World Bank
Report Year
1st MAR Year

Clarify approach. The World Bank Group should adopt an evidence-based and comprehensive approach to financial inclusion that aims at enabling access to a range of financial services with benefits for the poor in a sustainable manner. This approach should be reflected both in broader strategies (such as that for the F&M GP) and in its detailed business plan. As part of this approach, the conditions and business models under which subsidization is a useful tool to achieve sustainable services should be specified, and consistent, coherent guidance should be provided to staff on when and how to apply subsidy to financial services versus when a focus on markets can suffice. Also critical to this work is how the Bank Group systematically finds and replicates innovations that lower transactions costs and improve financial inclusion (Recommendation 2).

Recommendation Adoption
IEG Rating by Year: mar-rating-popup S NT NT NT Management Rating by Year: mar-rating-mng-popup H NT NT NT
NANot Accepted
NRNot Rated
Findings Conclusions

At present, the Universal Financial Access Goal 2020 (UFA) and the Financial Inclusion Support Framework (FISF) are key elements of the World Bank Group's engagement with member countries to promote financial inclusion. Although the public commitment to the UFA provides clear and measurable objectives, focusing the Bank Group's activities on improving access to financial services through transaction accounts, there is limited systematic guidance on how to operationalize this goal into an actionable agenda. The FISF delineates some principles of action, and the preparation of country support programs is under way in a first set of countries however, there is room for elaboration on the Bank Group's overall approach to financial inclusion in several dimensions:

First, the Bank Group can make clear where evidence points to clear benefits to the poor, and where evidence is lacking, in light of overall mixed results in the literature on gains to the poor of financial services. The evidence from a broad-based literature review of more than 140 peer-reviewed publications indicates that the expectations of microcredit pulling millions out of poverty have not been fulfilled. While there is a consistent pattern of modestly positive effects of microcredit on the poor, these effects are not transformative. The more limited evidence on non-credit services tends to be more encouraging.

Second, a fully elaborated Bank Group approach should address the need to find a balance between supply-driven approaches for access to finance and enabling actual inclusion. It is widely recognized that universal financial access is not the same thing as universal financial inclusion, which is a much broader concept based on quality, choice, inclusiveness, and range of services available to the poor. True inclusion involves actual use of offered services. There is insufficient evidence to assume that universal access will lead to universal inclusion, especially in light of the high dormancy of accounts newly opened through mass rollouts and low utilization rates of newly opened accounts in low-income and lower-middle-income countries in general. Investing in financial infrastructure, for example through no-frill accounts or transferring G2P payments from cash payments to accounts, may enable access to limited financial services for most of the excluded fairly quickly. Under the right circumstances, this may be self-financing, but as inclusion progresses the excluded ones will increasingly be spread over many countries and many of them will live in the rural areas where such initiatives are likely to incur costs, without providing active or demanded services to many. The relevant goal may be providing services to everyone who can make a productive or beneficial use of them.

Third, if pushed to the very low retail end or to mass rollouts aimed at quickly providing financial access to high number of people, supported interventions may involve subsidization, as do several recent World Bank activities on financial inclusion in the rural space through self-help groups. Any ongoing subsidy requires fiscal sustainability, but also needs to be justified as an effective use of development resources. Currently, however, the Bank Group lacks systematic guidance to clients and staff providing a consistent and rational basis on when and how subsidies should be used to extend financial services to the poor. As noted in the evaluation, in practice, interventions at times reflect different philosophies and approaches to subsidization of financial services across projects, countries, and practice groups.

Original Management Response

Finance & Markets Global Practice will adopt an evidence-based and comprehensive approach to financial inclusion that aims at enabling access to a range of financial services with benefits for the poor in a sustainable manner.

The WBG has for a number of years been using a standardized, comprehensive approach for diagnostics and support for relevant areas of financial inclusion, such as payment systems, financial infrastructure, and financial consumer protection.

The IEG methodology looked back to projects approved between FY06 and FY13, and also focused in more detail on lending/investment projects. The coverage of analysis did not fully reflect the strong emphasis on support to enabling environment reforms and government interventions that lower the costs and risks of providing financial services to all and encourage innovative models. Since FY13 the WBG has expanded its support to over 20 countries in designing or implementing national financial inclusion strategies which go well beyond microcredit or access.

Moreover, the programmatic approach being implemented by the WBG for financial access and inclusion includes a strong emphasis on data and diagnostics underpinning reform priorities and actions, and on enabling environment reforms and other measures to encourage investment in innovative models.

Management would like to reaffirm that evidence on the impacts of credit versus other financial services has already been taken on board in the design of the WBG's UFA goal (which is for payments and savings accounts) and in the broader programmatic approach to financial inclusion, which is increasingly the norm for WBG country engagement.

