Investments in this strategy aim to improve the provision and usage of responsible financial services by underserved populations so that they are better able to advance their economic situation. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.


Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What is the problem the investment is trying to address? For the people experiencing the problem, how important is this change?

Globally, 1.7 billion people remain unbanked, lacking either an account at a financial institution or a mobile money service provider (1). Populations that are unbanked or underbanked are denied the opportunities that such access provides for their economic well-being, relying either on cash, which can be unsafe and hard to manage, or on informal, often expensive, and sometimes inappropriate forms of finance, such as borrowing from money-lenders.

People who are included in the financial system are better able to improve their economic situations by investing in their health, education, and businesses. They can also make short- and long-term payments, smooth their consumption, manage risks, and cope with shocks like emergencies and large unexpected expenses. Financial inclusion makes it easier for people to manage financial emergencies (such as job loss or crop failure) that can otherwise push families into (deeper) poverty.

Digital financial services (mobile money services, payment cards, and other applications of financial technology) are transforming the landscape of financial inclusion. Digital services save time and money, ease collection of money  from family and friends during times of crisis, and lowering the costs of receiving payments. However, access to digital financial services alone is not enough: financial services must also be tailored to the needs and preferences of those who are intended to benefit (for details, please refer to the Contribution section).

What is the scale of the problem?

  • An estimated 1.7 billion adults worldwide have no basic account with a financial service provider (1).
  • Globally, two-thirds of adults without a financial account cite lack of funds as a key barrier to obtaining one, implying that financial services are not yet affordable for or designed to fit the needs of low-income users. Other barriers to account opening include cost (accounts are too expensive), distance from a financial service provider, lack of necessary documentation, lack of trust in financial service providers, and religion.
  • More than 200 million formal and informal micro, small and medium-sized enterprises (MSMEs) in emerging economies lack enough financing to thrive and grow (3); the financing gap for MSMEs in developing countries is an estimated USD 5.2 trillion (4).
  • In the United States, as of 2015, nine million households were unbanked and another 24.5 million were underbanked (5).


Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who/What is helped through this strategy?

Low-Income Groups: Those with limited income often have no collateral they can post to obtain loans and often cannot deposit large enough amounts to make deposit accounts attractive to banks. Some lack credit history or documentation and have low or no financial literacy.

Individuals in Remote Rural Areas: Areas with low population density typically lack infrastructure, including financial services.*

Micro, Small, and Medium-Sized Enterprises (MSMEs): Often perceived as too risky or too small for mainstream banking institutions, more than 200 million formal and informal MSMEs in emerging economies require adequate financing to thrive and grow.

Women: As a group, men have more access to the financial system. Fifty-six percent of women worldwide remain outside the formal financial system, reflecting a 7% gender gap with respect to access to financial services in developing countries (1).

Forcibly Displaced Populations: Eighty percent of adults in fragile and conflict-affected states are outside the formal financial system (3).

* As the Global Findex Database noted in 2017, the unbanked in developing economies predominately live in rural areas (1). However, accurately quantifying the urban–rural gap presents difficulties.

What are the geographic attributes of those who benefit?

In high-income OECD economies, account ownership is almost universal: in 2017, 94% of adults in these economies reported having an account, compared to only 64% of adults in developing economies. Virtually all unbanked adults globally are in developing economies—though many of the world’s unbanked are in developed economies as well—with nearly half in just seven (1):

  • China (225 million)
  • India (190 million)
  • Pakistan (100 million)
  • Indonesia (95 million)
  • Mexico
  • Nigeria
  • Bangladesh

Notably, too, although access to financial services is almost universal in developing economies, many adults are underbanked, including, for example 24.5 million households (19.9%) in the United States (5).


Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

Is the investment’s contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How Much and Who?

Evidence obtained using rigorous research methodologies (including randomized control trials) generally confirms that access to and use of formal financial services are beneficial (6). Recent studies suggest that financial services positively impact several microeconomic indicators, including self-employed business activity, household consumption, and well-being (7). For example, a study in Kenya found that access to mobile money services enabled woman-headed households to increase their aggregate savings by 20%, allowed 185,000 women to switch from farming to business or retail activities, and helped to reduce extreme poverty among woman-headed households by 22%. A study in Nepal found that after receiving free savings acounts, woman-headed households in Nepal spent 15% more on nutritious foods and 20% more on education (1).

