## wpiea2019079

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---

### Box 1 — Financial Inclusion and Financial Development: Indicators
- Financial Development — Depth:
  - Private sector credit to GDP
  - Deposits to GDP
  - M2 to GDP
  - Bank asset to GDP
- Financial Inclusion — Access:
  - Accounts per thousand adults
  - Branches per 100,000 adults
  - percent of people with a bank account
  - percent of firms with line of credit
- Financial Inclusion — Usage:
  - Average savings balances
  - Number of transactions per account
  - Number of electronic payments made
- Financial Inclusion — Quality:
  - Quality proxy for convenience, product-fit, transparency, safety, consumer protection, financial literacy
- Financial Inclusion — Impact on firms/households:
  - Impact assessment of financial inclusion on e.g. businesses’ performance or human capital investments.
- Efficiency:
  - Net interest margin
  - Lending-deposits spread
  - Non-interest income to total income
  - Overhead costs (percent total assets)
  - Profitability (ROA, ROE)
- Stability:
  - Z-score
  - CAR
  - NPL ratios
  - Liquidity ratios

### Recent Financial Inclusion Trends: How Does Asia-Pacific Compare to its Peers?
- Regional progress and ATM penetration:
  - Asia-Pacific has made considerable progress in financial inclusion over the past decade.
  - ATMs per 100,000 adults in Asia-Pacific:
    - increased from about 37 to 63 over ten years.
    - median growth in ATMs grew by almost four-fold over the same period.
  - Cross-country disparities:
    - Japan or Korea: over 200 ATM machines per 100,000 adults.
    - global average: less than 50 ATMs per 100,000 adults.
    - Myanmar: 2 ATMs per 100,000 adults.
- Usage and access by income group:
  - Asia-Pacific EMs and LIDCs tend to have greater access to banking accounts compared to peers in their income group.
  - Use of financial services tends to be higher in Asia-Pacific LIDCs compared to other LIDCs (examples: ATM withdrawals, bank loans).
  - Average incomes cited:
    - The average income in Asian low-income economies was 2,039 U.S. Dollars in 2017, compared to 1,088 for the rest of the world.
    - For Asian emerging markets the average income was 7,036 U.S. dollars, against an average of 10,379 U.S. dollars across other regions.
- Country-specific patterns:
  - China, Malaysia, Thailand: perform well on both traditional banking (accounts at financial institutions) and digital banking (making/receiving digital payments).
  - Cambodia and Nepal: informal financing important; Cambodia has significant mobile payments uptake while Nepal has yet to become a major user.
  - India: more than half the population has a bank account, but only 20 percent use bank accounts actively.

### Financial Inclusion Gaps: Who is Financially Excluded in Asia-Pacific?
- Within-country disparities:
  - South Asia gender gap: roughly 30 percent of women have a bank account, compared with nearly 45 percent of men.
  - Vulnerable groups with higher exclusion: young, uneducated, unemployed, poor in rural areas.
  - Indonesia: about 10 percent of adults from the poorest quintile have a formal bank account, compared with about 60 percent from the richest quintile.
  - India: about 46 percent of adult males from the poorest quintile have a formal account, compared with 79 percent from the richest quintile.
  - India’s disparity by usage:
    - mobile transactions show a fourfold difference between richest and poorest;
    - borrowings from a financial institution about a threefold difference.
- Income and geography:
  - Higher income-level countries tend to have higher financial inclusion, but wide disparities exist among EMs and LIDCs.
  - Examples:
    - Cambodia vs India: Cambodia’s public-private partnership in mobile financial services yields greater inclusion via mobile payments despite lower per-capita income.
    - Sri Lanka vs Indonesia: similar income levels but very different access to accounts; Indonesia’s geographic dispersion (around 17,500 islands, land mass almost 2 million square kilometers) concentrates population on Java (7 percent of land area, nearly 60 percent of population) leading to branch and ATM concentration and lower access in East Indonesia.
  - Small states:
    - Small states account for one-third of the countries in the Asia-Pacific region (13 out of 37).
    - Challenges: widely dispersed islands, small domestic economies, few financial entities, severe infrastructure gaps, narrow production bases, high dependence on imports, high transaction costs and cost of financial services.
    - Consequences: relatively low financial inclusion indicators (e.g., account access below regional middle-income peers) and high interest rate spreads curtailing credit access.
    - Remittances importance: remittances amounting to as much as between one-fifth (Samoa) and one-third of GDP (Tonga).
    - AML/CFT and correspondent banking relationships (CBRs): increased global scrutiny has strained CBRs for small states; suggested mitigation includes strengthening AML/CFT frameworks, setting up national know-your-customer utilities, and leveraging fintech (including blockchain) though operationalization likely viable only in the long run.
- Enterprises:
  - Enterprises in Asia-Pacific EMs and LIDCs generally do not identify access to finance as a major constraint relative to other regions.
  - Collateral requirements:
    - Low-income countries in Asia-Pacific: value of collateral about 239 percent of loan value.
    - Global average for other low-income countries: 196 percent.
    - Asia-Pacific EMs average: about 220 percent.
    - Global average for EMs: 192 percent.
  - Cross-country heterogeneity:
    - Nepal, Mongolia, Sri Lanka: among top 40 percent globally reporting access to finance as a major problem despite above-average access to loans or lines of credit.
    - Cambodia: ranks among lowest globally in enterprises’ access to bank or equity financing, yet only about 17 percent of enterprises identified financing as a major constraint because majority financed internally.

