(Shortened version of this article was first published by FinDev Gateway)

Earlier this year World Bank released the much anticipated “Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution”, giving the world another installment of the most robust, bird’s-eye view of financial inclusion across the globe. The Global Findex is a detailed, nationally representative, demand-side survey on financial service access and usage conducted across 144 countries every 3 years.

In April, the third global dataset was launched for all to peruse, crashing the World Bank’s website in the process.[1] The data show the progress we have made as well as the stumbling blocks we encounter in trying to create truly inclusive financial systems. Overall it showed that, although 1.2 billion adults had gained access to accounts since 2011, gains were uneven, and the divides between men and women, and rich and poor was not reduced.[2] In short, tremendous progress, but much remains to be done.

While most countries are represented in the dataset, there are currently no Pacific Island Countries (PICs) included in the Global Findex, nor are there any Small Island Developing States (SIDS). How do these countries stack up against their peer groups or global trends? To answer this question, several PICs’ central banks and Pacific Financial Inclusion Programme (PFIP) convened in 2014 to address the lack of a similar dataset and spent the following few years engaged in collecting and curating large-scale, nationally representative demand side surveys, designed to drive financial policies in the PICs forward. These studies were harmonized with the Global Findex, and while the methodologies of both studies are different, the two data sets do allow for some benchmarking and insights.[3] And the recent release of the Global Findex is a timely opportunity to reflect on how the PICs stack up to their peer (and not-so-peer) groups across the globe.[4]

This post looks at a few of these comparisons for the first time. In some cases, the Pacific echoes what we see in the Global Findex, but there are some poignant divergences as well. Here’s a few things we notice when we line up the Pacific data with the Global Findex[5]:

Overall, the PICs have same levels of access as Sub Saharan Africa

As a region, the average estimated percentage of adults with access to formal financial services[6] is around 41% -far lower than both the World and Developing countries peer groups, and similar to that of sub Saharan Africa at 43% (Fig 1). While myriad dissimilarities exist between the Pacific and Sub Saharan Africa, both areas struggle with challenges in building infrastructure (or digital “rails”) in remote areas and among sometimes isolated populations, although the Pacific may be more profoundly affected by this. Sub-Saharan Africa’s low performance in terms current overall formal account ownership, masks the incredible growth of this data point in some countries – more than doubling since 2011, due in part to the expansion of digital financial services. While the Pacific demand-side data cannot yet point to trends having only been collected one time, anecdotally and through supply side data we know that high growth rates may have been possible in some countries over a similar time period, while in others growth has likely been much slower. However, the Pacific data does not yet include Papua New Guinea (PNG); the country with the region’s highest population and likely lowest access. If PNG were included in the dataset, the overall Pacific figure would likely be much lower, and the recent growth trajectory would be unknown.

PICs’ individual footprint is as diverse as the islands themselves[7]

When we unpack the regional grouping (Fig 1) into separate countries an extremely varied picture emerges, as is the case with most development data on the PICs. The region contains three upper middle-income countries (Fiji, Samoa, and Tonga), with Tonga and Samoa newly minted as such. There are also two lower middle-income countries: Vanuatu and Solomon Islands. Fiji, the region’s most developed country, has the highest rate of adult account access at 60%, and Solomon Islands takes up the rear with 26%. Fiji is roughly on par with the rest of the developing world in 2017 and situated just between the upper middle-income countries and lower middle-income countries in terms of overall footprint. All other countries remain far behind the achievements any peer group shown here.

However, both the World and Developing countries peer groups contain population giants like India and Kenya, which are experiencing rapid transformation of their financial sectors due in part to their Fintech “revolutions” made possible with large, dense markets. Pacific markets are of an utterly distinctive character, and it would be unrealistic for Pacific countries to mimic this outreach in the near term.

Gender gap wider than global average in some PICs, with notable exceptions

While the Global Findex shows many more women gaining access to financial services, up 7% since 2014 to 65%[8], the gender gap remained unchanged at 9%[9][10]. Overall, the financial inclusion community has not managed to address the systematic barriers which prohibit women from gaining access to accounts, and the Findex data, stubbornly unchanged from previous years highlights this wake-up call[11]. Some countries have made progress, and even have a higher account ownership than men (Philippines), while some countries have even regressed with an increasing gap (Nigeria). The Pacific data show similar disparities. The Solomon Islands and Fiji contain the biggest gender gap at 12% and 16% respectively. However, Tonga and Samoa completely buck the trend with equal or better access to accounts for women (0% difference and +2% respectively). This is only present in a few other countries across the world (Argentina, South Africa, Indonesia).

