2015 FDIP Report and Scorecard. The list is in no way intended to be exhaustive, but rather to provide a snapshot illustrating how rapidly the financial inclusion landscape is evolving globally.   

1) The Philippines launched a national financial inclusion strategy.

In July 2015, the Philippines launched a national financial inclusion strategy (NFIS) and committed to drafting an Action Plan on Financial Inclusion. The Philippines’ NFIS identifies four areas central to promoting financial inclusion: “policy and regulation, financial education and consumer protection, advocacy programs, and data and measurement.”

 As discussed in the 2015 FDIP Report, national financial inclusion strategies often serve as a platform for identifying key priorities, clarifying the roles of key stakeholders, and setting measurable targets. These strategies can foster accountability and incentivize implementation of stated initiatives. While correlation does not necessarily equal causation, it is nonetheless interesting to note that, according to the World Bank, “[o]n average, there is a 10% increase in the percentage of adults with an account at a formal financial institution for countries  that launched an NFIS after 2007, whereas the increase is only 5% for those countries that have not launched an NFIS.”

2) Peru adopted a national financial inclusion strategy.

With support from the World Bank, Peru’s Multisectoral Financial Inclusion Commission established an NFIS that was adopted in July 2015 through a Supreme Decree issued by President Ollanta Humala Tasso. The strategy contains a goal to increase financial inclusion to 50 percent of adults by 2018. This is quite an ambitious target: As of 2014, the World Bank Global Financial Inclusion (Global Findex) database found that only 29 percent of adults in Peru had an account with a formal financial services provider. The NFIS also commits the country to facilitating access to a transaction account among at least 75 percent of adults by 2021.

Peru’s NFIS emphasizes the promotion of electronic payment systems, including electronic money, as well as improvements pertaining to consumer protection and education. Advancing access to both digital and traditional financial services should boost Peru’s adoption levels over time. As noted in the 2015 FDIP Report, while Peru’s national-level commitment to financial inclusion and regulatory environment for financial services are strong, adoption levels remain low (Peru ranked 15^th on the adoption dimension of the 2015 Scorecard, the lowest ranking among the Latin American countries in our sample).

3) Colombia updated its quantifiable targets and released a financial inclusion survey.

The 2015 Maya Declaration Progress Report, published in late August 2015, highlights a number of quantifiable financial inclusion targets set by the Ministerio de Hacienda y Crédito Público de Colombia (Colombia’s primary Maya Declaration signatory) relating to the percentage of adults with financial products and savings accounts. For example, the target for the percentage of adults with a financial product is now 76 percent by 2016, up from a target of 73.7 percent by 2015. The goal for the percentage of adults with an active savings account in 2016 is now 56.6 percent, up from a target of 54.2 percent by 2015. To learn more about concrete financial inclusion targets among other FDIP countries, read the 2015 Maya Declaration Progress Report.

In July, Banca de las Oportunidades, a key financial inclusion stakeholder in Colombia, presented the results of the country’s first demand-side survey specifically related to financial inclusion. As noted by the Economist Intelligence Unit, previous national-level surveys conducted by entities such as the Superintendencia Financiera and Asobancaria have identified supply- and demand-side indicators pertaining to various financial services. As discussed in the 2015 FDIP Report, national-level surveys that focus on access to and usage of financial services can help identify areas of greatest need and enable countries to better leverage their resources to promote adoption of quality financial services among marginalized populations.

4) Nigeria’s “super agent” network enables greater access to digital financial services.

In September 2015, telecommunications company Globacom launched a “super agent” network, Glo Xchange, which can access the mobile money services of any partner mobile money operator. The network has been launched in partnership with four banks. Globacom was given approval in 2014 to develop this network; since then, the company has been recruiting and training its agents. About 1,000 agents will initially be part of this system, with a goal to recruit 10,000 agents by September 2016. Expanding access points to financial services by building agent networks is hoped to boost adoption of digital financial services.

Despite having multiple mobile money operators (19 as of October 2015, according to the GSMA’s Mobile Money Deployment Tracker), Nigeria’s mobile money adoption levels have not reached the degree of success of some other countries in Africa: The Global Findex noted that less than 3 percent of adults in Nigeria had mobile money accounts in 2014, compared with over 30 percent in Tanzania and about 60 percent in Kenya. Nigeria’s primarily bank-led approach to financial services, which excludes mobile network operators from being licensed as mobile money operators, is one factor that may have constrained adoption of mobile money services to date. You can read more about Nigeria’s regulatory environment and financial services landscape in the 2015 FDIP Report.

We welcome your feedback regarding recent financial inclusion developments. Please send any links, questions, or comments to FDIPComments@brookings.edu.