### Structural Issues: Regulatory Environment and Financial Market Structure
- Regulation and inclusion:
  - Strong regulatory environment correlated with greater financial inclusion, though not the only factor.
  - Global Microscope findings: India, Philippines, Indonesia among top ten performers; China and Thailand at par with peer group; Myanmar, Cambodia, Bangladesh can benefit from regulatory improvements.
  - Asia-Pacific strengths: government support for financial and digital literacy, and regulations for stability and integrity.
  - Asia-Pacific weaknesses: lag in consumer protection, supervisory capacity, enforcing privacy laws, and providing inclusive insurance.
- Financial system structure:
  - Banking concentration (asset share of the 3 largest institutions) shows a positive correlation with financial inclusion globally and in Asia-Pacific.
    - Interpretation: dominant institutions may be better placed to invest in infrastructure for high-volume, low-return financial products and to take long-run positions.
    - Suggests a potential trade-off between competition and financial inclusion; high concentration does not preclude inclusion.
  - Public ownership:
    - Evidence shows a negative relationship between public-sector bank presence and various financial inclusion indicators.
    - Rationale: public banks can theoretically reach underserved segments, but in practice shortcomings (inefficiency, costly service provision) appear to overshadow potential benefits.

### Future Challenges: Usage, Development, and Technology
- Access does not guarantee usage:
  - Countries vary in translating access to active usage.
  - Cambodia: lower account access but high usage of banking services.
  - Sri Lanka and India: high access but low usage ratios; South Asia lags in active use.
  - Small states: increase in branches per capita has not ensured adequate usage due to geographic dispersion, high collateral, high interest rates.
- Financial inclusion vs financial development:
  - Financial inclusion is associated with but not equivalent to financial development (credit-to-GDP ratio).
  - Examples:
    - Malaysia, Thailand: achieved both financial inclusion and financial development.
    - Indonesia, Brunei Darussalam: increased access to depositors/borrowers but financial development remains low compared to the sample.
  - Implication: progress in inclusion does not guarantee progress in development; multiple policy efforts needed.
- Fintech adoption and implications:
  - Fintech modes in early Asia-Pacific: peer-to-peer lending, mobile payment, robo advice.
  - High-profile AI and fintech developments cited (e.g., ChinaAMC and Microsoft; Bank of China and Tencent) in the region.
  - China:
    - Global leader in mobile payments; accounted for more than half of total mobile payments in the region at end-2015.
    - Many consumers moved from cash directly to mobile payments, bypassing debit/credit cards; fintech expanded to savings and credit.
  - ASEAN and other EMs: fintech expanded beyond payments to lending, insurance, investment, mobile money; noted decline in physical bank branches in some countries (e.g., Thailand).
  - Mobile banking, payments, and mobile money:
    - Mobile banking not as prevalent in most Asia-Pacific countries as in Sub-Saharan Africa.
    - Geographic coverage of traditional infrastructure (branches per 1,000 km2) appears to drive adoption of technological solutions.
    - Mobile payments for remittances: Bangladesh, Cambodia, Philippines notable users.
    - Mobile money growth examples:
      - Bangladesh: mobile money accounts rose from about 10 accounts per 1,000 adults to about 500 between 2012-17.
      - Cambodia: number of mobile money accounts tripled between 2016 and 2017.
      - Rapid increases also observed in Indonesia, Mongolia, and several Pacific island countries (e.g., Fiji, Samoa) where mobile technology uptake helped overcome geographic dispersion.

