24
FINANCIAL INCLUSION: IMPORTANCE, KEY FACTS, AND DRIVERS
FIGURE 1.4 Selected Methods of Payment, 2011
59
Pays with debit card
29 36
Pays with credit card
15 24
Pays electronically
16
Developed economies Developing economies
10
Pays with mobile device
3 0
20
40
60
80
Adults, % Source: Calculations based on data from the Global Financial Inclusion (Global Findex) Database, World Bank, Washington, DC, http://www.worldbank.org/globalfindex. Note: The response on mobile payments may subsume some of the other categories. (For example, using a credit card to make a payment by phone may be seen as a mobile payment by the respondent.)
Insurance Insurance is crucial for managing risks, both the risks associated with personal health and the risks associated with livelihoods. In developing economies, 17 percent of adults report they paid for health insurance (in addition to national health insurance, where applicable). The share ranges from 3 to 5 percent in SubSaharan Africa, Europe, Central Asia, and South Asia. The corresponding ratio for East Asia and the Pacific is 38 percent, which is driven by China, where 47 percent of adults report they paid for health insurance; without China, the regional average would drop to 9 percent. People who work in farming, forestry, or fishing are critically vulnerable to severe weather events. Nonetheless, only 6 percent of these people report they purchased crop, rainfall, or livestock insurance in 2011. In Europe and Central Asia, only 4 percent report they purchased such insurance.
Credit Most borrowing by adults in developing economies occurs through informal sources, such as family and friends. Globally, 9 percent of adults report they originated a new loan from
GLOBAL FINANCIAL DEVELOPMENT REPORT 2014
a formal financial institution in the previous 12 months. But, in developing economies, adults are three times more likely to borrow from family and friends than from formal financial institutions. In high-income economies, the most commonly cited purpose of an outstanding loan is to purchase a home, while emergency and health reasons are most frequently cited by adults in the developing world. The introduction of credit cards has had a large effect on the demand for and use of short-term formal credit. In high-income economies, half of the adult population reports they have a credit card. Despite a surge in recent years, credit card ownership in developing economies still lags far behind the rates in high-income economies; in the former, only 7 percent of adults report they have a credit card (notable exceptions are Brazil, Turkey, and Uruguay, where the proportion of adults with a credit card exceeds 35 percent). As a result of the extensive ownership of credit cards, adults in high-income economies may have less need for short-term loans from financial institutions. This may help explain why the share of adults in these economies who report they received a loan in the previous year from a formal financial institution (such as a bank, cooperative, credit union, or MFI) is not particularly high. Indeed, if the adults in high-income economies who report they own a credit card are included in the share of those adults who report they borrowed from a formal financial institution in the previous year (a measure that may not include credit card balances), the share rises from 14 percent to 54 percent. Individuals in higher-income economies are more likely to borrow from formal sources, while those in lower-income economies tend to rely more heavily on informal sources. To illustrate, in Finland, 24 percent of adults report they borrowed money from a formal financial institution, such as a bank, credit union, or MFI, in the previous year (map 1.2). In Ukraine, only 8 percent of adults report they did so, and, in Burundi, only 2 percent of adults report they used formal credit. The pattern is reversed with respect to the proportion of adults who received