This chapter highlights three recommendations that may enhance the Bank Group’s work on financial inclusion. Given MIGA’s inactivity in financial inclusion, the recommendations are targeted to the World Bank and IFC. Should MIGA strategy define priorities in financial inclusion, these recommendations may prove useful. The chapter draws from the lessons of chapter 1 on the literature and global experience, from chapters 2 and 3 on the evidence for Bank Group relevance and effectiveness, and from chapter 4 on the lessons of experience for project success and failure.

Financial inclusion involves more than access, which was always regarded as a first step toward inclusion. Genuine inclusion needs to focus on usage by excluded groups in addition to access. After the initial emphasis on supporting large numbers of accounts opened under UFA2020, the Bank Group’s approach to financial inclusion evolved toward the more holistic concept of inclusion. Depending on context, engagement can involve upstream and downstream engagements and a combination of financing and advisory and analytical work (including FSAPs). However, under pressure to meet urgent needs during COVID-19, the focus largely reverted to access. Many G2P payment accounts created during COVID-19 are unlikely to be sustainably used. The incentive to users of collecting government payments is not, in many contexts, sustainable. Yet there are relatively few insights into how to increase this incentive beyond continuing payments. Support to Pakistan and Tanzania are two examples of successful long-term engagement and well-sequenced approach. The World Bank provided technical notes to the State Bank of Pakistan, complemented by parallel analytical work through the FSAP. The Bank Group’s engagement enabled it to support state institutions in responding to these challenges through a broad base of interventions, including direct payments. These payments, in turn, became opportunities to enhance financial inclusion. The long-term engagement also allowed the Bank Group to partner with the State Bank of Pakistan to introduce several market solutions. One was a recently launched interoperable instant payment system for smallholders called Raast, which was part of Pakistan’s National Payment Systems Strategy. In Tanzania, a 2014 IFC AS project supported the establishment of rules for mobile financial services interoperability. Five years later, IFC began to provide downstream AS to a leading mobile operator to enhance access to and usage of mobile payments.

Recommendation 1: The World Bank and IFC should further encourage account use by underserved groups, including women and rural poor people, and emphasize this more in their strategies and projects. This will require long-term and well-sequenced approaches, with due attention to private sector capabilities, a balanced combination of supported financial services (credit, payment, savings, and insurance), and a balance between supply (for example, DFS and G2P) and demand measures (for example, financial literacy and consumer protection), as well as among upstream policy, regulatory, and institutional measures and downstream service delivery interventions. The Pakistan and Tanzania projects provide good examples of long-term well-sequenced approaches to encourage account use by underserved groups.

DFS have tremendous potential to extend financial services to underserved groups but require an enabling framework and a more comprehensive approach than has usually been fully realized in the past. DFS have shown tremendous ability to extend financial services to underserved and excluded people, including in situations where traditional brick-and-mortar solutions are unsustainable but are often constrained by the absence of enabling conditions in terms of the legal and regulatory framework, financial or physical infrastructure, ancillary systems, institutional capabilities, or incorporation of DFS into financial services for MPWEG.

Recommendation 2: The World Bank and IFC should design and implement more comprehensive approaches that address constraints in the enabling environment for DFS to reach underserved and excluded groups. Depending on market conditions, attention may be needed to constraints in the legal and regulatory framework, financial or physical infrastructure, ancillary systems, institutional capacity, and integration of digital solutions into financial services for MPWEG. A full package would often include measures to advance universal identification, digital access (covered in a parallel IEG report), financial literacy, consumer protection, and data privacy. The Tanzania case study shows that a joint World Bank–IFC practice introduced complementary interventions, such as enabling regulations for mobile payments, merchant acceptance of such payments, and interoperability, which enhanced effectiveness.. The framework of measures needed for DFS to reach their full potential is known to the World Bank and IFC, but a number of client countries would require a more comprehensive approach to realize it.

Currently, the World Bank and IFC derive insufficient information from their projects on outcomes and impacts for financially excluded or underserved populations. Given the limited picture deriving from the literature of the effectiveness of financial inclusion in addressing the needs of poor and excluded people, Bank Group learning and feedback from its projects is vital. National data, such as Global Findex, have been very helpful but are insufficiently granular to track changes to project and program effects. It is important to fill in substantial gaps in evidence for a causal chain between the immediate outputs or intermediate outcomes measured in projects and the higher-level outcomes or impact expressed in the Sustainable Development Goals and by the Bank Group. Since the majority of defined project outcomes concern account access and number of transactions, there is a way to go to align project outcomes with higher-level outcomes, such as higher income, more investment and jobs, and, ultimately, economic and social mobility and poverty alleviation. The Bank Group has an important role to play in ensuring that data are collected at the project and market level to inform research and learning (including evaluation of outcomes and impact) on these links.

Recommendation 3: To enhance learning on what works to increase the beneficial use of financial services at the MPWEG, the World Bank and IFC should collect outcome data across different underserved and excluded groups, initially on a pilot basis. Relying on Global Findex and further developing it as a tool to understand financial inclusion outcomes are essential. Collecting additional data on financial inclusion outcomes more regularly, such as who is benefiting and how they are using and benefiting from services, would improve understanding of which financial inclusion interventions benefit the excluded groups and help people exit poverty. The data would also enhance the Bank Group’s understanding of and empirical research on how to encourage beneficial account use by underserved groups, including women and rural poor people, and how to improve the design of strategies and projects to encourage such beneficial use. In recognition of the challenges and costs of such systematic data collection on MPWEG, this could be launched initially on a pilot basis for a sample of relevant projects.