The extent to which this strategy can successfully reach the intended end users depends on several aspects including:

  • market penetration in the specific area served by investee institutions;
  • the development of financial products and services tailored to the needs of disadvantaged groups such as women, low-income people, and first-time users of financial services, whose literacy and numeracy skills may be limited;
  • the additional provision of non-financial services (such as training in financial and digital literacy);
  • the strength of the financial service provider’s policies and procedures with respect to Client Protection (Client Protection Principles); and
  • the adoption of management standards by the financial service provider that prioritize clients' needs (Universal Standards for Social Performance Management).

Regarding digital financial services, digital technology alone cannot ensure that people benefit from financial inclusion. Ensuring that such services deliver the greatest possible contribution requires well-developed payment systems, good physical infrastructure, appropriate regulations, and vigorous consumer protections and safeguards (1).

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many can receive the outcome through this strategy?

As indicated above, there are approximately 1.7 billion unbanked people worldwide who could be provided access to financial services. Some financial products and services provided to various populations may not be appropriate or may be mismatched to those populations. The number of potential beneficiaries could therefore be considerably higher than the number being reached now.

How much change can beneficiaries experience through this strategy?

The amount of change end users derive from this strategy depends on whether the products and services offered are tailored to the needs and preferences of the target population, along with several other contextual factors (see the Contribution section above). Examples of change aligned with this strategy include the following (6):

  • In a randomized study in Mongolia, the availability of credit allowed more women to expand their businesses and invest in small-scale enterprises. Credit availability was also linked to an 8.5% higher probability of entrepreneurship (6, 8).
  • Malawian farmers of cash crops who used a commitment savings product—one which did not allow withdrawals until after a certain date—increased investment by 13% and boosted crop output by 21% (6, 9).
  • A study in Nepal reported a 20% increase in spending on education among households that opened free bank accounts (6, 10).
  • In Niger, researchers found that sending social safety net payments via mobile phone—compared to requiring people to go and personally collect their payments—reduced overall travel and wait times by 75%. The authors calculated that the switch to digital payments saved end users enough equivalent time and cost to feed a family of five for a day (6, 11).
  • A randomized study in Bosnia and Herzegovina found increased self-employment (6%), inventory, and business ownership as a result of access to credit (6, 12).


Dimensions of Impact: RISK

Key questions in this dimension include:

What risks do investments in this strategy run in terms of either people/planet experiencing impact or society as a whole? What is the probability that those risks happen?

Risk factors include the following (categorized according to the IMP Impact Risk Framework):

  1. Stakeholder Participation Risk: Lack of proper attention to client protection and/or appropriate tailoring of products, lack of technical and financial literacy, lack of understanding of the objectives and experience of those affected by the investment, as well as lack of trust in financial and technology service providers could result in access not having as positive an impact on clients that it would otherwise have.
  2. External Risk: Lack of a supportive local regulatory framework and/or inappropriate government intervention could impede the healthy development of the market.*
  3. External Risk and Execution Risk: Significant economic, political or social instability could make it difficult for local organizations to operate effectively, reducing potential outreach and/or make it difficult for clients to use (especially credit) services effectively.
  4. Contribution Risk: Oversaturation of markets could result in overindebtedness of clients (refer to MIMOSA rankings).
  5. Drop Off Risk: Despite positive impacts of financial products and services, a persistent challenge facing financial service providers is the generally low uptake of certain products (e.g., savings). 

Other categories of risks included in the IMP framework were not seen to be significant. Diversification of investments across countries and regions, together with a generally strong commitment to the principles of expanding responsible access, putting client interests first, integrating the voice of those significantly affected,** and a focus on environmental screening and monitoring means that on a global level, such risks are well mitigated. The inclusive finance community engages in direct discussions with external parties, including regulators, to strengthen the sector, and proactively addresses issues such as client protection (Client Protection Principles), environmental standards, management standards and best practices to put clients at the center of all decisions of financial service providers (Universal Standards for Social Performance Management), as well as principles for mobile money providers (GSMA Code of Conduct for Mobile Money Providers). In addition the inclusive financial sector counts with different types of third party assessments, certifications, and ratings that allow investors to better understand whether and how the practices of financial service providers (investees) align with global principles and standards (e.g., Client Protection Assessment and Certification, SPI4 Assessment, Social Ratings, Mobile Money Certification).


