Demographic Trends and Financial Inclusion

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Demographic Trends and Financial Inclusion

  1. 1. Demographic Trends and the Future of Financial Inclusion Financial Inclusion 2020 Project: Mapping the Invisible MarketElisabeth RhyneGlobal Youth Economic Opportunities ConferenceWashington, September 2012
  2. 2. Three Parts1. Changing global demographics2. A lifecycle model of financial service demand3. Implications for financial inclusion policy2
  3. 3. Thank you to the Financial Inclusion 2020Project’s Funding PartnersLead Partner Principal Partner CFI Founding Sponsor
  4. 4. World population is skidding to a standstill4
  5. 5. By 2100 total population will level off at 10 billion In October, 2011 world population reached 7 billion. Throughout the 21st century nearly all growth will come from the developing world. Source: United Nations 20105
  6. 6. Most of the world’s “unbanked” are in middleincome countries. (gold)Top 20 countries by number of people age 15+ without bank accounts (in millions):Rank Country Millions Unbanked1 India 793.22 China 484.2 Totals3 Indonesia 192.9 Top 20: 2,5814 Pakistan 155.7 World: 3,4135 Nigeria 111.46 Bangladesh 89.97 Brazil 868 Mexico 82.3 Low income9 Russia 73.510 Egypt 73.2 Middle income11 Philippines 68.5 High income12 Vietnam 68.413 Congo, Dem. Rep. 63.514 Sudan 40.515 United States 37.316 Tanzania 37.117 Colombia 32.218 Afghanistan 31.3 Source: World Bank Global Findex 2012, World Bank Data Bank 2012, author’s19 Turkey 30.8 calculations.20 Iraq 28.76
  7. 7. Population pyramids: 1950 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 2507
  8. 8. Population pyramids: 1960 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 2508
  9. 9. Population pyramids: 1970 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 2509
  10. 10. Population pyramids: 1980 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25010
  11. 11. Population pyramids: 1990 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25011
  12. 12. Population pyramids: 2000 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25012
  13. 13. Population pyramids: 2010 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25013
  14. 14. Population pyramids: 2020 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25014
  15. 15. Population pyramids: 2030 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25015
  16. 16. Population pyramids: 2040 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25016
  17. 17. Population pyramids: 2050 World More developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 350 250 150 50 50 150 250 350 250 150 50 50 150 250 Less developed Least developed 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 250 150 50 50 150 250 250 150 50 50 150 25017
  18. 18. Expanding working age population The working age population in middle income countries is surging. The challenge is to enable these people to fulfill their productive potential.18
  19. 19. Total dependency ratios When countries have a low dependency ratio, they are poised for economic growth. This is called the demographic window.19
  20. 20. South Africa is in the demographic window In South Africa, fertility rates are slowing, reducing the percentage of young children, while there will be increasing numbers of elderly (though still a small fraction of the total population). 2010 2020 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 3,000 1,000 1,000 3,000 3,000 1,000 1,000 3,000 Source: United Nations 2010 20
  21. 21. South Africa’s middle-aged population is growingThere will be many more 30-39 year olds and 60-69 year olds during the next decade. South Africa net change in population 2010-2020 1400 1200 1000 Popula on change (000s) 800 600 400 200 0 -200 0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90+ -400 -600 -800 Age Group Source: United Nations 201021
  22. 22. Mexico is also in the demographic windowMexico also will see more adults, fewer children, and an increasingly older populationalong with declining fertility. Mexico population pyramids 2010 2020 100+ 100+ 90-94 90-94 80-84 80-84 70-74 70-74 60-64 60-64 50-54 50-54 40-44 40-44 30-34 30-34 20-24 20-24 10-14 10-14 0-4 0-4 6,000 3,000 0 3,000 6,000 6,000 3,000 0 3,000 6,000 Source: United Nations 201022
  23. 23. Mature adults dominate population growth in MexicoThe number of children will actually shrink over the next decade. Financial inclusionpolicy in Mexico must address the needs of mature adults. Mexico net change in population 2010-2020 4000 3000 Popula on change (000s) 2000 1000 0 0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90+ -1000 -2000 Age Group Source: United Nations 201023
  24. 24. Nigeria’s population pyramid will still havethe traditional shape Nigeria population pyramids 2010 2020 100+ 100+90-94 90-9480-84 80-8470-74 70-7460-64 60-6450-54 50-5440-44 40-4430-34 30-3420-24 20-2410-14 10-14 0-4 0-4 15,000 5,000 5,000 15,000 15,000 5,000 5,000 15,000 Source: United Nations 201024
