Despite uncertainty across global economies, financial inclusion around the world continues to improve.
Markets around the globe are tackling economic stress and making efforts to support their populations and business communities, according to 2024 Global Financial Inclusion Index findings.
“As global economies grappled with the perils of high inflation, geopolitical volatility, and a Chinese slowdown, our data shows a clear response from the majority of markets to support their populations,” says Seema Shah, chief investment strategist for Principal Asset Management.
Since the 2023 Index, 32 out of 41 markets (78%) saw their absolute scores for financial inclusion increase, reflecting these efforts.
32 out of 41 markets (78%) saw their absolute scores for financial inclusion increase in the last twelve months.
It’s notable that 25 out of 41 markets (61%) experienced declining scores in the access to credit indicator, which tracks the extent to which individuals and businesses have the necessary funds to invest, grow, and participate fully in the economy.
In 35 markets (85%) the scores for access to capital declined, further highlighting the difficulty faced by businesses to secure funds for growth and development. In both indicators, the drops in score are particularly notable in larger developed economies (such as the U.S., the U.K., France, Switzerland, and Norway) where the respective banking systems were quick to adopt a prudent approach to lending.
However, despite access to financing becoming scarcer, many scores across the financial system, government, and employer pillars rose. This implies that, even when the macroeconomic outlook and monetary conditions become more challenging, financially inclusive systems (which notably are often well-off markets), can be levers to provide support and help absorb some of the economic stress.
These levers are especially effective when the public and private sectors work together.
“As access to finance dried up,” Shah says, “governments and employers provided greater guidance and information around financial management, and the financial system took steps to ensure that business confidence was upheld.”
For example, this year’s data shows significant improvements across the globe in indicators that enable a digitized financial system. Scores for volume of real-time transactions have increased in 37 out of 41 markets (90%), and by more than 10 points in 19 of those. Equally, online connectivity and the presence and quality of fintechs have increased in 28 and 31 markets respectively.
Dive deep into data: Download the full 2024 Global Financial Inclusion Index report (PDF)
Within government support, this year’s data shows marked rises in indicators that promote better understanding and uptake of financial information, products, and services—such as the awareness and uptake of government-mandated retirement and pension schemes and the availability of government-provided financial education, which improved in 30 and 20 markets, respectively.
Employers also demonstrated they have tools at their disposal to support staff through periods of financial difficulty. In 26 markets, indicator scores rose for employers’ provision of guidance and support around financial issues, and 31 markets made improvements in the employer pay initiative indicator, which measures the extent to which businesses give employees the option to choose their method and frequency of payment, among other factors.
The positive impact of a more financially inclusive ecosystem—underpinned by measures implemented by governments, the financial sector, and employers—during challenging market conditions can be seen in the scores for business confidence.
The survey-based indicators of the financial system as an enabler of small and medium enterprise (SME) growth and success, and of general business confidence, saw their average year-over-year scores increase. Financial services as an enabler of general business confidence rose by 1.8 points; as an enabler of SME growth and success it rose more modestly, by 0.7 points. In short, business confidence in the financial system’s ability to promote growth held up strongly despite lending conditions worsening.
What’s next?
Explore more Global Financial Inclusion Index insights.
