A clear relationship exists between market maturity and the main source of financial inclusion support

As observed in last year’s inaugural Global Financial Inclusion Index, the 2023 data continues to suggest a clear pattern in financial support related to market maturity: Within many developed markets, strong support from the government and financial system often results in lower employer support. By contrast, developing markets tend to rank higher for employer support and lower for government and financial system support.

For example, Indonesia ranks 13th for employer support but 21st for government support and 39th for financial system support. India ranks first for employer support (rising three places, year over year, to claim the top place) but ranks 40th for government support.

Seven of the top 10 markets for employer support are in Asia (India, Singapore, China, Vietnam, Malaysia, Hong Kong, and Thailand), whereas Switzerland is the only European economy to rank in the top 10 markets for employer support.

"This report further validates our view established last year, whereby employers are the first source of financial support for the population of a less affluent market,” says Kamal Bhatia, global head of investments for Principal Asset Management^SM. “Economies that have not yet reached a sufficient level of wealth or economic growth to enable the establishment of a substantial financial safety net at the state level are reliant on employers to act as the main providers of financial tools and services.”

By contrast, the United Kingdom ranks 13th for government support and fourth for financial system support, but 39th for employer support. Similarly, Canada ranks 11th for government and financial system support but 40th for employer support. Australia, Sweden, and New Zealand demonstrate a similar pattern.

“At the point where business and economic growth enables governments to implement policies that promote financial inclusion and the financial system to mature,” Bhatia says, “a declining reliance on employers allows for further growth of capital markets.”

Of the 14 European markets tracked, six—including large continental European economies such as Germany, France, and Spain—have seen their employer rankings fall year over year. Those European markets where employer rankings have risen include Italy and Poland, both of which exhibit scores more consistent with developing markets than developed counterparts.