*Refer to EIU Global Microscope rankings.

**Refer to Engaging All Affected Stakeholders.

What are likely consequences of these risk factors?

Such risks could lead to an inability of investee institutions to expand their outreach to more clients and/or an increase in default rates among clients, potentially resulting in the financial failure of the investee institutions and potentially negative impacts on clients who carry excessive debt burdens.

Illustrative Investment

Fundación Genesis Empresarial was founded in 1988 to provide financial and nonfinancial services to rural community members and small business owners in Guatemala. It offers loans (group, business, housing, and education), financial and business education, insurance and medical assistance to a predominantly female (70%) and rural (87%) population. Further, over 80% of its clients are financially vulnerable to extremely poor. Genesis is a pioneer in client-centricity and has a culture of perpetual improvement. The organization gathers economic, social, and client data to drive innovative offerings of products and services. In 2017, the organization received both a Client Protection Certification from the Smart Campaign and a five-star rating from MicroRate for its social performance. It is one of only two organizations in the world with such a rating.

Enda Tamweel, a microfinance company in Tunisia, works to promote entrepreneurship and self-employment among young people and women in disadvantaged neighborhoods and rural areas. The company offers credit and insurance products tailored to the needs of its clients through a nationwide network of 83 branches. Since 2013 has offered mobile banking services to facilitate greater reach in remote areas. It currently serves more than 330,000 clients nationwide, 60% of whom are women and 40% of whom live in rural areas. In cooperation with the Enda Inter-Arab Association, it also offers clients training, coaching and marketing support to help them use their loans more effectively. The institution received SMART Campaign Certification in 2015,* underwent a full SPI4 audit in the same year, and received a social rating of five from Planet Rating.


*Enda Tamweel Smart Campaign Certification expired in 2017 and has not been renewed to date.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

Banking the Poor Via Savings Accounts: Evidence From a Field Experiment

Prina, Silvia. “Banking the poor via savings accounts: Evidence from a field experiment.” 2013

Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya

Dupas, Pascaline, and Jonathan Robinson. “Savings constraints and microenterprise development: Evidence from a field experiment in Kenya.” American Economic Journal: Applied Economics 5, no. 1 (2013): 163-92

Risk Sharing and Transaction Costs: Evidence from Kenya's Mobile Money Revolution

Jack, William, and Tavneet Suri. “Risk Sharing and Transactions Costs: Evidence from Kenyas Mobile Money Revolution.” American Economic Review 104, no. 1 (2014): 183-223

Smoothing the Cost of Education: Micro-Savings in Ugandan Primary Schools

Karlan, Dean, and and Leigh Linden. “Smoothing the Cost of Education: Micro-Savings in Ugandan Primary Schools”

Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts

Karlan, Dean, and Jonathan Zinman.“Expanding credit access: Using randomized supply decisions to estimate the impacts.” The Review of Financial Studies 23, no. 1 (2009): 433-464.

Payment Mechanisms and Anti-Poverty Programs: Evidence from a Mobile Money Cash Transfer Experiment in Niger

Aker, Jenny C., Rachid Boumnijel, Amanda McClelland, and Niall Tierney. “Payment mechanisms and antipoverty programs: Evidence from a mobile money cash transfer experiment in Niger.” Economic Development and Cultural Change 65, no. 1 (2016): 1-37.

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Burgess, Robin, and Rohini Pande. “Do rural banks matter? Evidence from the Indian social banking experiment.” American Economic Review 95, no. 3 (2005): 780-795.

Expanding Banking Access to the Rural Poor in Kenya: Challenges and Opportunities

Dupas, Pascaline, Sarah Green, Anthony Keats, and Jonathan Robinson. “Challenges in Banking the Rural Poor: Evidence from Kenyas Western Province.” 2012. doi:10.3386/w17851.

Interest Rate Subsidies and Savings Behavior in Kenya

Schaner, Simone. “Interest Rate Subsidies and Savings Behavior in Kenya”, 2009

The Long-Run Poverty and Gender Impacts of Mobile Money

Suri, Tavneet, and William Jack. “The long-run poverty and gender impacts of mobile money.” Science 354, no. 6317 (2016): 1288-1292.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.