### Conclusions and Policy Implications — Twelve Facts and Overarching Conclusion
- Summary of the twelve facts:
  - Fact I: Asia-Pacific has made significant strides in financial inclusion but retains the widest disparities across economies.
  - Fact II: Region tends to perform well in both access and usage by households.
  - Fact III: No single uniform method adopted across countries; approaches vary by country circumstances.
  - Fact IV: Within-country gaps persist driven by income, gender, and opportunity inequalities.
  - Fact V: Financial inclusion correlates with income but determinants extend beyond income and are varied.
  - Fact VI: Small states face additional, unique challenges.
  - Fact VII: Credit constraints on enterprises are, on average, less binding than in other regions though heterogeneity exists.
  - Fact VIII: Strong regulatory environments correlate with higher inclusion, but policy gaps remain.
  - Fact IX: Financial system structure (public ownership, concentration) influences inclusion outcomes.
  - Fact X: Access does not always translate into active use.
  - Fact XI: Financial inclusion is not equivalent to financial development.
  - Fact XII: Fintech is an important and growing provider of financial services, presenting both opportunities and new regulatory/cybersecurity challenges.
- Overarching conclusion and policy recommendation:
  - Varied approaches to financial inclusion reflect differing country conditions, challenges, and needs.
  - A holistic approach relying on complementary measures, informed by country-specific diagnosis, is recommended to improve both access and usage.
  - Countries can learn from each other while calibrating strategies to local circumstances and increasing availability of technologies.

### Annex I — National Strategies for Financial Inclusion: Regional Overview and Country Highlights
- Regional overview:
  - Greater financial inclusion allows for financially marginalized groups to increase their income, reduce its volatility, and build assets, thereby providing resilience to economic shocks and helping create jobs and promote business activities.
  - The annex takes stock of efforts in India, Indonesia, Malaysia, Myanmar, Nepal, Papua New Guinea, Solomon Islands and Vietnam.

- India — programs, distribution, and technology:
  - Key national schemes:
    - Pradhan Mantri Jan Dhan Yojana and Pradhan Mantri Mudra Yojana intended to provide universal banking, access to credit, financial literacy, insurance and pension to households and SOEs.
  - Distributional and product measures:
    - Agent banking network of state-owned banks expanded to cover geographically difficult and sparsely populated areas.
    - Debit cards such as the RuPay card introduced with inbuilt accident insurance cover and life insurance to allow domestic banks and financial institutions to participate in electronic payments at much lower costs.
    - Direct Benefit Transfer introduced to transfer money including for fuel directly to intended beneficiaries without delays.
  - Digital and regulatory measures:
    - Advancements in digital technology have made basic banking functions available on basic handsets removing the need to download complicated banking applications.
    - Reserve Bank of India policy: advising nationalized commercial banks to allocate at least twenty five percent of proposed new branches including mobile branches, service branches and administrative offices in underserved areas.

- Indonesia — national strategy and targets:
  - Institutional framework:
    - Financial Services Authority (OJK), established in 2011, implementing Financial Services Sector Master Plan (2015-19) including the National Strategy for Financial Inclusion.
  - Numeric target:
    - Strategy target that seventy five percent of the adult population will have access to formal finance by 2019.
  - Strategic focus areas:
    - Financial literacy, financing facilities, financial information mapping, financial regulations, distribution networks and intermediation facilities, and consumer protection.
  - Implementation mechanisms and initiatives:
    - Special committees such as “Teams for Regional Financial Access Acceleration”.
    - Schemes launched: Laku Pandai, SimPel / SimPel iB, Laku Mikro.
    - Savings promotion initiatives: “Save Your Money in SimPel / SimPel iB”, “Let’s Save in Stocks and Let’s Invest in Mutual Funds”, “Let’s Save in Gold” and “Start Saving for Your Future”.

