Is Financial Inclusion Really Impacting the SDGs? This New Research Approach Could Offer an Answer

  • February 14, 2019

  • Pacific


Perched on a hilltop overlooking the Suva Harbor, Nauluvatu village in Fiji is home to some industrious women. Local entrepreneurs Tulia and Ilisapeli get up at 4 am to run their canteens, selling lunch packs, kava, baked goods, noodles, tinned fish. Having taken several loans from a local microfinance institution, both women have bank accounts are avid users of mobile money. They send money to relatives, make payments on their loans, and buy top-ups, among other things. They are also able to pay bills, like water and electricity and deposit money into their pension. They’ve started using their mobile money in this way within the last year or two, and as such appear to be a part of the global narrative on the increase of financial inclusion.

Unresolved Questions on the Impact of Inclusion

Indeed, the World Bank’s Global Findex results from 2017 show steady success in getting more low-income people to use formal financial instruments. But as Klapper and other analysts have emphasized, many accounts remain dormant, and most transactions are person-to-person transfers or cash-outs. So while the achievements in expanding financial services across the globe should be celebrated, it is tempting to lose faith in financial inclusion as a tool for development. Is this growing rate of inclusion really making a difference in the lives of people like the canteen owner I met in Fiji? Is it moving the world, even slowly, toward the achievement of the SDGs?

Recent efforts to establish evidence that connects financial tools to development impacts have not been decisive. Some point out that while there is some sign of a connection between financial inclusion and a handful of SDGs (e.g. extreme poverty, gender equality and improved nutrition), the evidence for financial inclusion’s impact on other SDGs is even more sparse. Furthermore, financial inclusion programmes which target the SDGs sorely lack a convenient, standardized approach to nimbly appraise their impact. This issue is particularly challenging for development programs which operate in the adaptive management scenarios common in the dynamic environment of digital financials services.

A New Research Approach

The need for a better measurement approach was the impetus for establishing the Impact Pathways project, pioneered by the UN Capital Development Fund (UNCDF) with conceptual and technical support from BFA. This project embraces a “pathways” approach to unpacking the felt benefits and development outcomes experienced by users of financial services. The key goal behind this approach is to take into account the whole set of financial products that low-income customers use, to understand all the ways they might use each of them, and to assess the benefits that they experience. This comprehensive assessment might ultimately help detect any improvement financial services have on a range of SDGs.

We visualize this pathways approach in the dynamic infographic below which, moving from left to right, shows the ways financial tools can impact the SDGs. UNCDF and BFA are using data from providers that UNCDF supports to show the journey from financial product to use case to benefits to SDGs.

Figure 1. Conceptualizing pathways from financial tools to SDGs

Our Impact Pathways project is a mixed-methods research project. We first analyze large transactional and balance data sets from financial service providers in order to assign active customers into known uses cases. We then use the results of this analysis in a phone survey to question customers about the perceived benefits they receive from the different ways they use the financial product. Finally, we link academic literature to map these reported benefits to the SDGs, providing the overall SDG footprint of that service.

Under the Impact Pathways project, UNCDF set out to explore the connection between financial service use cases and the SDGs, in the hope of illuminating the multiple ways that formal financial service users might be experiencing impact (or not!) UNCDF is now using this approach to measure the impact of several financial service providers it has supported in the Pacific, as well as one in Zambia. The findings from these exercises will be released in the next few months.

To read a detailed account of the framework and methodology, see a recently released focus note from UNCDF and BFA [], “Pathways to a Better Life: The Intricate Role of Digital Finance in Reaching the Sustainable Development Goals” and the accompanying interactive graphic. This focus note discusses the logic, conceptual framework, caveats and detailed methodology behind this new approach to mapping the thorny trail between the use of financial services and the SDGs. UNCDF will also soon be providing a toolkit that will allow other stakeholders to deploy this method for themselves.

The Pacific Financial Inclusion Programme has helped over two million Pacific Islanders gain access to financial services and financial education. It achieves these results by funding innovation with financial services and delivery channels, supports policy and regulatory initiatives, and the empowerment of consumers. PFIP is jointly administered by the United Nations Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Governments of Australia and New Zealand and the European Union. Read more at: