World Bank, CEGA Workshop Propels Research Agenda to Promote Broader Financial Inclusion

With 2 billion adults worldwide lacking access to formal financial services, promoting broader financial inclusion has risen to the top of the global development agenda.

Through its Universal Financial Access 2020 initiative, the World Bank Group is focusing on enabling access to a transaction account in 25 countries where 73% of the world’s unbanked live. Access to a transaction account is considered to be the first step toward broader financial conclusion, where individuals can access a variety of financial products tailored to their needs.

To review efforts to achieve broader financial inclusion, nearly 200 scholars, development practitioners, private-sector partners and policy advocates gathered at a day-long workshop in June, convened by the World Bank’s Chief Economist for Equitable Growth, Finance and Institutions, William Maloney, and the Center for Effective Global Action (CEGA).

Developing more precise knowledge of the financial challenges faced by the under-served “is key for how poor people manage their households, how they manage financial shocks and how they invest in productive assets,” said William F. Maloney, the Chief Economist of the Bank Group’s Vice Presidency for Equitable Growth, Finance and Institutions.

“We now want to . . . bring a partnership together of the public sector, the private sector and the research community,” said Paul Gertler, a professor of economics at the University of California, Berkeley and a senior scholar at CEGA, “to see if we can develop a program to generate evidence to answer the types of questions [that] governments need to intervene in this sector effectively.”

Access to financial services seems poised to make dramatic progress, yet steps toward expanded inclusion have been hindered by the high cost of delivering banking services; rural residents’ long travel distances to bank branches; and burdensome regulatory and paperwork requirements for opening an account, said Ceyla Pazarbasioglu, Adviser in the Finance and Markets Global Practice of the Bank Group, in framing the conference priorities.

Participants reviewed the latest evidence from research in the field, identified current knowledge gaps about the financial needs of the under-served and envisioned the actions needed to achieve financial inclusion.

A key theme was the importance of financial literacy – especially among women, rural residents and those who have had little contact with the formal financial system – and best to deliver it, whether it’s outreach though imaginative channels (like embedding financial-literacy themes within the scripts of popular soap operas) and through social-marketing initiatives (like leveraging the influence of people with strong reputational capital in their local communities).

The crucial role that the private sector has was also discussed. Partnerships that unite the efforts of private-sector firms, technology innovators and public-sector regulators are indispensable to achieving financial inclusion.

The continuous innovation in product design to create financial products that fit with people’s financial needs, rather than trying to fit people into existing commercially available products, was another key point.

Over the course of six panels, researchers presented the novel findings grounded in rigorous research with important implications for operational work and pointed to remaining unanswered research questions; World Bank Group operational staff outlined the main priorities for achieving universal financial inclusion and mapped ongoing initiatives toward Universal Financial Access 2020.

Promoting the active use of accounts and deploying innovative technologies to expand financial systems’ reach will be vital in serving those who are unbanked, conference participants agreed.

 “Research is most relevant when it’s anchored in the behavior of people who are coping with everyday financial challenges” Maloney said. Armed with a more precise knowledge of consumers’ behavior, stronger research efforts can help guide practitioners in designing practical solutions that meet the everyday needs of the poor and the excluded.”