- Malaysia — strategic plans and monitoring:
  - Prior efforts:
    - Banking sector consolidation, Financial Sector Masterplan (2001–10) and Financial Sector Blue Print (FSBP, 2011–20).
  - FSBP actions:
    - Ten action plans under four broad strategic outcomes: innovative channels, innovative products and services, effective financial institutions and infrastructure, well informed and responsible underserved.
  - Measures:
    - Agent-based banking and advances in internet and mobile banking improved access in rural areas.
    - Development financial institutions reforms, reducing banking transaction costs and fees for the vulnerable, and setting up the office of the financial ombudsman for dispute resolution.
  - Monitoring:
    - Central Bank of Malaysia developed a financial inclusion index to track progress and impact.

- Myanmar — roadmap, legal reforms, and mobile financial services:
  - Strategic planning:
    - Financial sector development strategy and financial inclusion road map launched with multilateral donor assistance; roadmap recommends coordinated action across government, private sector and development partners.
  - Legal and regulatory developments:
    - Financial Institutions Law enacted in 2016 to strengthen legal, regulatory and supervisory framework.
  - Mobile finance:
    - Central Bank of Myanmar establishing regulatory framework for mobile financial services, supporting networks of small-scale agents and point-of-sale devices to offer basic financial services at lower cost and greater convenience.

- Nepal — branch expansion, microfinance, and literacy:
  - Central bank strategy:
    - Nepal Rastra Bank Strategic Plan (2012 –16) prioritizes financial inclusion.
  - Policies implemented:
    - Mandating opening of branches outside the capital with provision of interest-free loans to facilitate this in underserved areas.
    - Licensing new microfinance institutions and providing low cost funds based on location.
    - Introducing branchless and mobile banking.
  - Pending policy:
    - Final draft of the National Financial Literacy Policy pending government approval.

- Papua New Guinea — national strategies and payment systems:
  - Strategy development:
    - National Financial Inclusion and Financial Literacy Strategy (2014-15) succeeded by a second strategy launched in 2016 to promote financial inclusion through shared public and private sector goals.
  - Payment and financial infrastructure:
    - Access to mobile services expanding.
    - Kina Automated Transfer System (KATS) implemented to process checks electronically in larger batches with automatic processing and settlement between banks.
  - Institutional and product developments:
    - New credit union legislation enacted but requires supporting regulations and guidelines.
    - Authorities joined the Better Than Cash Alliance to accelerate transition from cash to digital payments.
    - Pacific Financial Inclusion Programme (PFIP) support: BIMA providing life and hospitalization insurance over mobile platform; PFIP partnering with microfinance institution MiBank on a “pay-as-you-go” solar energy kit loan pilot to introduce previously unbanked populations into the formal financial sector.

- Solomon Islands — early adopter of national strategy and women’s targets:
  - Strategy timeline:
    - National Financial Inclusion Strategy 2011–2015 (NFIS1) launched in 2010; one of the first Pacific island nationwide plans.
    - NFIS2 (National Financial Inclusion Strategy 2016–2020) succeeded NFIS1.
  - Notable features and targets:
    - First country in the world to integrate financial inclusion targets for women.
  - NFIS1 focus areas:
    - Digital financial services, financial literacy, and community-based financial models.
    - Formation of National Financial Inclusion Taskforce led by the Central Bank of Solomon Islands with government, commercial banks, private sector and NGOs for coordination.
    - Collected demand-side data to inform policy.
  - Outcomes:
    - Mobile banking introduced in 2013 and contributed to integrating 78,000 new individuals to the formal financial sector under NFIS1.
    - As at end-2016, mobile banking transactions relative to the adult population were the highest among Pacific island countries.
  - NFIS2 priority areas:
    - Digital financial channels; micro-, small and medium enterprises; women, youth and rural adults; household financial resilience; financial empowerment; and effective stakeholder coordination based on sound data.

- Vietnam — state-dominated system and national strategy priorities:
  - System characteristics and constraints:
    - Financial system dominated by the state; deeper financial market and institution reforms needed to boost access to credit, increase financial sector resilience and efficiency of investment.
    - Surveys highlight access to credit as the main business environment constraint for SMEs; access to financial institutions via branches and ATMs is low per capita.
  - Strategy assignment and focus (starting 2016):
    - State Bank of Vietnam assigned to develop a national strategy on financial inclusion.
    - Strategy to focus on enhancing the legal framework, improving financial technology to diversify financial products and services, and imparting financial education.
    - Specific focus areas: digital finance, boosting financial services to rural and agricultural communities and minorities, strengthening consumer protection and enhancing financial education.

