Measuring to Inform Policies Combined working group meeting
Measuring to Inform Policies Combined working group meeting of FID and FISPL, Dushanbe 24 April 2017
Overview • Who are we • Our measurement work • • • Measurement challenge in financial inclusion The i 2 i approach The way forward Bringing smart policies to life
Overview • Who are we • Our measurement work • • • Measurement challenge in financial inclusion The i 2 i approach The way forward Bringing smart policies to life
Our measurement objective What is the state of financial inclusion? What are the areas of concern in financial inclusion? Are people’s lives improved by the use of financial services? What can be done to address those areas? Evidence-based policies Policymakers What is the state of financial inclusion? What is the structure of the market? Are there areas of risk that requires regulatory attention? Do regulations unnecessarily inhibit the use of financial services? Informed regulatory frameworks Regulators Bringing smart policies to life
Our measurement objective Are there market opportunities? What is the size of the market? Is there a business case? What are the user needs? How are these needs being met? Who are the current participants in the market? Client-centric product design, lowered risk and cost Financial Service Providers Bringing smart policies to life
Inform policy through measurement What is the current state? Why are there deviations from the goal? Assessment What is the problem and what do I need to do? Evaluation Diagnostic Measure progress towards goal What indicators and what’s an appropriate target? Monitoring Target setting Bringing smart policies to life
How we are addressing this? Development and testing Enabling greater insight Catalysing innovation and change Data driven decisions Bringing smart policies to life
Timeline: How we moved forward in financial inclusion measurement Financial inclusion adopted by G 20 Basic set of indicators adopted AFI Core indicators adopted UFA 2020 launched Maya Declaration launched + 700 million new bank accounts Bringing smart policies to life
Origins: Available data drove targets in financial inclusion Access AFI Core Indicators G 20 Basic Set Financial Inclusion Indicators Existing global / multicountry source • • Number of branches per 100 000 adults • IMF FAS • % of adults with an account at a formal financial institution % of adults with at least one loan outstanding from a regulated financial institution • Global Findex • Usage • Number of access points per 10 000 adults % of adults with at least one type of regulated deposit account % of adults with at least one type of regulated credit account • Sources: G 20 Financial Inclusion Indicators, AFI Core Indicators Bringing smart policies to life
New data collected allow us to develop indicators National Demand Side Surveys Bringing smart policies to life
Overview • Who are we • Our measurement work • • • Measurement challenge in financial inclusion The i 2 i approach The way forward Bringing smart policies to life
What do we want to measure in financial inclusion? Enabling environment Environment allows appropriate products to be provided Access Appropriate products are available to capable consumers to use Uptake Usage Outcome Impact An existing relationship with an FSP that confers the right to use a financial services without any further requirements having to be met The utilization of a financial service Financial outcomes directly attributable to usage of financial services Household and government objectives for which the use of financial services is a necessary but not sufficient condition. Bringing smart policies to life
Usage theory Three assumptions: 1. Usage is necessary for financial inclusion outcomes and impact 2. Consumers choose financial services based on their underlying needs 3. Users engage different financial devices (payments, savings, credit, insurance), from different types of formal and informal providers, in meeting a specific need Bringing smart policies to life
Assumption 1: Usage is necessary for financial inclusion outcomes and impact (Transactional account example) Mailbox account at FI (1 - 2 transactions) C ut hi h na A fr ic B a ra Tu zil rk e K y en ya In N dia ig R eria w an M da ex Za ico In mb do ia C nes o B lom ia an g bi Ph lad a ili es pp h in es Pe Vi ru et n Et am h Ta iop nz ia M an ya ia nm a Eg r yp t Pa DR ki C st Ye an m en 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% So % of adults with an account at a formal financial institution Dormant account at FI (0 transactions) Used account at FI (> 3 transactions) Source: Findex 2014 Bringing smart policies to life
Assumption 2: Consumers choose financial services based on their underlying needs & Assumption 3: Users engage different devices to meet a need Use savings Borrow Use payment devices Use insurance Use multiple financial devices 100% 60% 40% 20% es in us B n ti m en ac st ve In A ss et Fa s n Ed u at m ul cu ca io tio n ts g in rm R es ili in en pu ce ity id Li qu TV C R TV D R pa ill B ca lp ay m ym en en t t 0% Lo % of adult population 80% Transfer of value Meeting goals Source: Fin. Scope Consumer Survey Zimbabwe 2014 Bringing smart policies to life
Understanding usage For some devices: two-step progression: uptake as interim step Use case Uptake First use/ trial For some devices, one-step progression: uptake and first use happen together ) re e lativ ved rcei e valu pe ve ( gati Ne Positive (perceived) relative value Use case falls Switch to an alternative Switch to alternative device or revert to prior default (e. g. cash) After some time, value breaks down, prompting a switch Sustained use Ongoing use of the device over time awa y Unmet need or use case falls away Uptake or first use drivers After some time, use case falls away or client does not meet need, and usage ceases Usage drivers Bringing smart policies to life
Unpacking the usage journey - 1 Switch Sustained use No use First use/trial Supply Side Drivers • • Advertising Promotions Trials Increased access Uptake Demand Side Drivers • Circumstantial • Procrastination Use case “Paying for my children’s school” Bringing smart policies to life
Unpacking the usage journey - 2 Sustained use Switch No use First use/trial Uptake Over-the-counter payments Use case “Paying for my children’s school” Bringing smart policies to life
Unpacking the usage journey - 3 Net Perceived Value Non-Functional Drivers • Behavioural factors • Contextual factors • Trust Functional Drivers • Meeting Needs • Costs Switch Sustained use No use First use/trial Uptake Bringing smart policies to life
Measuring usage Frequency Use case 1 Financial Device 1 Recency Financial Need Use case 2 Financial Device 2 Monetary value Financial Need: A human need that can be met by or through financial devices. • Liquidity • Resilience • Meeting goals • Transfer of value Financial Device 3 Use case 3 Use Case: Discrete purpose for which a person use a financial device. Duration Financial Device: A physical, social or electronic mechanism that stores, accumulates, distributes or transfers monetary value, and can be used to meet a financial need. Usage: A person deploying a financial device to meet a specific financial need. Bringing smart policies to life
Overview • Who are we • Our measurement work • • • Measurement challenge in financial inclusion The i 2 i approach The way forward Bringing smart policies to life
The way forward • Structuring the demand-side survey – needs-based approach and usage metrics: • South African survey just completed • “Needs strand” for resilience • Develop analytical framework for drivers of usage • Will reflect individual country realities • Match actual service provider data (supply-side) with survey data • Determine drivers for uptake/first use • Determine drivers for continued use/no use • Consider other factors – trust, financial capability, behavioural factors • Develop outcome measurement framework • Liquidity, resilience, meeting goals • Validate consistency of measuring outcomes from usage and any other factors Bringing smart policies to life
The way forward • Develop measurement lenses for • Policy makers • Regulators • (Classes of financial service providers) • Based on outcomes measurement framework • Include additional data – regulatory data, data on financial infrastructure, relevant non-financial data • Work with specific countries to develop and test these lenses – then extract insights for global approach Bringing smart policies to life
Inform policy through measurement What is the current state? Why are there deviations from the goal? Assessment What is the problem and what do I need to do? Evaluation Diagnostic Measure progress towards goal What indicators and what’s an appropriate target? Monitoring Target setting Bringing smart policies to life
Inform policy through measurement THANK YOU! Bringing smart policies to life
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