Calling All Countries to Get Policies Right
Reaching full financial inclusion by 2020 will require supportive policies in every country around the globe. The Economist Intelligence Unit’s “Global Microscope on Financial Inclusion, 2014”, assesses the policy environment for financial inclusion in 55 countries. The Microscope examines 12 policy dimensions essential for creating an inclusion-friendly regulatory and institutional framework. The rigorous model incorporates input from hundreds of policy makers and participants in the financial sector and a review of existing policies and implementation. The resulting rankings represent the best readily available source for judging the state of financial inclusion policy around the world.
What’s surprising about the 2014 Microscope results is their wide range. Out of a possible 100 points, the top scorer (Peru), received 87 while the lowest (Haiti) earned only 16. If full inclusion requires good policies, it is disappointing to learn that the median score across all countries was a mediocre 46.
Why do some countries score so much better than others? The best-scoring countries, led by Peru, Colombia and the Philippines, boast capable financial sector regulators who have exerted sustained effort over years. They issue, test and revise their rules as the market evolves. Many of the worst scoring countries (notably in the Middle East) have recently suffered political instability. However, in the vast middle group, regulators have worked on some aspects of financial inclusion policy leaving major gaps in others. Most countries have the regulatory basics down – like prudential supervision and regulation of deposit-taking – but fewer have mastered areas important for reaching lower income customers, especially electronic payments, supervising smaller financial service providers, and protecting consumers.
When new Global Findex results come out this month, we will learn more about how good policies contribute to progress toward inclusion. And in the next few years we hope to see advances, especially in the biggest countries covered in the Microscope – China, India, Indonesia, Brazil, Pakistan, Nigeria and Bangladesh. These giants’ policies are better than average, reflecting their capability as large economies and their priorities as high population countries. But not by much. Average score? 51.
Center for Financial Inclusion at Accion