Action Plans
Action 1
Action 1 Number:
Action 1 Title:
Action 1A: Strengthen WBG comprehensive approach to financial inclusion.
Action 1 Plan:

Action 1A: Strengthen WBG comprehensive approach to financial inclusion.
Indicator: Identification of financial inclusion as an over-arching theme for joint WBG Finance & Markets (F&M) GP.
Baseline: No current F&M GP strategic document.
Target: Strategic document for F&M adopted that identifies financial inclusion as one of the three strategic themes.
Timeline: FY16

Action 2
Action 2 Number:
Action 2 Title:
Action 1B: Apply and implement the Universal Financial Access ‘Framework for Action’.
Action 2 Plan:

Action 1B: Apply and implement the Universal Financial Access ‘Framework for Action’.
Indicator: Number of countries for which UFA Country Action Sheets prepared jointly with regional units, complemented by UFA briefings to Country Directors and Senior Management.
Baseline: UFA Framework for Action developed in September 2014, but with WB-IFC Country Action Sheets still to be developed.
Target: (i) 25 UFA Country Action Sheets developed and used to inform operations (ii) 5-10 UFA Briefings per fiscal year to Country Directors and Senior Management.
Timeline: FY18

Action 3
Action 3 Number:
Action 3 Title:
Action 1C: Project Documents for WBG Financial Operations to more systematically include a market failure/market development rat
Action 3 Plan:

Action 1C: Project Documents for WBG Financial Operations to more systematically include a market failure/market development rationale.
Indicator: Number of F&M GP Financial Inclusion project documents setting out the market failure/development rationale clearly.
Baseline: Rationale for use of subsidies not always set out clearly.
Target: New Financial Inclusion project documents for lending operations should set out the market failure (or market development) rationale clearly. Timeline: FY19

Action 4
Action 4 Number:
Action 4 Title:
Action 1D: Conduct research assessing varied relevant dimensions around the delivery of financial services to the poor
Action 4 Plan:

Action 1D: Conduct research assessing varied relevant dimensions around the delivery of financial services to the poor
Indicator: DEC ongoing and research pipeline focused on financial inclusion, including research focused on Sub-Saharan Africa linked to the IFC-MasterCard Foundation collaboration
Baseline: Multiple DEC studies on financial inclusion were conducted in the past
Target: 5-10 DEC research papers / reports relevant for informing WBG operation
Timeline: FY17-FY19

Action 5
Action 5 Number:
Action 5 Title:
Action 1E: Develop evidence based approaches for innovative and scalable financial interventions complemented by monitoring and
Action 5 Plan:

Action 1E: Develop evidence based approaches for innovative and scalable financial interventions complemented by monitoring and evaluation frameworks.

Indicator: Development of the M&E framework for Harnessing Innovation for Financial Inclusion (HiFi) programs and for Financial Inclusion Support Framework (FISF) programs.

Baseline: Systematic M&E frameworks for those global programs not in place.

Target: Evidence-based approach developed to support interventions to expand financial inclusion

Timeline: FY19

Action 6
Action 6 Number:
Action 6 Title:
Action 1F: Implement UFA reporting and monitoring framework
Action 6 Plan:

Action 1F: Implement UFA reporting and monitoring framework
Indicator: UFA monitoring and reporting framework developed and adopted.
Baseline: Monitoring and reporting approach in early stage of development.
Target: UFA monitoring and reporting framework applied to projects and aggregated globally.
Timeline: FY19

Action 7
Action 8
IEG Update:
No Updates
Management Update:
No Updates
IEG Update:
No Updates
Management Update:
No Updates
IEG Update:
No Updates
Management Update:
No Updates
IEG Update:

It is clear the WB has a vigorous program and F & M practice has a vigorous and ambitious program in the areas of these 5 actions. Regarding the specifics:
a) While the F&M GP strategic document attached was a draft, the organizational structure of F&M since 2016 makes clear that there is a strategy with financial inclusion/access as a key pillar. It there documentation that the draft strategy was approved?
b) Based on the examples of Country Action Sheets developed and used to inform operations, IEG understands that this was or is being achieved.
c) IEG highly appreciates the table evidencing the treatment of market failure in 6 financial inclusion projects mapped to F & M. IEG would encourage greater standardization in defining major types of market failure.
d) IEG agrees that the research program described is both systematic and strategic. Products are at different states of maturity.
e). From the update, IEG understands that HiFi and FISF have fully developed and implemented M & E frameworks. FIGI's system is conceptualized but not yet implemented. IEG appreciates the global indicator-based monitoring of financial inclusion referenced in the update, where WBG is a leader. IEG encourages WBG management to submit evidentiary materials in the MAR system so they can be properly aligned with individual action commitments

IEG notes that given that this rating combines 5 different areas of action each with multiple elements, it is difficult to arrive at an authoritative summary rating. In its judgement, progress is substantial -- well over halfway to targets, possibly at 80%, but less than the 90% complete required for "High".

