AFI Financial Inclusion Data working

group

San Salvador, April 2016

Shaping our tools: Measuring financial inclusion for development

“We shape our tools and thereafter our tools shape us”

- Marshall McLuhan

i2i Measurement mandate

• The i2i facility is an open collaboration funded by the Bill & Melinda Gates Foundation in partnership with The MasterCard Foundation.

• Facility objective: The i2i facility seeks to drive collaboration to improve the relevance, reliability and use of data to design of effective programmes, policies and products.

• Measurement objective: To develop measurement frameworks that answer key financial inclusion questions, in collaboration with decision makers.

• Measurement audience: Governments and development agencies

• Measurement and goals

• What to measure?

• Next steps

Overview

Measurement and goals: What concerns stakeholders?

Three common measurement needs• Driving usage• FI impact or outcomes including consumer protection• Financial literacy/ capability

Across measurement objectives• Disaggregated data – gender, location, youth, small business

Measurement and goals: Are we setting off the right races?

AFI members that adopted Maya Declaration increased % of adults with accounts by 9.5% from 2011 – 2014 (Findex)

The number of people worldwide having an account grew by 700 million between 2011 and 2014 (Findex)

Measurement and goals: The big compromise

Goal: Inclusive financial systems provide individuals and firms with greater access to resources to meet their financial needs, such as saving for retirement, investing in education, capitalizing on business opportunities, and confronting shocks (WB, 2014)

Financial inclusion: proportion of individuals & firms that use financial services (WB, 2014)

Why measure ownership to target financial inclusion?• Alternatives not defined• Data constrained

Measurement and goals: Account ownership not resulting in usage

China

South Afric

aBraz

il

TurkeyKen

yaIndia

Nigeria

Rwanda

Mexico

Zambia

Indonesia

Colombia

Banglad

esh

Philippines

Peru

Vietnam

Ethiopia

Tanza

nia

Myanmar

Egypt

DRC

Pakist

an

Yemen

0%10%20%30%40%50%60%70%80%90%

100%Dormant account at FI (0 transactions) Mailbox account at FI (1 - 2 transactions)Used account at FI (> 3 transactions)

% o

f adu

lts w

ith a

n ac

coun

t at a

form

al

finan

cial

inst

itutio

n

Source: Findex 2015

“[Bankerisation*] It is not so good, it obliges us to not go to work, because we need so much time. And not only for ourselves, I also know friends in the province that require us to collect for them here. I am practically the second signatory for two or three people who live in the province”

DRC, male, government employee in Kinshasa, 2015*Paying civil servant salaries into bank accounts

“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”

- James Harrington

• Measurement and goals

• What to measure?

• Next steps

Overview

What to measure? Our focus

The challenge: To measure financial inclusion for development

i2i goal = improve data available and use of data to drive appropriate decisions – in collaboration with data collectors and users

i2i measurement focus:• Going beyond ownership to usage• Exploring outcomes

What to measure? Unpack AFI framework into an FI theory of change – focus on usage and outcomes

* An existing relationship with a financial service provider that confers the right to use a financial service without any further requirements having to be met

Enabling environment

Environment allows appropriate products to be provided

Availability

Appropriate products are available to consumers

Ownership*

Adults take-up products

Usage

Adults use products effectively

HH and gov’t objectives for which the use of financial services is a necessary but not sufficient condition.

FI Outcome

Outcomes directly attributable to usage of financial services

Impact

Quality Access Usage Impact

(Outside FS control)

What to measure? Drivers of usage and outcomes?

Enabling environment

Availability/Access

Ownership

Consumer value not increased

Usage FI Outcome Impact

Quality Access Usage Impact

What to measure? Understanding the linkages: Consumer value

Enabling environment

Availability/Access

Ownership Usage ImpactFI Outcome

Net value Value Cost

Increase in welfare of consumer

Utility derived from using financial

services

Direct and indirect cost to use financial

services

Portfolio of needs met

Functional needs

Experiential needs

Capability cost

Access costIndi

cato

rs

Sustainable usage

Consumer value increased

Quality Access Usage Impact

What to measure? Unpacking consumer value

• Transfer of value• Liquidity• Resilience• Meeting goals (education,

housing, business, old age)• Productive risk taking

• Awareness• Knowledge• Skills• Attitudes incl. Trust• Decision constraints

Net value CostValue

Sustainable usage

Functional needs

Experiential needs

Capability cost

Access cost

• Usage (digital, informal, cash)• Fit for purpose interactions (save,

spend, risk, grow)• Number/ value/ proportion of

interactions • Breadth of use (portfolio of

services)• Negative value (Indebtedness,

Abuse)

• Consumer satisfaction• Control/ Self-discipline• Choice• Social identity/ Status• Peace of mind

• Proximity• Affordability• Reliability• Convenience• Connectivity (digital, physical)• Eligibility incl. Identity

Portfolio of needs met

• Financial health/ wellness• Financial stress

What to measure? Measuring value – improving FI outcomes by meeting needs

RCTV – Remote cross-border transfer of valueRDTV – Remote domestic transfer of value

Source: FinScope Consumer Survey Zimbabwe , 2014

RCTV

Investm

ent in

Busines

s

Educatio

n

Asset

accu

mulation

RDTV

Farming in

puts

Encash

ment

Consumptio

n smoothing

Risk m

itigati

on

Bill pay

ment

Local p

aymen

t0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Use savings Borrow Use payment instrumentsUse insurance Use multiple financial services

% o

f adu

lt po

pula

tion

What to measure? Financial stress: Assessing the link between inclusion and well-being

$0 - $300%

10%

20%

30%

40%

50%

60%

70%60%

48%

% of adults, earning less than a dollar a day, that reported they had to skip a meal, were not able to send their children to school

or had to go without medical treatment or medicineFinancially excluded adults (informal or formal)Financially included adults (formal or informal)

Income category

% o

f adu

lts

Source: FinScope Consumer Survey DRC, 2015

What to measure? Potential game-changers

1. Usage: Move away from ownership-based indicators of usage, to interaction-based indicators of usage

2. Defining markets for financial services: Moving from product-based measures of market size to needs-based measures of market size

3. Proximate outcomes: Measure proximate outcomes that contributes to impact

“One accurate measurement is worth a thousand expert opinions”

– Grace Hopper

• Measurement and goals

• What to measure?

• Next steps

Overview

Next Steps

1. Survey to better understand AFI members’ measurement needs2. Select priority measurement frameworks3. Build key frameworks in collaboration with AFI4. Pilot frameworks with interested partners

Thank you!

Mia ThomE-mail: miathom@cenfri.org

Celina LeeE-mail: celina@cenfri.org

Please contact us at…insight2impact | i2i is a facility established by FinMark Trust and Cenfri to advance the use of data for financial inclusion. i2i aims to demonstrate how policymakers and providers can draw insights from data to inform the design of financial inclusion programmes, policies and products. i2i is funded by the Bill & Melinda Gates Foundation in partnership with The MasterCard Foundation.

For more about i2i, see attached brochure or our website at www.i2ifacility.org