Editor’s Note: This post is part of a series on the 2015 Brookings Financial and Digital Inclusion Project (FDIP) Report and Scorecard, which were launched at a Brookings public event in August. Previous posts have highlighted regional findings from Southeast and Central Asia, the Middle East, and Africa, as well as selected financial inclusion milestones from FDIP countries. This post focuses on key financial inclusion achievements and challenges regarding the five Latin American FDIP countries: Brazil, Chile, Colombia, Mexico, and Peru.

Financial inclusion growth and opportunities in Latin America

With its well-developed banking infrastructure and growing mobile ecosystem, Latin America presents a unique set of opportunities and obstacles with respect to promoting greater financial inclusion. From 2011 to 2014, there was a 12 percentage point increase in the number of adults in Latin America and the Caribbean with formal financial accounts, according to the World Bank’s Global Financial Inclusion (Global Findex) database. As noted in the 2015 GSMA report “Mobile financial services in Latin America & the Caribbean,” in 2014 Latin America and the Caribbean saw the fastest growth of any region in terms of new registered mobile money accounts.

Moreover, these accounts are often used for more advanced transactions that go beyond simple transfers: As stated in a 2015 post published by the GSMA, “ecosystem transactions (transactions that involve third parties, e.g. bill payment, merchant payment or bulk payment) already make up 27% of transaction volumes in Latin America & the Caribbean.” In contrast, only 6 percent of transaction volumes over the same period were considered ecosystem transactions in East Africa, where mobile money has been most widely adopted and used.

Moving forward, facilitating greater adoption of a suite of digital financial services (e.g., savings) will be a vital component of promoting sustainable financial inclusion in the region. Recent regulatory changes in several Latin American countries designed to promote a greater diversity of service providers should propel financial inclusion growth, although a need for regulatory clarity persists in some places. Financial inclusion strengths and challenges germane to our five Latin American FDIP countries are explored below.

Brazil: Branchless banking leadership combined with dynamic mobile market

Brazil achieved the highest ranking of any Latin American country on the Brookings 2015 FDIP Scorecard, ranking 3^rd overall with a score of 78 percent. Brazil’s economy is the largest in Latin America, with a GDP (in current US dollars) of about $2.3 trillion as of 2014; for comparison, Mexico, the Latin American country with the second largest economy, had a GDP of about $1.3 trillion within that same period.

Brazil received strong country commitment and mobile capacity scores (89 and 83 percent, respectively) in the 2015 FDIP Scorecard and earned the highest regulatory environment score among the Latin American FDIP countries, which also included Chile, Colombia, Mexico, and Peru. As noted in the 2015 FDIP Report, Brazil launched a National Partnership for Financial Inclusion in November 2011, which has supported the development of a number of enabling financial inclusion initiatives. In 2013, Law 12865 and associated regulations permitted non-banks to issue e-money as payments institutions. Brazil boasted the largest mobile market in Latin America as of 2014, with a unique subscribership rate of about 57 percent in 2015 (a lower unique subscribership rate than Chile’s by about 7 percentage points, but otherwise higher than that of any of the other Latin American FDIP countries).

Brazil received 4^th place on the 2015 FDIP Scorecard for adoption of selected traditional and digital financial services. As with many other countries in Latin America, branchless banking (i.e., access to formal financial services beyond a traditional brick-and-mortar bank) through “agents” is popular in Brazil — as of 2014, Brazilian banks’ agent networks had a presence in all of the country’s approximately 6,000 municipalities, contributing to formal account growth. Chile was the only Latin American country that received a higher ranking for the adoption dimension, placing 2^nd. In terms of account usage, government-to-person payments comprise a significant source of activity for formal accounts: The 2014 Global Findex report noted that among recipients of government payments in Brazil, 88 percent received their transfers directly into an account.

Yet according to the Global Findex, about 32 percent of Brazilian adults age 15 and older still do not have accounts with a formal financial institution or mobile money provider. As with the other Latin American countries in the FDIP sample, mobile money adoption in Brazil has remained low: Brazil received the lowest score (one out of three possible points) for all six mobile money indicators included in the 2015 FDIP Scorecard. However, given that as of 2014 Brazil had the fifth-largest global smartphone market in the world in terms of subscribers, a combination of growing smartphone penetration and an increasingly enabling regulatory environment should drive greater adoption of digital financial services in the future.

Chile: Opportunities for enhanced e-money regulatory clarity

Chile tied with Colombia and Turkey for 6^th place on the overall 2015 FDIP Scorecard. Chile’s financial inclusion environment is characterized by a firm national commitment to financial inclusion (earning a country commitment score of 89 percent) but a less developed mobile money environment than the other Latin American FDIP countries. While Chile’s unique mobile subscribership rate and 3G network coverage rate by population are higher than and on par with other countries in the region, respectively, Chile’s mobile money offerings are limited. The lack of a robust mobile money market contributed to Chile’s mobile capacity score of 72 percent, the lowest score among the FDIP Latin American countries.