Most people saved something

All the Pacific Island countries outperformed their peers in term of saving something – via any means in the last year. Solomon Islands showed a particularly high propensity for this behavior, although a low tendency for using formal accounts to do so. In all cases, the PICs profiles differ from the major peer groups. This points out an interesting area for future research, or perhaps additional probing in future demand side surveys.

Borrowing, both formal and informal, showed less of a stark difference between the peer groups and the PICs. Samoa and Vanuatu are very similar to upper and lower middle-income countries. Across the board, like all the peer groups, the PICs have a much higher rate of informal borrowing.

There is not a direct contraction from savings to borrowings per se, however the high rates of both do illuminate an area which might benefit from extra research to fully understand this picture at the consumer level.

The role of mobile

We see that among peer groups in which there is a leap in inclusion (World, Developing World), there has been a corresponding leap in people reporting they have digitally paid a bill in the last year, although overall numbers are still low (Fig 6). In the Pacific, the numbers of people who have paid a bill digitally are very small or nonexistent, possibly indicating that mobile money has not caught hold – even for early adopters. All PICs are under 1.5% on this data point, with three countries at zero, including Fiji – the region’s most financially included country. The Fiji demand side survey found that 10.6% of the population had a mobile account, but usage of those accounts is likely miniscule. Other countries were not able to report this indicator, another likely sign of the lack of reliance on mobile for accessing financial services.

While this data point does not conclusively show the state of mobile phones in getting financial services to people, it does hint at what we anecdotally know to be true: mobile is not driving financial inclusion in the PICs. There are extreme differences in the role mobile plays in getting financial services to people across the world, and PICs are trailing the pack. The overall usage of mobile for financial services has not yet hit a point in which it is a driving force behind of account ownership, unlike some other areas of the world.

Innovation to spur inclusion

While the PICs lag behind their peers on some important levels, they also show a respectable footprint given the sparsely populated and remote markets with low levels of infrastructure. Although the demand-side data does not yet show trends, supply side data indicates the overall landscape in the PICs is changing – hopefully in an inclusive way. In a region where mobile is minimal, and cash is king, there is scope for new innovations in technology to take hold which are rapidly evolving and driving expansion in other areas the world. PFIP and others are supporting this agenda by employing innovative technologies to spread equitable access for financial services throughout the Pacific. PFIP is engaging more on the latest global initiatives in financial inclusion, and increasingly in fintech – creating the digital rails, new credit products, artificial intelligence (AI) and payment solutions, just to name a few. We hope to bring these lessons to the Pacific, ensuring – along with other key actors – equitable, sustainable growth, maximizing the latest technology deployed across the world.

[1] https://www.womensworldbanking.org/news/blog/what-does-the-global-findex-have-in-common-with-the-olympics/

[2] https://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows

[3] It should be noted that other important datasets exist on financial inclusion in the Pacific, most notably those supply side data sets from the Central Banks and PIRI/AFI. For more on this, see the AFI PIRI Financial Inclusion 2017 Status Report: https://www.afi-global.org/sites/default/files/publications/2018-06/AFI%20PIRI%20report_AW_01.06.18_digital.pdf

[4] To download the reports from the PFIP and the Central Banks of Samoa, Fiji, Tonga, Vanuatu and Solomon Islands, see https://www.pfip.org/our-work/work-streams/market-information/national-demand-side-surveys/

[5] We acknowledge that the Global Findex and the Pacific demand side surveys are differing methodologies and should keep this in mind when interpreting comparisons. However, both surveys are rigorous, demand side exercises, and similar enough in their rigor to warrant useful comparisons.

[6] This figure refers to the total percentage of adults with access to a formal account at a commercial bank, MFI, private finance company, provident fund, or other investment firm, or held an insurance policy.

[7] Pacific Island Countries are classified by income as per the most recent World Bank Listing: https://datahelpdesk.worldbank.org/knowledgebase/articles/906519

[8] https://www.womensworldbanking.org/news/blog/what-does-the-global-findex-have-in-common-with-the-olympics/

[9] https://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows

[10] https://www.cgap.org/blog/new-global-findex-what-you-need-know

[11] https://www.cgap.org/blog/measuring-women%E2%80%99s-financial-inclusion-2017-findex-story