*Source: conclusions, this paper uses information from a wide array of databases and conducts (wpiea2019079 — conclusions).*

### Box 1. Financial Inclusion and Financial Development

### Box 1. Financial Inclusion and Financial Development

### Financial Development — Depth
- Private sector credit to GDP
- Deposits to GDP
- M2 to GDP
- Bank asset to GDP

### Financial Inclusion — Access
- Accounts per thousand adults
- Branches per 100,000 adults
- percent of people with a bank account
- percent of firms with line of credit

### Financial Inclusion — Usage
- Average savings balances
- Number of transactions per account
- Number of electronic payments made

### Financial Inclusion — Quality
- Quality proxy for convenience, product-fit, transparency, safety, consumer protection, financial literacy

### Financial Inclusion — Impact on firms/households
- Impact assessment of financial inclusion on e.g. businesses’ performance or human capital investments.

### Efficiency
- Net interest margin
- Lending-deposits spread
- Non-interest income to total income
- Overhead costs (percent total assets)
- Profitability (ROA, ROE)

### Stability
- Z-score
- CAR
- NPL ratios
- Liquidity ratios

*Source: World Bank*

### conclusions, this paper uses information from a wide array of databases and conducts

### conclusions, this paper uses information from a wide array of databases and conducts

### Recent Financial Inclusion Trends: How Does Asia-Pacific Compare to its Peers?
- Asia-Pacific has made considerable progress in financial inclusion over the past decade.
- ATMs per 100,000 adults in Asia-Pacific:
  - increased from about 37 to 63 over ten years.
  - median growth in ATMs grew by almost four-fold over the same period.
- Cross-country disparities are large:
  - Japan or Korea: over 200 ATM machines per 100,000 adults.
  - global average: less than 50 ATMs per 100,000 adults.
  - Myanmar: 2 ATMs per 100,000 adults.
- Usage and access by income group:
  - Asia-Pacific emerging markets (EMs) and low-income developing countries (LIDCs) tend to have greater access to banking accounts compared to peers in their income group.
  - Use of financial services tends to be higher in Asia-Pacific LIDCs compared to other LIDCs (examples: ATM withdrawals, bank loans).
  - Average incomes cited:
    - The average income in Asian low-income economies was 2,039 U.S. Dollars in 2017, compared to 1,088 for the rest of the world.
    - For Asian emerging markets the average income was 7,036 U.S. dollars, against an average of 10,379 U.S. dollars across other regions.
- Country-specific patterns:
  - China, Malaysia, Thailand: perform well on both traditional banking (accounts at financial institutions) and digital banking (making/receiving digital payments).
  - Cambodia and Nepal: informal financing important; Cambodia has significant mobile payments uptake while Nepal has yet to become a major user.
  - India: more than half the population has a bank account, but only 20 percent use bank accounts actively.

### Financial Inclusion Gaps: Who is Financially Excluded in Asia-Pacific?
- Within-country disparities:
  - South Asia gender gap: roughly 30 percent of women have a bank account, compared with nearly 45 percent of men.
  - Vulnerable groups with higher exclusion: young, uneducated, unemployed, poor in rural areas.
  - Indonesia: about 10 percent of adults from the poorest quintile have a formal bank account, compared with about 60 percent from the richest quintile.
  - India: about 46 percent of adult males from the poorest quintile have a formal account, compared with 79 percent from the richest quintile.
  - India’s disparity is greater when measured by usage: mobile transactions show a fourfold difference between richest and poorest; borrowings from a financial institution about a threefold difference.
- Income and geography:
  - Higher income-level countries tend to have higher financial inclusion, but wide disparities exist among EMs and LIDCs.
  - Examples:
    - Cambodia vs India: Cambodia’s public-private partnership in mobile financial services yields greater inclusion via mobile payments despite lower per-capita income.
    - Sri Lanka vs Indonesia: similar income levels but very different access to accounts; Indonesia’s geographic dispersion (around 17,500 islands, land mass almost 2 million square kilometers) concentrates population on Java (7 percent of land area, nearly 60 percent of population) leading to branch and ATM concentration and lower access in East Indonesia.
  - Small states:
    - Small states account for one-third of the countries in the Asia-Pacific region (13 out of 37).
    - Challenges: widely dispersed islands, small domestic economies, few financial entities, severe infrastructure gaps, narrow production bases, high dependence on imports, high transaction costs and cost of financial services.
    - Consequences: relatively low financial inclusion indicators (e.g., account access below regional middle-income peers) and high interest rate spreads curtailing credit access.
    - Remittances importance: remittances amounting to as much as between one-fifth (Samoa) and one-third of GDP (Tonga).
    - AML/CFT and correspondent banking relationships (CBRs): increased global scrutiny has strained CBRs for small states; suggested mitigation includes strengthening AML/CFT frameworks, setting up national know-your-customer utilities, and leveraging fintech (including blockchain) though operationalization likely viable only in the long run.
- Enterprises:
  - Enterprises in Asia-Pacific EMs and LIDCs generally do not identify access to finance as a major constraint relative to other regions.
  - Collateral requirements:
    - Low-income countries in Asia-Pacific: value of collateral about 239 percent of loan value.
    - Global average for other low-income countries: 196 percent.
    - Asia-Pacific EMs average: about 220 percent.
    - Global average for EMs: 192 percent.
  - Cross-country heterogeneity:
    - Nepal, Mongolia, Sri Lanka: among top 40 percent globally reporting access to finance as a major problem despite above-average access to loans or lines of credit.
    - Cambodia: ranks among lowest globally in enterprises’ access to bank or equity financing, yet only about 17 percent of enterprises identified financing as a major constraint because majority financed internally.