Chile’s regulatory environment score (67 percent) was also the lowest of the Latin American FDIP countries, primarily due to a lack of regulatory clarity surrounding digital financial services. Developing or clarifying regulations pertaining to electronic money in particular could potentially drive more engagement with the sector and advance the diversity of mobile money providers and offerings. Further, supporting the interoperability of digital and traditional financial services could enhance the utility of these products for customers.

Given that 37 percent of adults in Chile did not have an account with a formal financial provider as of 2014, there is also room for growth in terms of expanding financial inclusion. However, it should be noted that Chile earned the highest adoption ranking of any Latin American country featured in the 2015 FDIP Scorecard. While Chile’s adoption levels with respect to mobile money services were limited, adoption rates of other formal financial services were among the highest of the FDIP countries. Chile received three out of three possible points for all but one indicator (savings at a formal financial institution) related to traditional financial services. Chile’s performance on the adoption dimension of the scorecard contributed to its 6^th place ranking overall.

While Chile’s mobile money adoption rates are low, use of other digital financial services is increasingly popular. For example, as noted in the “2015 Maya Declaration Progress Report,” since 2012 the number of CuentaRUT accounts (accounts that feature debit cards associated with a savings account provided by Chile’s BancoEstado) has increased by about 47 percent. As of 2014, there were over 7 million active CuentaRUT cards in Chile.

Colombia: Regulatory advancements coupled with sustained country commitment

As noted above, Colombia tied with Chile for 6^th place on the overall 2015 FDIP Scorecard. Colombia has demonstrated strong commitment to financial inclusion, including through involvement in multinational organizations such as the Alliance for Financial Inclusion (AFI). An example of Colombia’s national-level financial inclusion commitment is the 2006 establishment of Banca de las Oportunidades, an entity charged with fostering regulatory reforms conducive to financial inclusion. Another key player in the financial inclusion space is the Intersectoral Economic and Financial Education Committee, created in February 2014 under Decree 457.

In terms of the country’s regulatory environment, Law 1735 of 2014 permitted new institutions, called Sociedades Especializadas en Depósitos y Pagos Electrónicos, to offer mobile financial services. As part of the law, proportionate “know-your-customer” (KYC) requirements were also instituted for under-resourced customers in order to facilitate greater access to financial services among low-risk populations. In July 2015, Decree 1491 implemented Colombia’s financial inclusion law and highlighted the regulatory regime for the mobile money market. Colombia’s regulatory environment earned a score of 89 percent, ranking it 2^nd among the Latin American FDIP countries in this dimension.

On the supply side, banking correspondents (also known as agents) have been utilized to extend financial access to underserved populations.  As of 2015, all of Colombia’s 1,102 municipalities had at least one financial access point, defined as bank branches, banking correspondents, and ATMs. Another innovative approach to branchless banking in Colombia is bank Davivienda’s initiative to use DaviPlata mobile wallet accounts to distribute government transfers to more than 900,000 recipients of welfare program “Familias en Accion.”

With respect to demand side figures, Colombia tied with Mexico for 7^th place on the adoption dimension. As of 2014, about 38 percent of adults in Colombia had an account with a formal financial institution, and about 2 percent of adults were mobile money account holders. In terms of advancing future mobile money use, Colombia received the highest score of the Latin American countries on the mobile capacity dimension; thus, Colombia is well-positioned to advance access to and use of mobile money services in the future. Promoting usage of appropriate, quality financial services is critical, as dormancy rates have been identified as an obstacle to financial inclusion; about half of accounts in Colombia (including savings accounts, simplified accounts, and electronic deposits) were identified as dormant in 2014.

Mexico: Recent reforms may enhance competition and drive digital takeup

Mexico ranked 9^th on the overall 2015 FDIP Scorecard, with adoption of traditional and digital financial services as its highest-ranked dimension. Among the Latin American FDIP countries, Mexico features the greatest parity in terms of formal financial account ownership rates among men and women, at about 39 percent each.  In terms of national-level commitment to financial inclusion, Mexico tied with Peru for the highest ranking among the Latin American countries. AFI’s Maya Declaration was signed at the 2011 Global Policy Forum held in Riviera Maya, Mexico, signaling Mexico’s public commitment to financial inclusion.

