At a glance
- In just the past six years, 1.2 billion people worldwide have gained access to bank and mobile money accounts.1 This revolution in financial inclusion has the potential to offer a pathway out of poverty for hundreds of millions of people and to spur broad economic growth.
- We work to expand the availability of affordable and reliable financial services that serve the needs of all, including the world's poorest people.
- Digital technologies and changes in national policy are clearing away obstacles that once kept these services out of reach for many, but tough challenges remain.
- We work with our partners to support public and private investment in digital payment infrastructure, new regulatory standards, and gender equality initiatives such as digitized government benefit payments, to ensure continued progress toward the promise of financial inclusion.
1 World Bank, “Global Findex 2017”
We work to broaden the reach of low-cost digital financial services for the poor by supporting what we and our partners believe are the most catalytic approaches to financial inclusion. These include promoting the development of digital payment systems that can help spread use of digital financial services quickly, advancing gender equality to ensure that women share in the benefits of financial inclusion, and supporting the development of national and regional strategies that accelerate progress for the poor and can serve as models.
To achieve these objectives, we work with partners around the world to align on common principles for digital financial inclusion and support policymakers as they work to develop policies and regulations that facilitate growth in digital financial services and provide oversight and accountability. We also invest in national financial inclusion initiatives, through which the largest number of people living in poverty stand to benefit, including in Bangladesh, India, Nigeria, Pakistan, Indonesia, and East Africa.
We focus not on establishing a particular product or distribution channel, but rather on finding innovative ways to expand access and encourage markets to determine which products and channels are most effective. We support approaches that can provide financial services to the broadest number of people, but we also recognize that countries are at different stages of developing inclusive digital financial systems and their approaches must reflect the distinct needs of their economies and citizens.
Areas of focus
One of our most important priorities is the development of digital payment systems that poor people and the businesses that serve them will actually use. These systems can foster competition, drive innovation, and accelerate the development of digital financial products and services customized for the needs of low-income communities. To be genuinely inclusive, these payment systems must have five key traits:
- Accessible. They need to reach into the poorest neighborhoods and smallest villages, and they need to be easy to acquire and understand.
- Reliable. Users’ money and information must be readily available and highly secure—protected against cybertheft, money laundering, and other breaches.
- Valuable. They must offer people clear advantages over using cash.
- Affordable. They must be cost-free for all or most people.
- Profitable. They must fully involve the private sector and allow service providers to develop sustainable business models.
Perhaps the most important condition for the development of these payment systems is interoperability—allowing customers to transact with any other customer, whether or not they use the same service provider. This kind of open-loop system substantially lowers the costs and complexity of digital financial services and payment platforms. Opening up payment infrastructure to new kinds of companies outside of traditional banking organizations can help accelerate the development of these systems.
Our team is actively exploring ways to accelerate use of digital financial services. One priority is facilitating services that help consumers convert digital money to cash when needed. These “cash in, cash out” services must be easily accessible, trusted, and available at low cost for consumers in order to work well and enable use by more people. But they are the highest-cost component of a digital payment ecosystem and the biggest challenge for private-sector players that want to provide innovative payments solutions. We also are working to promote the development of effective identification systems in priority geographies. ID platforms such as the Aadhaar system in India are promising models for providing safe, efficient, and widely beneficial identification services that support financial inclusion across a country.
Governments can accelerate financial inclusion by establishing regulatory frameworks, policies, and incentives to help a wider variety of digital financial service providers compete on a level playing field while protecting consumers and the financial system. Open and fair competition will spur innovation and competition and drive down costs, as will essential regulations governing agents, licensing, and know-your-customer policies. But financial inclusion is not just about developing systems and lowering barriers. Our work also focuses on new risks and challenges, including how to protect millions of new consumers and how a wider range of market participants can be supervised.
An important component of our foundation’s initiatives to increase financial inclusion and gender equality is our work to ensure that more women benefit from empowering financial tools and services—such as bank accounts, mobile money, and credit. This includes supporting the digitization of social protection programs, which can help improve the speed, efficiency, security, and accuracy of these programs and provide incentives for women to use digital accounts more broadly. Digitizing government payments could help bring formal financial services to an estimated 60 million women in the poorest households in emerging economies, broadly benefiting them and their families. For example, a randomized experiment in India found that when government payments to women were delivered directly into women-held accounts, it triggered a 25 percent increase in earnings among women, boosted women’s bank balances by 60 percent, and caused an 11 percent increase in women’s participation in the labor force. When women can fully participate in the economy, they become engines of opportunity for their communities and their countries and can be powerful drivers of global growth.
Why focus on financial services for the poor?
Every year, millions of people around the world transition out of poverty. Regional growth and economic opportunities like new jobs, technologies, and business opportunities help people build more stable economic lives. At the same time, millions of people remain trapped in a cycle of poverty that is difficult to escape. We believe that financial exclusion is a significant driver of this cycle.
About 1.7 billion people worldwide are excluded from formal financial services such as savings, payments, insurance, and credit. In developing economies, only 63 percent of adults have an account, and women—nearly 1 billion of them—are disproportionately excluded from beneficial financial systems.
Most poor households still operate almost entirely through a cash economy. This means they have to save using physical assets, such as livestock or jewelry. Cash gets spent, animals die, and jewelry can be lost or stolen. What’s more, these forms of savings earn no interest and can actually lose value over time. To send money to family, those without a bank account have to rely on couriers or friends who carry cash by bus, which is expensive, insecure, and slow. To borrow money in an emergency, they must turn to moneylenders who charge notoriously high interest rates.
Without formal financial histories, people are also cut off from potentially stabilizing and uplifting opportunities like building credit or getting a loan to start a business. And it’s harder to weather common financial setbacks, such as serious illness, a poor harvest, or an economic downturn. All too often, financial exclusion makes the expenses of poverty difficult to overcome.
Delivering financial services by mobile phone could benefit billions of people by spurring inclusive growth that adds US$3.7 trillion to the GDP of emerging economies within a decade.
Transforming the economics of payments to build sustainable, inclusive financial systems.
Five key ways in which G7 countries can support African countries as their leaders seek to include more than 400 million people in the digital economy for the first time.
A World Bank database that provides 850+ country-level indicators of financial inclusion summarized for all adults and disaggregated by key demographic characteristics—gender, age, education, income, employment status, and rural residence.
A collection of rigorous evidence from a range of studies about the impact of mobile money on individuals and households and on the user experience of payment transfers enabled by mobile phones.
A reference guide created to assist regulators who are exploring policy options for enabling the development of inclusive digital financial services.
A Gates Foundation project focused on helping the public and private sectors develop pro-poor digital financial services and markets that work for all.
Open source software that serves as a reference model for creating interoperable digital payments platforms.
How digitization of payments, transfers, and remittances contributes to the G20 goals of broad-based economic growth, financial inclusion, and women’s economic empowerment.
A report examining what 1 billion registered accounts signify for mobile money users, the mobile money industry, and the future of the mobile money ecosystem.