### Structural Issues: Regulatory Environment and Financial Market Structure
- Regulation and inclusion:
  - Strong regulatory environment correlated with greater financial inclusion, though not the only factor.
  - Global Microscope findings: India, Philippines, Indonesia among top ten performers; China and Thailand at par with peer group; Myanmar, Cambodia, Bangladesh can benefit from regulatory improvements.
  - Asia-Pacific strengths: government support for financial and digital literacy, and regulations for stability and integrity.
  - Asia-Pacific weaknesses: lag in consumer protection, supervisory capacity, enforcing privacy laws, and providing inclusive insurance.
- Financial system structure:
  - Banking concentration (asset share of the 3 largest institutions) shows a positive correlation with financial inclusion globally and in Asia-Pacific.
    - Interpretation: dominant institutions may be better placed to invest in infrastructure for high-volume, low-return financial products and to take long-run positions.
    - Suggests a potential trade-off between competition and financial inclusion; high concentration does not preclude inclusion.
  - Public ownership:
    - Evidence shows a negative relationship between public-sector bank presence and various financial inclusion indicators.
    - Rationale: public banks can theoretically reach underserved segments, but in practice shortcomings (inefficiency, costly service provision) appear to overshadow potential benefits.

### Future Challenges: Usage, Development, and Technology
- Access does not guarantee usage:
  - Countries vary in translating access to active usage.
  - Cambodia: lower account access but high usage of banking services.
  - Sri Lanka and India: high access but low usage ratios; South Asia lags in active use.
  - Small states: increase in branches per capita has not ensured adequate usage due to geographic dispersion, high collateral, high interest rates.
- Financial inclusion vs financial development:
  - Financial inclusion is associated with but not equivalent to financial development (credit-to-GDP ratio).
  - Examples:
    - Malaysia, Thailand: achieved both financial inclusion and financial development.
    - Indonesia, Brunei Darussalam: increased access to depositors/borrowers but financial development remains low compared to the sample.
  - Implication: progress in inclusion does not guarantee progress in development; multiple policy efforts needed.
- Fintech adoption and implications:
  - Fintech modes in early Asia-Pacific: peer-to-peer lending, mobile payment, robo advice.
  - High-profile AI and fintech developments cited (e.g., ChinaAMC and Microsoft; Bank of China and Tencent) in the region.
  - China:
    - Global leader in mobile payments; accounted for more than half of total mobile payments in the region at end-2015.
    - Many consumers moved from cash directly to mobile payments, bypassing debit/credit cards; fintech expanded to savings and credit.
  - ASEAN and other EMs: fintech expanded beyond payments to lending, insurance, investment, mobile money; noted decline in physical bank branches in some countries (e.g., Thailand).
  - Mobile banking, payments, and mobile money:
    - Mobile banking not as prevalent in most Asia-Pacific countries as in Sub-Saharan Africa.
    - Geographic coverage of traditional infrastructure (branches per 1,000 km2) appears to drive adoption of technological solutions.
    - Mobile payments for remittances: Bangladesh, Cambodia, Philippines notable users.
    - Mobile money growth examples:
      - Bangladesh: mobile money accounts rose from about 10 accounts per 1,000 adults to about 500 between 2012-17.
      - Cambodia: number of mobile money accounts tripled between 2016 and 2017.
      - Rapid increases also observed in Indonesia, Mongolia, and several Pacific island countries (e.g., Fiji, Samoa) where mobile technology uptake helped overcome geographic dispersion.