With respect to mobile capacity, as of the first quarter of 2015 Mexico’s unique subscribership rates were the lowest of the Latin American countries. Mexico tied with Chile and Brazil for 3G network coverage by population. In terms of mobile money, Mexico’s market is still developing; several providers were available as of May 2015, but the extent of offerings was somewhat limited. As noted in the GSMA’s “Mobile Economy: Latin America 2014” report, new telecommunications reforms recently passed in Mexico are expected to affect the mobile market and potentially increase competition among the telecommunications sector. This increased competition could in turn drive the development of a greater array of innovative, affordable mobile money products.

Regarding Mexico’s regulatory environment, the country has been lauded for its risk-based KYC requirements that enable underserved individuals to access low-value accounts without fulfilling the full array of traditional identification processes, which can sometimes be burdensome for under-resourced groups. Under Mexico’s four-tiered KYC system (introduced in 2011), “level one” (very low-risk) accounts feature monthly deposit limits and a maximum balance limit of about 400 dollars; accounts can be opened at a bank branch, banking agent, over the internet, or by telephone. Higher-tier accounts have more stringent KYC requirements. A 2015 AFI article noted that Mexico's banking and securities regulator, the Comisión Nacional Bancaria y de Valores, indicated about 7.5 million new accounts were opened between August 2011 and September 2012, including over 4 million “level one” accounts.

Mexico tied with Colombia for 7^th place on the adoption dimension of the 2015 FDIP Scorecard. About 39 percent of adults in Mexico held accounts with a formal financial institution as of 2014, while about 3 percent of adults held mobile money accounts. As with other countries in Latin America, debit card and credit card use were much higher than mobile money use as of 2014, although usage of both kinds of cards was lower in Mexico than in several other Latin American FDIP countries such as Brazil and Chile. Initiatives such as the Saldazo debit card, which enables customers to use a debit card associated with a savings account and does not require a minimum balance, have helped drive adoption of digital financial services in Mexico.

Peru: Enabling regulatory environment, but constrained adoption of financial services

Peru presents perhaps one of the most interesting paradoxes among the FDIP countries. While Peru’s regulatory environment has been consistently recognized as among the best in the world for enabling financial inclusion, adoption of formal financial services remains quite low. Peru received 17^th place overall on the 2015 FDIP Scorecard, which can primarily be attributed to its low adoption score: Peru received a 15^th place ranking on the adoption dimension, the lowest score among the Latin American FDIP countries. However, we anticipate that recent regulatory changes in Peru, coupled with increasing smartphone penetration rates (Peru’s 2014 adoption rates were about 12 percentage points below the Latin American average), will facilitate adoption of digital financial services and drive greater financial inclusion in the future.

With respect to the supply side aspect of financial inclusion, as of 2014 about 92 percent of Peru’s population lived in a district with access to financial services, according to the Superintendencia de Banca, Seguros y AFP (SBS) del Peru. Nonetheless, demand side figures lag behind: The Global Findex found that only about 29 percent of adults had an account with a formal financial provider as of 2014. Peru received a “1” for two-thirds of the non-mobile money indicators on the adoption dimension of the 2015 FDIP Scorecard, and mobile money adoption was negligible. Moreover, as of 2014 there was a 14 percentage point disparity in financial account ownership between men and women, the highest financial inclusion “gender gap” among the Latin American FDIP countries.

However, given Peru’s strong national commitment to financial inclusion (reflected in Peru’s country commitment score of 94 percent) and legislative initiatives designed to promote an enabling regulatory environment, we fully anticipate that financial inclusion growth will accelerate in the future. For example, Peru recently finalized its national financial inclusion strategy, as discussed in our earlier post. Moreover, Peru has adopted laws and regulations that permit a greater diversity of players to enter the financial services market. Law 2998 of January 2013 allowed both banks and non-banks to issue e-money, and October 2013 regulations issued by the SBS enabled e-money issuers to follow a simplified account opening process. These initiatives should facilitate greater access to and usage of formal financial accounts in the future.

In terms of electronic payments specifically, diversifying the mobile money market and increasing unique subscribership could help facilitate greater adoption of mobile money services. Demand side factors, such as ensuring that services are a good fit for customers, are also critical — as evidenced by the fact that Mexico, which had comparable smartphone adoption rates to Peru and lower unique subscribership rates as of 2014, features significantly higher rates of mobile money adoption across all demographics than Peru. Peru is making a concerted effort to develop innovative electronic platforms — for example, the Peruvian Association of Banks (ASBANC) is working on the creation of an electronic money platform accessible by both financial institutions and telecommunications companies. Implementation of this interoperable platform is expected to promote further adoption of digital financial services.

How can countries support innovative approaches to facilitating access to and usage of formal financial services among low-income and other marginalized groups while mitigating the risk of misuse within the financial sector?