  25. 25. The youth bulge in Nigeria will be enormous In Nigeria financial inclusion policy will be all about access and youth Nigeria net change in population 2010-2020 14000 12000 Popula on change (000s) 10000 8000 6000 4000 2000 0 0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90- Age Group Source: United Nations 201025
  26. 26. A lifecycle approach to financial services Childhood Youth Young Adult Mature Adult Old Age birth marry children born children marry parents dieLifecycle events death Education enter school finish school child in school child ends school enter workforce set up household migrate leave Economic life workforceActivities, need establish identity continue learning contribute to workforce workforce contribution wind down economic begin learning prepare for work launch business grow business activity s, and care for children launch children care for food, clothing food, clothing care for parents grandchildren responsibilities identity, food, clothing prepare for old age early childhood housing food, clothing health & nutrition start-up business investment food, clothing medical care children’s school and business investment source of income medical children’s school, wedding post-retirement parent’s medical, funeral illness and death Payments + receive salary, pay bills, business transactions, send pay bills, receive receive support payments management remittances support payments Savings, short learn to use learn to save seasonal needs, consumption smoothing, emergencies term savings services save for draw-down of Savings, long save for business save for life cycle events for learn to save schooling and savings; annuity or term investment, housing self, parents, children “launch” pension payouts some business business loans; home loans; consumer credit; school loans, Credit emergency loan credit emergency loans Insurance health health, property, crop, life, disability health, funeral setting financial goals, use of use new Financial intro to thrift, begin using financing business growth, more complex services; technologies, access 26 education, etc. financial identity savings establish credit history planning for old age, for PWD
  27. 27. A lifecycle approach to financial services Continued business finance Youth savings Health insurance Education loans Remittances Initial business finance Government benefits Basic financial education Disability insurance Older Children and People Youth Mature Young Families Families Health insurance Housing finance Health insurance Business maintenance Housing finance Weddings and funerals Business start-up and growth Savings for old age Consumer loans Bill payment and salary depositNote: Financial decisions by people in their productive years (young and mature families) will vary not only by their economicstatus, but also by their responsibility for dependents and expectations of their own future dependency. 27
  28. 28. Implications for financial inclusion1. Demography suggests that financial inclusion is a critical enabler of a country’s ability to achieve its economic potential. Much more than “banking the unbanked”.2. Countries with different demographic characteristics will have different financial inclusion strategies – Middle income countries – window countries – where most of the unbanked live. Focus on mature families, elderly. – Poorest countries – Africa. Focus on youth and access.3. Use lifecycle model to segment customers – young families and mature families have different financial needs4. Urgency – and difficulty – of increasing savings rates5. Financial education at critical life points 28
  29. 29. FI2020’s Definition of Financial Inclusion 1. Access to a full suite of financial services • Including credit, savings, insurance, and payments 2. Provided with quality • Services are convenient, affordable, suitable, provided with dignity and client protection 3. To everyone who can use financial services • Both excluded and under-served populations. Special attention to rural, people with disabilities, women, and other often-excluded groups 4. With financial capability • Clients are informed and able to make good decisions about their use of financial services 5. Through a diverse and competitive marketplace • A range of financial service providers, supported by robust financial infrastructure and a clear regulatory framework29
  30. 30. Rising numbers of elderly In middle income countries the percentage of elderly is rising steeply. This will happen later in the poorest countries.30
  31. 31. Saved in the past year (ages 15+)31
  32. 32. Saved at a formal financial institution32
  33. 33. For more on Financial Inclusion 2020 go towww.centerforfinancialinclusion.orgLead Partner Principal Partner CFI Founding Sponsor

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