Management Update:

Action 1A Response:In FY16, F&M GP Strategy, covering all priority areas, including financial access and inclusion was developed, although not published. In this strategy, financial inclusion is elevated to be one of the three priority themes, along with financial stability and financing for development.In FY17, business line strategy documents were developed for all business lines in F&M GP, including for Responsible Financial Access, and Payments and Market Infrastructures, which contribute directly to the financial inclusion work in F&M.In FY17, global engagements of the Responsible Financial Access, and Payments and Market Infrastructures global teams in F&M GP were organized into three programmatic approaches (PAs) in order to provide a strategic multi-year framework: Responsible Financial Access PA, Universal Financial Access PA, and Payment Systems and Remittances PA. These PAs will be reviewed annually.Rating of Implementation Progress for Action 1A: High-------------------Action 1B Response:All 25 UFA Country Action Plans developed during FY16-FY17. These action plans are updated annually.In FY17, country briefings with Senior Management were made before Annual Meetings and Spring Meetings for Egypt, Ethiopia, Kenya, Mozambique, Nigeria, Rwanda, Tanzania, Vietnam, Zambia.Rating of Implementation Progress for Action 1B: High----------------Action 1C Response:There were six F&M GP lending projects on financial inclusion approved during FY17. These six projects are summarized in the table in the attachment. All these six projects include clear descriptions for market failure as indicated in the last column, and activities to address those failures. These projects are: P153603, P154389, P159428, P161136, P159303, P150008.Rating of Implementation Progress for Action 1C: High-------------------Action 1D Response: [This action was for DEC, which provided this response]Based on surveys of the empirical literature on financial inclusion (World Bank, 2014 Cull, Ehrbeck, and Holle, 2014), DECFP identified gaps and priorities for future research. These comprise five areas: (1) Measurement of financial usage (2) Financial education/literacy (3) Disclosure of product information to financial services customers (consumer protection) (4) Digital finance and electronic payments and (5) Alternative delivery approaches (agent banking, mobile financial services). Working papers and journal articles that appeared in FY17 in each of these areas are listed below, as are descriptions of work that is in progress:(1) Measurement of financial usageDemirguc-Kunt, Asli Klapper, Leora Singer, Dorothe. 2017. Financial Inclusion and Inclusive Growth: A Review of Recent Empirical Evidence. Policy Research Working Paper No. 8040. World Bank, Washington, DC. © World Bank. License: CC BY 3.0 IGO."There is growing evidence that appropriate financial services have substantial benefits for consumers, especially women and poor adults. This paper provides an overview of financial inclusion around the world and reviews the recent empirical evidence on how the use of financial products -- such as payments services, savings accounts, loans, and insurance -- can contribute to inclusive growth and economic development.Ongoing Research:Women's financial inclusion: "Women's Financial Inclusion: An Overview." Draft summarizes the literature on women's financial inclusion and proposes directions for future research. (Klapper, Leora, and Dorothe Singer).(2) Financial education/Financial literacyJournal Article:"The ABCs of Financial Education: Experimental Evidence on Attitudes, Behavior, and Cognitive Biases." Accepted for publication in Management Science. (Carpena, Fenella, Shawn Cole, Jeremy Shapiro, and Bilal Zia).Ongoing research:Financial education, adaptive learning: Field experiment to study the effect of financial education through adaptive machine learning in Kenya. Partnering with a fintech startup called Arifu that specializes in mobile phone based learning. (Bilal Zia). Status: In progress.Financial Literacy, Social Networks and Insurance Demand: Experimental Evidence from Kenya. (Xavier Gine, Dean Karlan, and Muthoni Ngatia). Status: In progress.(3) Disclosure of information to customers by providers of financial servicesGine, Xavier Garcia, Nidia Gomez-Gonzalez, Jose. 2017. "Financial Information in Colombia." Policy Research Working Paper No. 7998. World Bank, Washington, DC. © World Bank. License: CC BY 3.0 IGO.An audit study was conducted in Colombia Where trained auditors visited multiple financial institutions, seeking credit and savings products. The study found that the staff only provided information about the cost when asked, disclosing less than a third of the total cost voluntarily. In addition, clients were rarely offered the cheapest product, most likely because staff was incentivized to offer more expensive and thus more profitable products to the institution.Ongoing research:"Information Disclosure and the Demand Elasticity for Financial Products: Evidence from a Multi-Country Experiment." (Xavier Gine, Cristina Mart&iacute nez, and Rafael Mazer). Status: Paper in progress.