As part of the Brookings Financial and Digital Inclusion Project (FDIP), the FDIP team recently hosted a roundtable to examine this central question. The objective of the roundtable was to identify and discuss salient challenges and opportunities for financial services providers, government entities, and consumers with respect to balancing anti-money laundering/countering the financing of terrorism (AML/CFT) compliance — a critical component of financial integrity and stability — with inclusive financial access and growth.

We explore several key questions and themes that emerged from the roundtable below.

Do areas of synergy exist between financial inclusion and AML/CFT efforts?

• AML/CFT requirements and financial inclusion have sometimes been perceived as being in tension with one another — for example, stringent “know your customer” (KYC) requirements associated with AML processes can restrict formal financial access among marginalized groups who are unable to fulfill the KYC documentation requirements. However, the objectives of AML/CFT (ensuring stability and integrity within the financial sector) and financial inclusion (providing access to and promoting usage of a broad range of appropriate, affordable financial services) can be mutually reinforcing.
• By moving individuals from the shadow economy into the formal financial system, greater opportunities emerge for introducing underserved populations to a broad suite of formal financial services, and ensuring those services are accompanied by suitable consumer protections. Thus, financial inclusion, financial integrity, and financial stability can act as complementary objectives.
• The 2012 Declaration of the Ministers and Representatives of the Financial Action Task Force (FATF) recognized financial exclusion as a money laundering and terrorist financing risk in approving FATF’s 2012-2020 Mandate. This mandate affirmed FATF’s 2011 guidance on AML and terrorist financing measures and financial inclusion, which stated that “[i]t is acknowledged at the same time that financial exclusion works against effective AML/CFT policies. Indeed the prevalence of a large informal, unregulated and undocumented economy negatively affects AML/CFT efforts and the integrity of the financial system. Informal, unregulated and undocumented financial services and a pervasive cash economy can generate significant money laundering and terrorist financing risks and negatively affect AML/CFT preventive, detection and investigation/prosecution efforts.”

What are key challenges and concerns with respect to balancing financial inclusion with financial integrity?

• Awareness of financial inclusion issues is not universal among individuals who work in the regulatory, compliance, and law enforcement spheres of the financial ecosystem. Engagement among these groups is critical for promoting knowledge-sharing with respect to financial integrity and inclusion.
• Although FATF and other standard-setting bodies (SSBs) have increasingly adopted recommendations favoring proportionate, risk-based approaches to AML/CFT (as evidenced by the 2013 FATF Guidance on Financial Inclusion), regulators often pursue more conservative approaches than SSB guidelines recommend. These conservative approaches may constrain access to and usage of formal financial services among marginalized groups.
• Combating the potential use of low-value transfers within countries and across borders for terrorist financing purposes is a salient concern for the law enforcement community when considering proportionate AML/CFT approaches.

How does the digital component fit into these issues?

• As its name suggests, FDIP is interested in exploring the evolving role of digital technology within the financial services ecosystem. As discussed in the 2015 FDIP Report, digitization of financial services can be more cost-effective for public and private sector providers to manage and safer for consumers than carrying or storing cash.
• For example, a 2013 report found that the Mexican government saved about $1.3 billion annually by centralizing and digitizing payments for wages, pensions, and social transfers. A 2014 report by the World Bank Development Research Group, the Better Than Cash Alliance, and the Bill & Melinda Gates Foundation highlighted several countries, including South Africa, where disbursing social transfers electronically cost significantly less than manual cash disbursement.
• Digital financial services can also promote women’s economic empowerment, as these services are often more private and convenient to access than traveling to a “brick and mortar” financial service provider. Given that as of 2014 there was a 9 percentage point gap between the number of men and women with accounts in developing economies (with women disproportionately excluded from account ownership), facilitating access to formal financial services among the 42 percent of women globally who do not have an account will be a major factor in advancing financial inclusion.
• With respect to financial integrity in particular, digital identification mechanisms such as biometric IDs can help lower access barriers to financial services while ensuring that providers have the information they need to promote security and stability in the financial ecosystem. In its June 2011 guidance, FATF recognized the use of non-documentary methods of identification verification — for example, a signed declaration from a community leader coupled with a photo taken by a mobile phone — for advancing access to formal financial services among underserved groups.
• The Aadhaar initiative in India, which the FDIP team referenced in a previous post, is currently the largest biometric identification program in the world. The unique 12-digit ID enables individuals to meet KYC requirements and has been used as a financial account among those who do not have an account with a financial institution. Another innovative digital initiative is underway in Tanzania, where the government is working in concert with mobile carrier Tigo and UNICEF to provide birth certificates via mobile phones.

What are critical questions and areas of opportunity for fostering financial inclusion and integrity moving forward?