### Conclusions and Policy Implications
- Summary of the twelve facts:
  - Asia-Pacific has made significant strides in financial inclusion but retains the widest disparities across economies (Fact I).
  - Region tends to perform well in both access and usage by households (Fact II).
  - No single uniform method adopted across countries; approaches vary by country circumstances (Fact III).
  - Within-country gaps persist driven by income, gender, and opportunity inequalities (Fact IV).
  - Financial inclusion correlates with income but determinants extend beyond income and are varied (Fact V).
  - Small states face additional, unique challenges (Fact VI).
  - Credit constraints on enterprises are, on average, less binding than in other regions though heterogeneity exists (Fact VII).
  - Strong regulatory environments correlate with higher inclusion, but policy gaps remain (Fact VIII).
  - Financial system structure (public ownership, concentration) influences inclusion outcomes (Fact IX).
  - Access does not always translate into active use (Fact X).
  - Financial inclusion is not equivalent to financial development (Fact XI).
  - Fintech is an important and growing provider of financial services, presenting both opportunities and new regulatory/cybersecurity challenges (Fact XII).
- Overarching conclusion:
  - Varied approaches to financial inclusion reflect differing country conditions, challenges, and needs.
  - A holistic approach relying on complementary measures, informed by country-specific diagnosis, is recommended to improve both access and usage.
  - Countries can learn from each other while calibrating strategies to local circumstances and increasing availability of technologies.

*Source: conclusions, this paper uses information from a wide array of databases and conducts (wpiea2019079 — conclusions).*

### Annex I. National Strategies for Financial Inclusion

### Annex I. National Strategies for Financial Inclusion

### Regional overview
- Greater financial inclusion allows for financially marginalized groups to increase their income, reduce its volatility, and build assets, thereby providing resilience to economic shocks and helping create jobs and promote business activities.
- The annex takes stock of efforts in India, Indonesia, Malaysia, Myanmar, Nepal, Papua New Guinea, Solomon Islands and Vietnam.

### India — programs, distribution, and technology
- Key national schemes:
  - Pradhan Mantri Jan Dhan Yojana and Pradhan Mantri Mudra Yojana intended to provide universal banking, access to credit, financial literacy, insurance and pension to households and SOEs.
- Distributional and product measures:
  - Agent banking network of state-owned banks expanded to cover geographically difficult and sparsely populated areas.
  - Debit cards such as the RuPay card introduced with inbuilt accident insurance cover and life insurance to allow domestic banks and financial institutions to participate in electronic payments at much lower costs.
  - Direct Benefit Transfer introduced to transfer money including for fuel directly to intended beneficiaries without delays.
- Digital and regulatory measures:
  - Advancements in digital technology have made basic banking functions available on basic handsets removing the need to download complicated banking applications.
  - Reserve Bank of India policy: advising nationalized commercial banks to allocate at least twenty five percent of proposed new branches including mobile branches, service branches and administrative offices in underserved areas.

### Indonesia — national strategy and targets
- Institutional framework:
  - Financial Services Authority (OJK), established in 2011, implementing Financial Services Sector Master Plan (2015-19) including the National Strategy for Financial Inclusion.
- Numeric target:
  - Strategy target that seventy five percent of the adult population will have access to formal finance by 2019.
- Strategic focus areas:
  - Financial literacy, financing facilities, financial information mapping, financial regulations, distribution networks and intermediation facilities, and consumer protection.
- Implementation mechanisms and initiatives:
  - Special committees such as “Teams for Regional Financial Access Acceleration”.
  - Schemes launched: Laku Pandai, SimPel / SimPel iB, Laku Mikro.
  - Savings promotion initiatives: “Save Your Money in SimPel / SimPel iB”, “Let’s Save in Stocks and Let’s Invest in Mutual Funds”, “Let’s Save in Gold” and “Start Saving for Your Future”.

