Highlights from The Global Findex Database 2021

Although no recent data on financial inclusion in Ethiopia is available, the 2021 Findex database, contains valuable insights for industry players and policymakers.

(Source: Findex 2021)

The Global Findex Database is a World Bank project that compiles data on how adults use financial services, including how they save, borrow, and make payments. It has been active since 2011 and covers 140 economies in the world.

Its 2021 report titled “Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19” sheds light on account ownership and the effects of COVID-19. Although no recent data on financial inclusion in Ethiopia is available, it contains valuable insights for industry players and policymakers.

The 2021 edition presents results from a survey done in 123 countries and 120,000 adults.

Positive progress in account ownership

According to the report, globally, account ownership increased to 76% adult population in 10 years since 2011 from 50%. Ethiopia’s adult population owning an account is estimated to be 50%.  

Key findings  

-Mobile money is driving growth in account ownership, particularly in Sub-Saharan Africa, where 33% of adults have a mobile money account.

-Lack of money, distance to the nearest financial institution, and insufficient documentation are consistently cited by unbanked adults as some of the primary reasons they do not have an account.

-In some economies in Sub-Saharan Africa, greater access to ID could drive account access as More than 100 million unbanked adults n Sub-Saharan Africa have no ID.

-Lack of money, perceived cost of accounts, and distance to financial institutions are the top reasons people remain unbanked

Digital payments into accounts catalyze the use of financial services

Findex report highlights receiving payments directly into an account is associated with the tendency to use other financial services in developing economies. This is because once money is received into an account, it’s easier to keep it there until needed and make payments digitally from the account.

 Key findings

-83% of adults in developing economies who received a digital payment also made a digital payment, up from 66% in 2014 and 70% in 2017.

The share of adults making or receiving digital payments grew from 35% in 2014 to 57% in 2021.

Mobile money continues to play its critical role

In Sub-Saharan Africa, 33% of adults have a mobile money account, the largest share from any region in the world in contrast to the 10% global average.

Mobile money has been driving mobile account ownership in Ethiopia as well. Ethiotelecom’s Telebirr has managed to onboard over 19 million accounts. In 2020, there were only 7.9 million mobile money accounts, according to data from the National Bank of Ethiopia. As per 2021/22 data, there are over 30 million mobile money accounts.

Key findings

  • About three in four mobile account owners in Sub-Saharan Africa used their mobile money account to make or receive at least one payment that was not person-to-person.
  • Seven percent of adults in Sub-Saharan Africa also borrowed using their mobile money account

COVID-19 catalyzed growth in the use of digital payments

In developing economies in 2021, 18 percent of adults paid utility bills directly from an account. About one-third of these adults did so for the first time after the onset of the COVID-19 pandemic.

Payments made through digital channels have surged in Ethiopia as well.

The number of mobile banking transactions made by the end of 2020 reached 11.6 million from 4.69 million (147% increase. In 2019 and 2018, year-to-year growth recorded was 30 % and 3.2, respectively. the previous year

Gaps in Financial Literacy

About two-thirds of unbanked adults said that if they opened an account (excluding mobile money) at a financial institution, they could not use it without help. One-third of mobile money account holders in Sub-Saharan Africa say they could not use their mobile money account without help from a family member or an agent.

The study recommends investment is needed in extending financial literacy, developing customer-centric products, and building trust in financial products.

Read the full report here https://www.worldbank.org/en/publication/globalfindex/Report