• How can regulators and providers ensure sufficient privacy protections are in place for customers when advancing financial inclusion efforts, particularly through digital channels?
• Through what mechanisms can government entities and non-government financial services providers best mitigate the risks of centralizing sensitive customer data?
• Could an industry utility that facilitates a common solution to AML systems serve as a feasible solution for harmonizing standards?
• What is the proper role of private solutions in the AML/CFT and financial inclusion spaces?
• Could identification verification applications be developed using blockchain technology?
• In what ways can social networks be leveraged with respect to digital identity initiatives and financial inclusion?

While significant progress has been made in terms of facilitating greater access to and use of financial services among underserved populations, barriers to financial inclusion remain. The global dialogue surrounding the financial inclusion gender gap (referring to the disproportionate exclusion of women from access to and usage of formal financial services) has intensified as key stakeholders—including financial service providers, regulatory bodies, policymakers, civil society entities, and consumers—explore how best to engage prospective women customers in ways that meet the needs of both consumers and providers situated within different market contexts.

As part of the consultation process for the second annual Brookings Financial and Digital Inclusion Project (FDIP) report and scorecard, to be published in late summer 2016, the FDIP team held a roundtable in March 2016 to facilitate dialogue and knowledge-sharing regarding the issue of gender disparities in access to and usage of formal financial services. The first FDIP report and scorecard, published in August 2015, are available here.

The roundtable provided an opportunity for participants to discuss the legal, policy, and cultural drivers of the gender gap, highlight examples of enabling approaches in countries that have made strides in reducing the gender gap, and identify action steps for governments, financial service providers, and consumers in terms of promoting greater equity within the financial landscape. Before diving into the key themes and action items explored at the roundtable, below is some background on the nature and implications of the gender gap.

What is the financial inclusion gender gap, and why does it matter?

From 2011 to 2014, the percentage of women in developing economies with formal financial accounts increased by 13 percentage points, according to the World Bank’s Global Financial Inclusion (Global Findex) database. In relative terms, these gains were comparable to those among men in developing economies during the same time period—but in absolute terms, there remains considerable room for growth, as half of women in developing economies still did not have formal financial accounts as of 2014.

While there is good reason to celebrate the tremendous gains made across the financial inclusion landscape in recent years, significant opportunity for expanding access to and usage of financial services among women remains. Globally, the financial inclusion gender gap remained at seven percentage points between 2011 and 2014, and in developing economies the gap was even higher, at nine percentage points.

The FDIP focus countries reflect this global trend. Of the 21 FDIP focus countries examined within the 2015 FDIP Report and Scorecard, only four (Indonesia, the Philippines, Mexico, and South Africa) exhibited either gender parity or a greater percentage of women than men who reported using mobile money within the previous 12 months or holding an account at a bank or another type of financial institution.

The gender gap is of course not the only global disparity in terms of access to and usage of financial services—for example, rural and low-income populations are often underserved by formal financial service providers compared with their more urban and wealthier counterparts. (You can learn more about financial inclusion among these underserved groups across different economic, political, and geographic contexts in the 2015 FDIP Report and Scorecard.) Indeed, in 2014 the gap between account ownership among the poorest 40 percent of households in developing economies and the richest 60 percent of households in developing economies was about five percentage points higher than the gender gap in developing economies.

However, as noted by the Global Findex, the global financial inclusion gender gap remained essentially static from 2011 to 2014, while the financial inclusion income gap was reduced by several percentage points. Additionally, the increase in ownership of formal accounts among the poorest 40 percent of households in developing economies was slightly higher proportionately than the increase in ownership of formal accounts among women in developing economies over the same period. In short, the gender gap is particularly noteworthy for its persistence over time and for the broad scope of the underserved population it represents.

Investing in women and girls should be a shared priority across public and private sector stakeholders given the economic and civic implications of female participation in the formal financial ecosystem. From a micro perspective, having convenient access to a suite of quality financial services enables women to invest in themselves, in their families, and in their communities by saving for the future, paying for educational and health expenses, putting money toward small businesses, and engaging in other productive financial activities. Participants at the roundtable noted that a less tangible—but no less valuable—outcome of facilitating access to and usage of formal financial services among women is the sense of empowerment many women feel when they are equipped with greater control of their finances.

For businesses, reaching an untapped segment of the market with products and services that individual customers find useful would augment providers’ revenue. From a macroeconomic perspective, women’s economic empowerment has increasingly been regarded as “contributing to sustained inclusive and equitable economic growth, and sustainable development,” as noted in a recent study by the Global Banking Alliance for Women in partnership with Data2X and the Multilateral Investment Fund of the Inter-American Development Bank.

If women’s participation in the financial ecosystem is so advantageous, why hasn’t the gender gap improved?

A number of legal, policy, and cultural restrictions have constrained access to and usage of financial services among women. A few examples of these constraints are described below; additional information on access and usage barriers is available in the 2015 FDIP Report.

