The economic effects of COVID-19 have made the need to increase financial inclusion more pressing than ever
By Francisco Astelarra, chair of the GFIA financial inclusion working group
“Build back better” is the oft-repeated mantra as policymakers seek a way out of the global economic plunge caused by the COVID-19 pandemic and look to take urgent action to decarbonise to prevent climate disaster.
The economic effects of the pandemic have driven more individuals into poverty and reduced the financial resilience of many others, so “build back better” must include improved financial inclusion and greater financial literacy worldwide, as both are key drivers of economic growth and poverty alleviation.
Financial inclusion — which means individuals and businesses having access to useful, affordable financial products and services — has been identified as an enabler for seven of the UN’s 17 Sustainable Development Goals, as it facilitates daily life and helps people and businesses plan for long-term goals and unexpected events. The G20 is committed to advancing financial inclusion worldwide and the World Bank considers financial inclusion a key enabler in reducing extreme poverty and boosting prosperity.
Products designed to provide support in times of adversity — such as insurance — or to provide financial cushions — such as savings or private pensions — were already underused worldwide before the pandemic: a survey carried out just before COVID-19 took hold by the OECD and the International Network on Financial Education found that only 37% of respondents from 26 countries had bought an insurance product in the previous year and 23% had turned to non-formal sources (family, friends) rather than formal ones to borrow or save.
Progress on financial inclusion is being made; the World Bank estimated that 1.2 billion adults gained access to a bank account between 2011 and 2018, for example. Yet the same research showed that nearly a third of adults — 1.7 billion — were still unbanked. And according to 2018 UN figures, while 68% of the world’s retirees were receiving a pension, the figure was only 26% in central and southern Asia and just 23% in sub-Saharan Africa. Pension coverage was lower among women than men in all regions. Indeed, in March 2020 the OECD reported that in European OECD countries pension payments to women aged 65 and over were 25% lower than for men.
“Financial inclusion is an enabler for 7 UN SDGs.”
“According to 2018 UN figures, while 68% of the world’s retirees were receiving a pension, the figure was only 26% in central and southern Asia and just 23% in sub-Saharan Africa.”
A GFIA survey
GFIA’s financial inclusion working group has been carrying out a survey among its members to get a clear picture of the actions and best practices of policymakers, insurance associations and insurers in boosting financial inclusion, particularly for women. The survey focuses on three areas:
Women’s access to affordable and adapted insurance
Financial exclusion unduly affects women, the elderly, the poor and the less well educated. The World Bank research cited above showed that the gender gap between bank account ownership remained stuck at 9 percentage points in developing countries. GFIA’s survey looks at whether its members have set objectives to meet the financial security needs of women, whether members or governments have gathered data on women’s protection gaps and their access to insurance, and whether companies offer products and services tailored to women’s needs or target women specifically through marketing and distribution.
Insurers’ internal practices and advancing diversity and inclusion within companies
Here, GFIA is canvassing its members about their initiatives or those of their companies to promote gender diversity and equality, their collaborations with policymakers and others in this area, and the proportion of women in leadership roles in insurance.
Financial education and economic empowerment
Improving levels of financial literacy is vital for boosting financial inclusion, so insurers around the world are engaged in financial education initiatives. GFIA’s survey is examining countries’ strategies for financial education and whether they take gender into account. It is also mapping the initiatives of members and their companies in the community, in the workplace and in their investment criteria.
The results of the survey will feed into GFIA’s own activities in this area, particularly its engagement with policymakers in international discussions on financial inclusion.
FIDES (Interamerican Federation of Insurance Companies)