One topic that came up several times on my recent visit to Tanzania and Zambia was the definition of financial inclusion. For a long time, being financially included was seen as a simple yes or no. Either someone has a connection with a formal financial institution or not. This also led the Gates foundation a few years ago to declare the 100% financial inclusion goal as all households in a country having access to a deposit or savings account. Looking at recent data collections, however, shows that many have a bank account but use it rarely. As shown by the recent Global Findex survey, 10 percent of adults in developing countries make neither withdrawals from nor deposits into their account in a typical month. And the majority of account holders use it rarely, a few times per month. This raises the question of the depth of financial inclusion.
But what determines the actual use of bank accounts? Anecdotal evidence suggests that customers might open accounts for one-off transactions, especially in countries where mobile and agency banking has allowed an administratively easy account opening with few legal documents and on the spot. There might be a lack of trust in banks or the lack of need. Informal financial services are easy to come by in most developing countries and in spite its shortcomings (including lack of reliability and privacy), people are used to them.
This debate also puts in perspective attempts to turn the share of banked population into a simple cross-country benchmarking exercise. More is not always better. Banking systems across the developing world, but especially in many African countries have made progress on the share of population with a bank account. The next step is to turn these accounts into tools in participating in modern market economies. Only as a larger share of the population regards the active use of formal financial services as a useful tool to manage their private and business life, are we moving ahead in the challenge of financial inclusion