• Legal, regulatory, and policy barriers: The World Bank Group’s Women, Business, and the Law project has examined data regarding legal and regulatory restrictions on entrepreneurship and employment among women since 2009. The project’s 2016 report found that about 90 percent of the 173 economies covered in the study had at least one law impeding women’s economic opportunities. For example, in some countries women are not permitted to open a bank account or are required to provide specific permission or additional documentation that is burdensome (or even impossible) to obtain. Restrictions on whether property is titled in a women’s name can also impede access to finance since titled land is often a preferred form of collateral among banks. Moreover, women are less likely than men to have the identification documents needed to open formal financial accounts. Among adults without an account at a financial institution as of 2014, 17 percent of women stated that a lack of necessary documentation was a barrier to their use of an account. Promoting a unique, universal identification system can facilitate access to formal labor markets and formal financial services.
• Cultural barriers: One example of a cultural constraint on usage of financial services among women is that many women may be more comfortable utilizing formal financial services when they can interact with a female point of contact, which is often not a readily available option.  
• Technological barriers: Digital financial services such as mobile money can help mitigate financial access barriers, in part by enabling women to more easily open accounts and to complete transactions through their phones without visiting a “brick and mortar” store. However, the gender gap in mobile phone ownership and usage must be addressed to fully take advantage of the benefits of digital financial services. The GSMA’s 2015 report noted that the most frequently cited barrier to mobile phone ownership and usage was cost, and cultural dynamics in which men prohibit women from owning or using a phone also contribute to the gap. Incongruous policies in some markets such as more stringent registration processes for SIMs and mobile money accounts than for bank accounts can also inhibit adoption of digital financial services.

What are examples of initiatives to facilitate greater financial inclusion among women?

Participants highlighted several examples of initiatives that were designed to promote women’s financial inclusion. For example, Diamond Bank in Nigeria and Women’s World Banking developed a savings product called a BETA account that could be opened over the phone with no minimum balance and no fees. The product was designed to be affordable and convenient for individuals engaging in frequent deposits, with agents visiting customers’ businesses to facilitate transactions. Other add-on products are being built around this basic product to provide more opportunities for individuals to use the financial services most useful to them. While the product was developed for women, it is available to both men and women.

Also in Nigeria, MasterCard and UN Women have partnered on an initiative that aims to educate women on the benefits of a national identification program and enroll half a million Nigerian women in this program so that they receive identification cards that include electronic payments functionality.

What can be done to advance gender equity within the financial ecosystem?

One of the central questions discussed during the roundtable was how to reconcile the sometimes diverging mandates of businesses, public sector actors, and the development community in order to foster a sustainable financial and economic ecosystem. In short, businesses must generate profits to be sustainable, while development community and public sector entities often focus on longer-term micro- and macro-economic growth and development. The challenge with these potentially competing time horizons is that initiatives involving a complex network of participants (such as those to cultivate women’s financial participation) may take time to scale. Moreover, some of the major factors contributing to the financial inclusion gender gap (such as lower financial literacy levels among women) will require a long-term approach to fully address.

The good news is that serving women customers ultimately meets the complementary objectives of benefiting providers by expanding their customer base and benefiting consumers by enabling them to use financial services to improve their lives and invest in their communities. Thus, leveraging data to present the business case to providers (see point 1 below) and promoting dialogue across public and private sector representatives (see point 2 below) will enable different players in the financial ecosystem to identify the best approaches to closing the gender gap in ways that are sustainable for consumers and providers.

While the list below is certainly not exhaustive, it highlights several pathways for promoting women’s financial inclusion.

