MICROFINANCE PAPER WRAP-UP: 2016 Brookings Financial and Digital Inclusion Project Report; by John Villasenor, Darrell West, Robin Lewis

“The 2016 Brookings Financial and Digital Inclusion Project Report Advancing Equitable Financial Ecosystems;” by John D. Villasenor, Darrell M. West and Robin J. Lewis; published by the Center for Technology Innovation at the Brookings Institution; August 2016; 146 pages; available at: https://www.brookings.edu/wp-content/uploads/2016/08/fdip_20160816_project_report.pdf

The 2016 Brookings Financial and Digital Inclusion Project (FDIP) Report examines access to and utilization of basic formal financial services, such as payments and savings, in 26 lower- and middle-income nations. The authors find that many of the countries surveyed have made gains in terms of advancing access to nontraditional financial service channels in two ways that FDIP argues are crucial to creating a more equitable financial landscape: (1) bolstering mobile phone capacity and infrastructure to facilitate more widespread adoption of mobile money platforms; and (2) increasing platform interoperability, which allows transfers to occur between systems operated by different providers.

FDIP gives each surveyed country a composite score based on 30 total indicators of performance on four financial inclusion dimensions: country commitment, mobile capacity, regulatory environment and user adoption. The highest performing countries were Kenya (84 percent), which maintained its position as the highest scorer from the 2015 report, and Colombia (79 percent), whose increase of 5 percentage points the authors attribute to the introduction of quantitative financial inclusion goals and widespread mobile phone capacity. Brazil, South Africa and Uganda tied for the third position with 78 percent each.

This report expands upon the findings of the previous year’s edition, which was the first in this series, by surveying five additional countries – the Dominican Republic, Egypt, El Salvador, Haiti and Vietnam – and introducing the following indicators for all 26 countries: 1) the “existence of a specific consumer protection framework;” 2) “availability of merchant payments via mobile money services;” 3) “smartphone adoption;” and 4) “frequency of account usage with a formal financial institution.” The last of these is taken from the World Bank’s Global Findex database to indicate “the percentage of respondents [aged 15 or over] with an account at a bank or another type of financial institution who report that money is withdrawn from their account three or more times in a typical month.”

The authors conclude that, “while there is no single path to facilitating financial inclusion, engagement in multinational knowledge-sharing networks and investing in digital financial services can help countries develop successful and sustainable approaches to making progress toward inclusive finance.” The authors suggest general “calls to action” for the international financial inclusion industry, such as collecting, analyzing and sharing financial inclusion data, as well as country-specific “next steps” towards greater financial inclusion. For example, FDIP recommends that the Philippines, whose overall score improved by 8 percentage points from the 2015 survey, implement a formal interoperability agreement between PayMaya, a mobile payment app offered by PLDT Inc. (formerly the Philippines Long Distance Telephone Company) and Smart CommunicatIons, and Globe Telecom’s GCash mobile money service. In Rwanda, which received an overall score of 76 percent, FDIP suggests that lawmakers utilize the World Bank’s “Diagnostic Review of Consumer Protection and Financial Literacy” to establish a financial consumer protection framework in attempt to build trust in and usage of formal financial services.

By Michelle Dold, Research Associate

About the Brookings Institution

The Brookings Institution is a US-based nonprofit think tank that generates policy recommendations based on research it conducts in five areas: economic studies, foreign policy, governance studies, global economy and development, and metropolitan policy. Brookings operates from its headquarters in Washington, D.C. and has three additional research centers in Doha, Qatar; Beijing, China; and New Delhi, India. As of June 30, 2015, Brookings reports total yearly unaudited operating revenue of USD 95.6 million.

Sources and Additional Information:

[1] 2016 Brookings Financial and Digital Inclusion Project Report

[2] MicroCapital Universe Profile: Brookings Institution

[3] World Bank: “Diagnostic Review of Consumer Protection and Financial Literacy

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