Global Microscope 2018: The Enabling Environment for Financial Inclusion and the Expansion of Digital Financial Services

20 December, 2018


Original Source: CFI

The Global Microscope is a benchmarking index that assesses the enabling environment for financial inclusion in 55 countries. Now in its 11th year, the Microscope is the global standard for financial inclusion policy in developing economies. The 2018 Global Microscope on Financial Inclusion, with a revised research framework, offers a forward-looking focus on the digital financial services now and in the future, and the critical role for financial inclusion envisioned in the Sustainable Development Goals.

The 2018 Global Microscope sets a model for an enabling environment for financial inclusion across five domains: government and policy support, stability and integrity, products and outlets, consumer protection, and infrastructure. The Microscope evaluates the regulatory and policy environment for key players in the financial inclusion space including banks, non-bank financial institutions, e-money issuers and cross-border payment providers. It also focuses on the role of inclusive insurance, financial agents, financial technology (fintech) firms, and credit information providers.

The Global Microscope is produced by The Economist Intelligence Unit (The EIU), with policy guidance and financial support from leading organizations in the field, including CFI.

Major Findings


2018 Global Microscope Highlights

  • Colombia, Peru, Uruguay, the Philippines and India have the most conducive environments for financial inclusion, driven by a high degree of government coordination
  • Rwanda and South Africa stand out for the most enabling environments amongst countries in sub-Saharan Africa
  • Gaps in connectivity infrastructure and digital identification systems represent a barrier for the expansion of digital financial services in sub-Saharan Africa and Middle East and North Africa
  • E-money is making inroads in countries that allow market entry to a variety of providers
  • Technology introduces new opportunities and new risks, and most countries still need to increase their commitment to cybersecurity and develop their capacity to enforce data privacy protections

The top-performing countries demonstrate government and policy support for financial inclusion, prioritize financial stability and integrity, and foster inclusion through a variety of products and outlets.

Colombia, Peru and Uruguay hold the top three spots in the overall rankings in the 2018 Global Microscope on Financial Inclusion. Of the top five overall, only fourth-ranked India has yet to issue a financial inclusion strategy, although the country is following a coordinated, three level-approach and publication of a strategy is expected during 2018-19. Rwanda and South Africa stand out for the most enabling environments amongst countries in sub-Saharan Africa (SSA), tied for 11th place overall. In terms of stability and integrity, leading countries also feature market entry regulations that do not deter new players that serve the low and middle-income population. A common strength among top-ranked countries is the ease with which customers can access a variety of financial products and outlets.

E-money is making inroads, becoming more accessible as a wider variety of providers are able to enter the market.

Most countries in the 2018 Microscope have made efforts to facilitate new digital providers and performed well on the market entry restrictions indicator. This overall positive operating environment across the world, along with client demand, is contributing to e-money becoming a leading digital financial product. However in three countries (Chile, Guatemala and Vietnam) there is no legal recognition of e-money and 16 countries have opted for bank-led digital transformations. The research suggests that competition and innovation can make e-money more accessible, especially if a wide range of institutions can become e-money issuers.

Although many countries in SSA and Middle East and North Africa (MENA) score well on Government and Policy Support, a lack of connectivity infrastructure and digital identification systems limits the expansion of digital financial inclusion.

In terms of connectivity, most of the SSA countries in the index have substantial room for improvement—although South Africa, Senegal and Ghana scored among the top half of countries in this category. Infrastructure for payments also has considerable room for growth in both regions.

Technology introduces new risks, and many countries still need to update cybersecurity laws and develop their capacity to enforce data privacy protections.

In 35 of the 55 countries in the 2018 Microscope, consumer protection regulations generally facilitate financial inclusion, and previous editions have shown gradual strengthening of these protections over time. As digital financial services expand, new consumer risks emerge, and therefore, in the best performing countries, traditional consumer protections are coupled with data privacy and cybersecurity safeguards. Colombia and South Africa have dedicated financial consumer protection frameworks and specialized enforcement capacity, as well as government entities with a strong capacity to enforce data protection laws. However, in most countries data privacy protections are not well developed—42 countries have limited or no capacity to enforce data privacy.

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