The World Bank’s recent Global Economic Prospects for 2024 project that, by the end of 2024, people in about 25% of developing countries and about 40% of low-income countries will still be poorer than they were in 2019 before the pandemic. Since implementation of the CGAP VII Strategy began in July 2023, we have continued to confirm the challenges that lie before us as a global community. Although the economic hardships associated with the COVID-19 pandemic are receding, these compounding threats from climate change, fragility, and violence are making it harder for poor and vulnerable people to recover from the various shocks and stresses they regularly face.
Despite these enormous challenges, there are also opportunities to collaboratively work toward a greener, more inclusive, and more resilient world. Indeed, this global outlook reaffirms the critical role that financial inclusion can play as a key enabler for development outcomes and its role as a foundational element to improve livelihoods and build resilience in an ever more vulnerable and turbulent world. Inclusive and responsible financial services are a critical pathway to achieving important development outcomes.
But, as we have said before, to unleash that potential, the financial inclusion community will need to go beyond supporting access to and usage of financial services (i.e., the breadth and depth of financial inclusion) to a strong emphasis on enhancing the practical benefits of financial inclusion (i.e., its utility). While the measures of and global focus on access and usage have contributed to the financial inclusion community’s success over the past decade – with, for instance, global account ownership increasing from 51% in 2011 to 76% in 2021 – in and of themselves, they are not sufficient to unleash the full potential of financial services.
A new approach is needed to unleash the full potential of financial inclusion
The days of financial inclusion operating in its own distinct space are a thing of the past. Business as usual will not get us to the development outcomes we seek – we must be bold and ambitious. As the CGAP VII Strategy lays out, this new approach requires that we articulate and demonstrate how financial inclusion contributes to the broader global development agenda, that we bring financial inclusion into new domains where our presence and reputation are not already established, and that we engage with new stakeholders to bring financial inclusion into their agenda as well.
Business as usual will not get us to the development outcomes we seek – we must be bold and ambitious.
For instance, CGAP’s research on the intersection of climate change and financial inclusion has found that while there is an increasingly urgent agenda for research and action on this nexus, most financial service providers do not yet see climate adaptation as a top priority and many in the broader development community do not understand the linkages well either. Bridging this knowledge gap and demonstrating the importance of financial inclusion in new domains like climate change requires robust research and strong advocacy. Of course, as we push into new frontiers we must also simultaneously recognize and act on the fact that there is still much to do to deepen the financial access agenda, and our work there is not done either.
We need evidence of financial inclusion’s role in driving positive development outcomes
New evidence is crucial to ensuring CGAP’s work – and more broadly, that of the financial inclusion sector – brings value to these new domains and agendas. As part of CGAP’s shift to this new approach, we have launched a sector-wide Financial Inclusion 2.0 initiative. This three-year initiative aims to inspire and guide the inclusive finance sector in improving our understanding and measurement of the impact of financial services by leveraging newly available data and innovative research methodologies to enhance our knowledge of the contextual factors that drive impact. Through this initiative, we seek to elevate the sights of all those who contribute to inclusive finance towards the outcomes their work can influence, including financial services providers that provide inclusive finance services, impact and other investors that invest in inclusive finance, governments, and regulatory authorities that have financial inclusion and financial sector strategies, development finance institutions (e.g., European Investment Bank, International Finance Corporation) and multilateral development banks (e.g., the World Bank) that support the sector with funding and advisory services, and sector support and research organizations that guide the sector.
The Financial Inclusion 2.0 initiative is supported by a senior-level Champion Group
The Champion Group, chaired by CGAP’s CEO, aims to help guide this ambitious outcome agenda and includes public and private sector representatives from across the inclusive finance ecosystem. It includes: Smita Aggarwal, Director, Office of the United Nations Secretary General’s Special Advocate for Inclusive Finance for Development (UNSGSA); Renato Dias de Brito Gomes, Deputy Governor, Licensing and Resolution, Central Bank of Brazil; Makhtar Diop, Managing Director, IFC; Catherine Flockhart, Head of ESG, Baillie Gifford; Javier M. Flores, CEO of BBVA Microfinance Foundation; Indermit Gill, Chief Economist of the World Bank and Senior Vice President for Development Economics; Gaurav Gupta, Global Managing Director, Dalberg; Nazmeera Moola, Chief Sustainability Officer, Ninety One; Michael Schlein, President and CEO, Accion; and Shamina Singh, Founder and President, Mastercard Center for Inclusive Growth. Collectively, these individuals will help advise and guide CGAP throughout the duration of the initiative and advocate for the importance of this work throughout the industry.
As a community, we will gain enormously in focusing our work on the outcomes we aim to achieve
By better understanding the evidence of the impact of financial services and the drivers that influence that impact, we can scale successes and learn from our failures – and create much-needed positive change for the communities that need it most.
Achieving a greener, more inclusive and resilient world cannot be done alone or in silos
To maximize the potential of financial inclusion for those who need it most, we need cross-sectoral collaborations anchored in evidence of how financial inclusion contributes to various aspects of the broader development agenda. However, to do so, all actors within the financial inclusion community – from providers to funders and investors to sector support organizations – must be ready to push the focus on impact forward, one step at a time. At CGAP, we have taken our first step with the launch of the Financial Inclusion 2.0 initiative. Many organizations have already joined us on this journey. We invite all our peers in the financial inclusion community to join us in this journey by thinking about how to better measure and focus on impact within your work.
