Financial inclusion has been a topic of discussion for many years, with its progress often measured in terms of the number of accounts opened or loans granted. However, these measures only provide a limited perspective. They do not necessarily reflect the impact of financial inclusion on the lives of the underserved populations. The real question lies in understanding how many of these account holders have been able to use these financial tools to uplift their lives, increase their income, and secure their futures. Thus, the conversation needs to shift from outreach to outcomes.
Redefining Access and Impact
Traditionally, the expansion of financial services – including loans, cards, and accounts – has been considered an indication of success. However, this approach treats access as the final goal, thereby blurring the distinction between access and impact. The true measurement of success should be based on the change these services bring about in people’s lives, particularly those from underserved groups such as women, young people, low-income households, and rural communities. We need to ensure that our efforts are improving lives, not just increasing numbers.
The Power of Data in Understanding Impact
To bring the focus back to outcomes, we can employ robust, poverty-focused measurement tools. The Poverty Probability Index (PPI) is one such tool that estimates the likelihood of a household living below a chosen poverty line. This tool, based on national household survey data, allows institutions to understand the poverty status of their clients, tailor their services accordingly, and identify when additional services might be required. The goal here is to ensure that financial products and services reach those who need them the most and improve their lives over time.
Strengthening Governance and Accountability
Poverty metrics like the PPI fill a crucial gap in ensuring that financial institutions are effectively serving low-income customers. They provide a structured framework for understanding who is being reached and how their situations are evolving. These metrics also enhance governance by aligning with the Universal Standards for Social and Environmental Performance Management, which call for client-centered strategies and outcomes monitoring. Therefore, poverty metrics turn “impact” from a narrative into something that can be measured, tested, and improved.
The Business Case for Measuring Poverty
While measuring poverty has ethical and investor-relations advantages, it also has a strong commercial rationale. Tools like the PPI provide insights that help financial institutions fine-tune their products and services, identify and manage vulnerability, and protect portfolio quality. Therefore, the data that supports better impact management also assists in better risk management and business planning, reinforcing both ethics and strategy.
Redefining Success in Financial Inclusion
Shifting the focus from access to impact is a significant shift in defining success in financial inclusion. The ultimate aim is not just to bring people into the formal financial system but also to enable them to build stability, invest in their futures, and withstand shocks. Only by measuring inclusion by outcomes can we answer the critical question: are our clients better off? Until we make this shift, we cannot honestly claim to have achieved financial inclusion.
Jonty Rawlins, Director of Sustainability at Platcorp
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