(4) Digital finance and electronic paymentsJournal Article:"The Opportunities and Challenges of Digitizing Government-to-Person Payments." Accepted for publication in World Bank Research Observer, 2017. (Leora Klapper, Dorothe Singer).Ongoing research:Electronic payments, commitment savings: Field experiment in Ghana to test the effects of electronic wage payments coupled with a commitment savings device on consumption, investment and payday loans among government workers. (Leora Klapper). Status: Experiment completed. Paper in progress.Digital wage payments: A field experiment in Bangladesh to introduce digital wage payments to a population to see whether the mode of payment changes financial behaviors and capabilities. (Martin Kanz, Leora Klapper). Status: Paper to be submitted to working paper series.(5) Alternative delivery mechanisms (agent banking mobile financial services)Cull, Robert Gine, Xavier Harten, Sven Rusu, Anca Bogdana. 2017. "Agent Banking in a Highly Under-Developed Financial Sector: Evidence from the Democratic Republic of Congo." Policy Research Working Paper No. 7984. World Bank, Washington, DC. © World Bank. License: CC BY 3.0 IGO." [Funded under MasterCard IFC Partnership for Financial Inclusion in SSA]The paper provides evidence on the number and volume of financial transactions undertaken by agents (local businesses that double as more convenient, lower cost alternatives to formal branches) of the largest microfinance institution operating in the Democratic Republic of Congo. Transactions are higher in low-income, densely populated areas with high levels of commercial development. This finding suggests that the agent network has been best at supporting financial transactions among the urban poor. In addition, branding and effective liquidity management are strongly linked to agent activity.Ongoing research:Banking with Agents: a randomized control trial in Senegal to study the effects of access to agent banking versus conducting financial transactions at branches only. Experimental subjects who were encouraged to open an account at an agent were subsequently much more financially active than those encouraged to open the same no-frills account at a branch. (Sinja Buri, Bob Cull, Xavier Gine, Sven Harten). Status: Experiment complete. Paper being finalized. [Funded under MasterCard IFC Partnership for Financial Inclusion in SSA]ReferencesCull, Robert Ehrbeck, Tilman Holle, Nina. 2014. Financial inclusion and development: recent impact evidence. CGAP focus note no. 92. Washington, DC World Bank Group.… Bank. 2014. Global Financial Development Report 2014: Financial Inclusion. Washington, DC: World Bank. doi:10.1596/978-0-8213-9985-9.Rating of Implementation Progress for Action 1D: Substantial-----------Action 1E Response:M&E frameworks for FISF and HiFi programs are developed. All country programs under FISF and HiFi use these M&E frameworks.In addition, the new Financial Inclusion Global Initiative (FIGI) program developed an M&E program during the proposal stage. Country programs under FIGI will use this M&E framework as soon as they become active.Indicators were developed to support financial inclusion operations in general, and in line with these global program M&E frameworks. At the same time, the financial sector indicator in the new Core Sector Indicators support the measurement and monitoring of financial inclusion at project level.Rating of Implementation Progress for Action 1E: High-----------Action 1F Response:Response:UFA monitoring framework developed for estimating the "expected" number of previously unbanked adults reached by WBG advisory and financing engagements. There are separate approaches for FMGP work and IFC FIG work, due to the different nature of the businesses of the two units.&bull The methodology to estimate the expected number of previously unbanked adults reached by WBG ASA engagements was developed by the F&M GP UFA team and was reviewed by the DECFP team.&bull Monitoring for WB financing engagements are done through the indicators included in the results framework of these projects. These indicators are in line with the new WB Core Sector Indicator on Finance: "beneficiaries reached with financial services" where, for UFA purposes, financial services is defined as "transaction accounts."&bull An internal methodology note was drafted to describe the methodology (for all WBG advisory and financing arrangements), in collaboration with the EFI Front Office.&bull The methodology takes into account potential double counting across IFC FIG and FMGP in countries where both units work.&bull Progress updates for the expected reach figures are made semi-annually, in January-February, and in July-August.&bull Progress updates are shared online at the UFA Data Portal: IFC FIG has an established methodology to report on expected number of previously unbanked adults reached by IFC investment and advisory projects as well as financing engagements on the WB side. An extension of this methodology is used to measure and report on actual reach numbers.&bull IFC FIG reports quarterly for ex-ante measure of UFA and annually for the ex-post measure.&bull In FY 18, F&M GP will be working on a methodology to measure actual reach numbers based on the new Global Findex data (to be announced in 2018 Spring Meetings).Rating of Implementation Progress for Action 1F: Substantial