Dan Houston
Singapore is the world’s most financially inclusive market, alongside the U.S., Nordic Europe, and Hong Kong, according to the inaugural Global Financial Inclusion Index (Index) sponsored by Principal Financial Group®. The research, conducted by the Centre for Economics and Business Research and released today, examines how well a market’s respective government, financial system, and employers provide relevant tools, services, and guidance to enable greater levels of financial inclusion.
“Financial inclusion is foundational to global economic progress. As an organization focused on helping more people gain access to financial security, we believe inclusion is an integral component of a market’s ability to prepare for and recover from adversity, grow sustainably, and build a brighter future,” said Dan Houston, chairman, president, and CEO for Principal®. “The Global Financial Inclusion Index provides a rigorous, data-driven framework to track financial inclusion on a global scale. Through this we can identify the structural gaps in financial inclusivity and take steps to address them, along with many others, to help build a more productive and protected workforce and society.”
The Index examines 42 markets and scores them across three pillars — government support, financial system support, and employer support — using datapoints across public and survey-based sources.
The government support pillar examines the degree to which governments promote and enable financial inclusion, considering data on public pension support, deposit and consumer protections, employment, education, and financial literacy levels, and online connectivity.
The financial system support pillar reviews the availability and uptake of various financial products, services, and education, considering data on access to bank accounts and credit, maturation of financial technology and use of real-time payments, and the overall effectiveness of the financial services industry in promoting confidence and small to medium sized business growth.
The employer support pillar evaluates the availability and impact of employer programs to improve employee financial wellbeing and inclusion across various dimensions such as employee pension contributions, employee insurance programs, and financial guidance
In its first year, the Index is helping to develop a benchmark for financial security and inclusion across global economies.
Key findings
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In general, developed economies tend to pool towards the higher end of the Index, and emerging and developing economies cluster at the bottom. Six of the top 10 markets for financial inclusion are European and, within this group, four are Nordic. Europe’s larger economies rank at the bottom of the table, with Italy as a particular outlier at 37th. The lower half of the ranking consists mainly of countries in Latin America, sub-Saharan Africa, and Asia. Argentina ranks last.
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Economies that provide strong support from their government and financial system tend to provide a lower level of employer support – and the reverse is also true. Developed economies typically score well for government and financial system support, whereas emerging economies generally score better for Employer support.
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When considering this research on an investment basis, the markets analysed can be broadly grouped into four categories – mature, forward-looking economies; mature, backward-looking economies; young, forward-looking economies; and reliant economies – each of which provides an indication of several of the short-, medium- and long-term risks to which economies are exposed. There are some outliers to these categories – primarily some of the largest economies including the U.S., China, and India – which do not fit neatly into a single category.
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The findings suggest financial inclusion may be a powerful indicator of next generation capital and wealth markets globally. When performance in each pillar is strong, it helps promote business growth and confidence and may lead to accelerated development of a capital market. These three pillars can provide insights into its overall economic maturity and development of a market and suggest ways to drive progress.
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Markets which rank highly for financial inclusion tend to also perform well on other societal factors such as food security, productivity, economic and social resilience, standards of living, and climate change adaption. There are strong, positive correlations between the Index rankings and the rankings of markets in several other indices which track the key factors affecting global populations today.
“The Index provides a data-driven, horizontal view for developed and emerging markets to learn from each other when it comes to fostering a financially inclusive citizenry,” said Kay Neufeld, head of forecasting and thought leadership at the Centre for Economics and Business Research. “We tracked the Index against metrics that follow some of the most significant trends facing society today – like food insecurity and climate change – and recognized a clear relationship between financial inclusion and those factors that contribute to a successful society.”
Global Financial Inclusion Index
Top 10 Scoring Markets:
1. Singapore (68.9)
2. United States (68.3)
3. Sweden (65.4)
4. Hong Kong (65.1)
5. Finland (64.7)
6. Denmark (63.9)
7. Australia (63.6)
8. Switzerland (63.4)
9. Norway (63.1)
10. The Netherlands (59.8)
Bottom 10 Scoring Markets:
33: Turkey (36.1)
34. South Africa (34.1)
35. Brazil (33.9)
36. Mexico (33.3)
37. Italy (32.8)
38. Peru (32.7)
39. Colombia (32.2)
40. Nigeria (26.9)
41. Ghana (22.2)
42. Argentina (19.2)