An Indian woman talks on her mobile phone at a vegetable market Noah Seelam/Getty Images

The Value of Measuring Financial Inclusion

Most financial policy decisions are based on observed regularities in data, which makes the World Bank’s Global Findex database a goldmine for analysis. Beyond supporting evidence-based policymaking, the report also spurs healthy competition among countries in areas that ultimately improve citizens’ wellbeing.

NEW YORK – In modern economics, the interaction between supply and demand with regard to goods and services is well understood, thanks to the pioneering work of the late Kenneth Arrow and Gérard Debreu. But the links between the domain of goods and services and that of money and finance are so mathematically complex that, despite repeated attempts, our understanding of them remains rudimentary. As a result, most policy decisions in the domain of money and finance are based on observed regularities in the data.

That is why the World Bank’s triennial Global Findex report is so important. Based on a survey of more than 150,000 representative individuals, the report provides a birds-eye view of patterns and regularities in data pertaining to finance and financial inclusion – such as saving behavior, use of mobile money, and preferred modes of sending and receiving remittances – in 140 economies. The insights gleaned from these data provide vitally important help in shaping effective policy.

The latest Global Findex report informs us that 515 million individuals opened a “bank account” at a traditional financial institution or through a mobile money provider between 2014 and 2017. As a result, 69% of adults worldwide now have bank accounts, up from 62% in 2014 and 51% in 2011. This rise in financial inclusion is welcome news, not least because, in the event of a downward income shock, a household’s consumption will fall much less if it is linked to the formal financial sector.

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