Beyond Financial Inclusion:

Financial Health as a Global Framework

Individuals all around the world strive to improve their financial lives. They spend, save, borrow, and plan, working to grow their assets and protect their resources, in the pursuit of improved financial health. This paper expands upon our initial financial health research and applies it to a global setting.

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By Tanya Ladha, Kaitlin Asrow, Sarah Parker, Beth Rhyne (Center for Financial Inclusion at Accion), Sonja Kelly (Center for Financial Inclusion at Accion)

Executive Summary

Individuals all around the world strive to improve their financial lives. They spend, save, borrow, and plan, working to grow their assets and protect their resources, in the pursuit of improved financial health. A relatively new term in the financial inclusion community, financial health is a model for assessing how well one’s daily financial systems help build resilience from shocks and create opportunities to pursue one’s dreams. Whether rural or urban, in countries both developed and developing, individuals share a common aspiration for financial health.

In 2015, the Center for Financial Services Innovation (CFSI) created the framework and definition of financial health, originally designed for use and applicability in the United States. Employing an outcomes based approach, CFSI created indicators to help consumers and providers measure and improve financial health. This framework created a definition of success beyond financial literacy or capability, and access or use of products. Having deep expertise in the global financial inclusion arena, the CFSI framework resonated with the Bill & Melinda Gates Foundation and the question was raised – Could an outcomes based financial health framework translate into a developing world context?

Over the course of 2016, CFSI, in collaboration with the Center for Financial Inclusion at Accion (CFI) and Dalberg’s Design Impact Group (DIG), evaluated hypotheses, conducted field research, convened thought-leaders, and tested assumptions, all for the purpose of determining the validity of financial health as a core concept internationally. Teams worked to understand the necessary adaptations such a model would require across borders, as well as the opportunities and use cases for such a framework.

This report presents results of these efforts, finding that the core financial health framework resonates with consumers, practitioners, providers, and funders both in the U.S. and in the developing world.

"A growing number of thought leaders
are using 'financial health' to orient
work in the developing world. This report
explains why this framework resonates
with consumers, practitioners,
providers, and funders."

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While the core financial health framework translates across borders, there are important distinctions and constraints that influenced the creation of the indicators. Within a developing world context, there are factors exogenous to one’s own behaviors that have critical impact on one’s financial life. While exogenous factors are important in the U.S., we found them to be uniquely important in the developing world. The global financial health framework consists of six primary indicators, used to measure consumer financial health, as well as four contextual factors that are important to consider in the developing world:

Financial Health Indicators for the Developing World

A consumer in the developing world is financially healthy when he or she:

  1. Balances income and expenses
  2. Builds and maintains reserves
  3. Manages existing debts and has access to potential resources
  4. Plans and prioritizes
  5. Manages and recovers from financial shocks 6. Uses an effective range of financial tools
  6. Uses an effective range of financial tools

Four Key Factors in Understanding Financial Health In the Developing World

A consumer’s financial health is significantly influenced by his or her:

  1. Absolute income level
  2. Income and expense volatility
  3. Social network
  4. Financial role

Financial health as a concept has garnered traction within the U.S., and is gaining momentum globally. Such a framework can push the financial inclusion conversation forward, helping shape policy, direct donor and government resources, and contribute to the high-quality design of financial services. More work must be done to create instruments for accurate measurement. There is a role for researchers, financial services providers, and policymakers in supporting the creation of more nuanced infrastructure from which to build out a more tactical and actionable framework. However, preliminary research suggests a powerful and profound parallel between the financial lives of consumers in the U.S. and abroad.

Attributions

The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank working toward full global financial inclusion. Constructing a financial inclusion sector that reaches everyone with quality services will require the combined efforts of many actors. CFI contributes to full inclusion by collaborating with sector participants to tackle challenges beyond the scope of any one actor, using tools that include research, convening, capacity building, and communications.


This report was created by the Center for Financial Services Innovation, in partnership with the Center for Financial Inclusion at Accion, through the generous support of the Bill & Melinda Gates Foundation.

Guided by the belief that every life has equal value, the Bill & Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people—especially those with the fewest resources—have access to the opportunities they need to succeed in school and life. Based in Seattle, Washington, the foundation is led by CEO Dr. Susan Desmond-Hellmann and Co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett.

All in-country field research was led and conducted by Dalberg’s Design Impact Group.

 

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