1. Generate data to better serve customers and attract providers: While we delineate the gender gap in terms of men and women, women (like all customer segments) are not monolithic. Thus, the intent of demand- and supply-side data collection should be to inform the development and delivery of a suite of products and services that target customer segments and to make a business case for offering those products and services. Many financial institutions have historically refrained from collecting data disaggregated by sex because doing so was perceived as discriminatory and/or ineffective given the issue of duplicability in reporting. Government leadership on collecting sex-disaggregated data can help ameliorate this issue. An in-depth look at the process of collecting and analyzing sex-disaggregated data is provided in the recent case study on Chile published by the Global Banking Alliance for Women, Data2X, the Economic Commission for Latin America and the Caribbean, and the Multilateral Investment Fund of the Inter-American Development Bank.
2. Promote inward and outward-facing stakeholder collaboration: Financial service providers and non-government entities active within the financial services landscape should find champions of women’s economic empowerment within their organizations to help build strategies for reaching women customers with appropriate products and services. Representatives from both the public and private sectors should work together to facilitate dialogue and collaboration across relevant stakeholders such as telecommunications providers, formal and informal financial institutions, public sector representatives, and consumers. This objective should be reflected in countries’ national financial inclusion strategies where possible.
3. Engage in client-centric design: Providers should deploy relevant data to evaluate customers’ needs and reflect those needs in product design, provision, and promotion. By thinking about the customer experience of access and usage holistically, providers will have the potential to sustainably amplify adoption of financial services.
4. Invest in financial education and financial capability among women and girls: Many women feel that they do not have enough money to hold an account with a formal financial institution, as evidenced by the 2014 Global Findex results noting that 57 percent of women without an account at a financial institution cited having insufficient funds as a barrier to account ownership. Financial inclusion stakeholders should aim to familiarize prospective female customers with appropriate, affordable financial services and promote sound financial behaviors that will help spur greater financial inclusion.
5. Adapt anti-money laundering/countering the financing of terrorism requirements to reflect perceived risks: Enabling risk-based “know your customer” (KYC) processes such as the tiered KYC approach applied in the Diamond Bank example above or in other countries such as Mexico reduces access barriers to formal financial accounts. For more information on KYC processes among different countries, please see the 2015 FDIP Report and Scorecard.
6. Formalize informal financial entities as appropriate: According to the 2014 Global Findex, about 160 million unbanked adults in developing economies saved through informal savings clubs or a non-family member. Vetting and formalizing certain informal providers to ensure adequate consumer protection while preserving services that are familiar and accessible to customers could advance women’s financial inclusion.
7. Leverage digital financial tools to facilitate greater access to and usage of formal financial services:
• Digital platforms can help reduce disparities in access to identification documents. For example, an initiative in Tanzania allows health workers to deliver birth certificates using a mobile phone. Birth certificates facilitate access to healthcare, education, and other important government services, including government-to-person payments.
• Digital financial services such as mobile money can provide greater privacy, convenience, and security to customers who have been disproportionately excluded from the formal financial system. For more information on developing enabling infrastructure and policy environments to support mobile money access and usage, please refer to the 2015 FDIP Report.
• Using “big data” generated by and about consumers on digital platforms helps providers better evaluate the creditworthiness of individuals who may previously have been excluded from the formal financial system due to a lack of or minimal credit history. Since women often lack credit history, these innovative measures to assess credit risk and collateral issues can contribute to women’s economic empowerment by facilitating access to credit. As with all financial services, these “big data, small credit” propositions should be coupled with adequate consumer protection and privacy mechanisms.

Editor’s Note: Brookings will hold an event and live webcast on Thursday, August 4 to discuss the findings of the forthcoming 2016 Financial and Digital Inclusion Project (FDIP) Report. Follow the conversation on Twitter using #FinancialInclusion.

The 2016 Brookings Financial and Digital Inclusion Project (FDIP) Report, the second annual report produced by the FDIP team, assesses national commitment to and progress toward financial inclusion through traditional and digital mechanisms in 26 countries.  

As in the 2015 report, the FDIP team analyzed four key dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of formal financial services. The 2016 report amplifies the geographic diversity of the FDIP country sample by adding five new countries and features descriptions of the financial inclusion landscape in all 26 countries.

The 2016 FDIP Report finds that significant progress has been made toward advancing financial inclusion in many countries, and robust commitment to strengthening the digital financial services ecosystem is evident across diverse geographic, political, and economic contexts.

On August 4, the Center for Technology Innovation will discuss the key findings of the 2016 FDIP Report and host a conversation with public sector representatives about key trends, opportunities, and obstacles regarding financial inclusion in their respective countries and around the world.

Below we provide some context regarding the role of financial inclusion within the global drive for sustainable development.

What is financial inclusion?

The common themes that emerge from many definitions of financial inclusion are the ability to access formal financial services and to utilize those services in a way that promotes financial health.

For example, the Center for Financial Inclusion at Accion defines financial inclusion as a “state in which everyone who can use them has access to a range of quality financial services at affordable prices, with convenience, dignity, and consumer protections, delivered by a range of providers in a stable, competitive market to financially capable clients.”

In short, financial inclusion in itself is not the end goal, but instead serves as a key mechanism for advancing the well-being of individuals, families, and communities. At the macroeconomic level, financial inclusion provides opportunities to advance economic growth, reduce income inequality, and combat poverty.

For the purposes of FDIP, we primarily focus on individuals’ access to and usage of affordable, secure, basic financial services and products, such as person-to-person payments and savings accounts. However, we also recognize the important role that more extensive financial services (e.g., microinsurance and microcredit) can play in enabling individuals to plan for the future and absorb financial shocks. Where possible, we highlight examples of a broad suite of financial services within the country profiles of the 2016 report.

To learn more about the 2016 FDIP Report, please register to attend the launch event in-person or watch the live webcast.