Beyond Financial Inclusion: Financial Health as a Global Framework

A relatively new term, financial health is a model for assessing how well one’s daily financial systems help build resilience from shocks and create opportunities to pursue one’s dreams. This report, co-authored in partnership with the Center for Financial Services Innovation, presents findings in determining the validity of financial health as a core global concept.

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AUTHORS

Elisabeth Rhyne, Sonja Kelly, Sarah Rotman Parker, Tanya Ladha, Kaitlin Asrow

Topics

Over the course of 2016, CFI collaborated with project leads from the Center for Financial Services Innovation (CFSI) and Dalberg’s Design Impact Group (DIG) to evaluate hypotheses, conduct field research, convene thought-leaders, and test assumptions, all for the purpose of determining the validity of financial health as a core concept internationally. The teams worked to understand the necessary adaptations such a model would require across borders, as well as the opportunities and use cases for such a framework.

This report presents results of these efforts, finding that the core financial health framework resonates with consumers, practitioners, providers, and funders both in the U.S. and in the developing world.

This report is authored by Tanya Ladha, Kaitlin Asrow, and Sarah Rotman Parker of the Center for Financial Services Innovation (CFSI), and Elisabeth Rhyne and Sonja Kelly of CFI.

Executive Summary

Within a developing world context, there are factors exogenous to one’s own behaviors that have critical impact on one’s financial life.

While the core financial health framework translates across borders, there are important distinctions and constraints that influenced the creation of the indicators. And while exogenous factors are important in the U.S., we found them to be uniquely important in the developing world. The global financial health framework consists of six primary indicators, used to measure consumer financial health, as well as four contextual factors that are important to consider in the developing world:

Financial Health Indicators for the Developing World

A consumer in the developing world is financially healthy when he or she:

Balances income and expenses
Builds and maintains reserves
Manages existing debts and has access to potential resources
Plans and prioritizes
Manages and recovers from financial shocks
Uses an effective range of financial tools

Four Key Factors in Understanding Financial Health in the Developing World

A consumer’s financial health is significantly influenced by his or her:

Absolute income level
Income and expense volatility
Social network
Financial role

Financial health as a concept has garnered traction within the U.S., and is gaining momentum globally. Such a framework can push the financial inclusion conversation forward, helping shape policy, direct donor and government resources, and contribute to the high-quality design of financial services. More work must be done to create instruments for accurate measurement. There is a role for researchers, financial services providers, and policymakers in supporting the creation of more nuanced infrastructure from which to build out a more tactical and actionable framework. However, preliminary research suggests a powerful and profound parallel between the financial lives of consumers in the U.S. and abroad.

This work was conducted in partnership with the Center for Financial Services Innovation (CFSI), the Bill and Melinda Gates Foundation, and Dalberg. The Center for Financial Services Innovation (CFSI) is the authority on consumer financial health in the United States. CFSI leads a network of financial services innovators committed to building a more robust financial services marketplace with higher quality products and services. This report was created through the generous support of the Bill & Melinda Gates Foundation. All in-country community-based research, both qualitative and quanitative, was led by Dalberg and their findings informed the refinement of the financial health framework and development of the indicators for this report.

Elisabeth Rhyne

Former Managing Director

From its founding in 2008 until retiring in 2019, Elisabeth Rhyne was the Managing Director of CFI. As senior vice president of Accion since 2000, Beth led Accion’s initial entry into Africa and India, directed the organization’s research efforts to develop new financial products, and managed Accion’s publications and educational activities. Recognized as a leading thinker and writer in the field of microfinance, Beth has published numerous articles and four books on the topic, including Mainstreaming Microfinance: How Lending to the Poor Began, Grew and Came of Age in Bolivia (Kumarian Press, 2001). She was also co-editor of The New World of Microenterprise Finance (Kumarian, 1994), which provided the introduction to microfinance for many of the field’s current professionals. Beth was director of the Office of Microenterprise Development at the U.S. Agency for International Development (USAID) from 1994 to 1998, where she developed and led USAID’s Microenterprise Initiative. While there, she contributed to the founding of the Consultative Group to Assist the Poor (CGAP) and the Boulder Institute of Microfinance. Beth’s experience includes eight years of residence in Africa (Kenya and Mozambique) and independent consulting on microfinance policy and operations for governments, international organizations and microfinance institutions. She holds a master’s and Ph.D. in public policy from Harvard University. She earned a bachelor’s degree in history and humanities from Stanford University.

Sonja Kelly

Director of Research and Advocacy, Women’s World Banking

Sonja Kelly is the global lead for Women’s World Banking research and was the research director at CFI from 2011 to 2018. Through research on the financial sector, policy trends, financial services providers, and end users, Sonja and her team advocate for women’s financial inclusion. Before joining Women’s World Banking, she advised the U.S. Department of State on strategy for U.S. Embassy engagement in digital finance around the world. She has also held consulting roles at the World Bank and the Consultative Group to Assist the Poor (CGAP), and has worked in microfinance at Opportunity International. Sonja holds a doctorate in international relations from American University where she researched financial inclusion policy and regulation.