### Malaysia — strategic plans and monitoring
- Prior efforts:
  - Banking sector consolidation, Financial Sector Masterplan (2001–10) and Financial Sector Blue Print (FSBP, 2011–20).
- FSBP actions:
  - Ten action plans under four broad strategic outcomes: innovative channels, innovative products and services, effective financial institutions and infrastructure, well informed and responsible underserved.
- Measures:
  - Agent-based banking and advances in internet and mobile banking improved access in rural areas.
  - Development financial institutions reforms, reducing banking transaction costs and fees for the vulnerable, and setting up the office of the financial ombudsman for dispute resolution.
- Monitoring:
  - Central Bank of Malaysia developed a financial inclusion index to track progress and impact.

### Myanmar — roadmap, legal reforms, and mobile financial services
- Strategic planning:
  - Financial sector development strategy and financial inclusion road map launched with multilateral donor assistance; roadmap recommends coordinated action across government, private sector and development partners.
- Legal and regulatory developments:
  - Financial Institutions Law enacted in 2016 to strengthen legal, regulatory and supervisory framework.
- Mobile finance:
  - Central Bank of Myanmar establishing regulatory framework for mobile financial services, supporting networks of small-scale agents and point-of-sale devices to offer basic financial services at lower cost and greater convenience.

### Nepal — branch expansion, microfinance, and literacy
- Central bank strategy:
  - Nepal Rastra Bank Strategic Plan (2012 –16) prioritizes financial inclusion.
- Policies implemented:
  - Mandating opening of branches outside the capital with provision of interest-free loans to facilitate this in underserved areas.
  - Licensing new microfinance institutions and providing low cost funds based on location.
  - Introducing branchless and mobile banking.
- Pending policy:
  - Final draft of the National Financial Literacy Policy pending government approval.

### Papua New Guinea — national strategies and payment systems
- Strategy development:
  - National Financial Inclusion and Financial Literacy Strategy (2014-15) succeeded by a second strategy launched in 2016 to promote financial inclusion through shared public and private sector goals.
- Payment and financial infrastructure:
  - Access to mobile services expanding.
  - Kina Automated Transfer System (KATS) implemented to process checks electronically in larger batches with automatic processing and settlement between banks.
- Institutional and product developments:
  - New credit union legislation enacted but requires supporting regulations and guidelines.
  - Authorities joined the Better Than Cash Alliance to accelerate transition from cash to digital payments.
  - Pacific Financial Inclusion Programme (PFIP) support: BIMA providing life and hospitalization insurance over mobile platform; PFIP partnering with microfinance institution MiBank on a “pay-as-you-go” solar energy kit loan pilot to introduce previously unbanked populations into the formal financial sector.

### Solomon Islands — early adopter of national strategy and women’s targets
- Strategy timeline:
  - National Financial Inclusion Strategy 2011–2015 (NFIS1) launched in 2010; one of the first Pacific island nationwide plans.
  - NFIS2 (National Financial Inclusion Strategy 2016–2020) succeeded NFIS1.
- Notable features and targets:
  - First country in the world to integrate financial inclusion targets for women.
- NFIS1 focus areas:
  - Digital financial services, financial literacy, and community-based financial models.
  - Formation of National Financial Inclusion Taskforce led by the Central Bank of Solomon Islands with government, commercial banks, private sector and NGOs for coordination.
  - Collected demand-side data to inform policy.
- Outcomes:
  - Mobile banking introduced in 2013 and contributed to integrating 78,000 new individuals to the formal financial sector under NFIS1.
  - As at end-2016, mobile banking transactions relative to the adult population were the highest among Pacific island countries.
- NFIS2 priority areas:
  - Digital financial channels; micro-, small and medium enterprises; women, youth and rural adults; household financial resilience; financial empowerment; and effective stakeholder coordination based on sound data.

### Vietnam — state-dominated system and national strategy priorities
- System characteristics and constraints:
  - Financial system dominated by the state; deeper financial market and institution reforms needed to boost access to credit, increase financial sector resilience and efficiency of investment.
  - Surveys highlight access to credit as the main business environment constraint for SMEs; access to financial institutions via branches and ATMs is low per capita.
- Strategy assignment and focus (starting 2016):
  - State Bank of Vietnam assigned to develop a national strategy on financial inclusion.
  - Strategy to focus on enhancing the legal framework, improving financial technology to diversify financial products and services, and imparting financial education.
  - Specific focus areas: digital finance, boosting financial services to rural and agricultural communities and minorities, strengthening consumer protection and enhancing financial education.

*Source: Annex I. National Strategies for Financial Inclusion (wpiea2019079).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019079.pdf_