A growing body of research—some of it by the World Bank—shows that well-developed and inclusive financial systems are associated with more rapid growth and better income distribution. Finance helps the poor catch up with the rest of the economy as it grows. Finance also helps extend the range of individuals, households, and firms that can get a foothold in the modern economy, and it can reduce damaging concentrations of economic power. Largely thanks to microfinance, there is now a growing appreciation of the “empowerment” dimension of finance, of the extent to which it can give ordinary people and the poor access to opportunity and the ability to escape ossified social structures. It is perhaps symbolic of this evolutionary thinking that “building inclusive financial systems that work for the poor” became the mantra of the United Nations International Year of Microcredit 2005.
But building more-inclusive financial systems requires us first to get a handle on how well financial systems across countries are directly serving the poor and others at the margins. Which segments are underserved or excluded from the financial system, and why? What are the binding constraints faced by these underserved and/or excluded segments in accessing financial services (savings, money transfer, credit, insurance, etc.) from different types of providers? Which types of direct access to financial services have the greatest impact on reducing poverty and lifting growth rates in deprived districts and regions? How does financial sector access affect the efficiency of micro- and small-scale enterprises? What kinds of organizational and product strategies can help banks to “downscale” in order to reach underserved segments, and help microfinance scale up its outreach while achieving financial viability?
Here we are confronted with a scarcity of data, and even of consensus on what ought to be measured. Despite the existence of numerous extensive financial databases, our knowledge in most countries of the degree to which effective and low-cost financial services reach low- and middle-income households, small enterprises, and other less-privileged segments of society is very limited.