Growing Income, Growing Inclusion: How Rising Incomes at the Base of the Pyramid Will Shape Financial Inclusion

This report analyzes existing financial services use among the bottom 40% of the global population and considers the ways this usage may change with rising income. It illustrates these trends at a national level through examples from South Africa, Mexico, and Nigeria. The report states that the bottom 20% of the world's population will still likely hold only 5% of the total GDP in 2020. It also states that there is a strong correlation between income and account ownership and suggests that rising incomes will likely be accompanied by a significant increase in financial services usage among those in the bottom 40%.

The paper suggests the following implications for providers and policy makers:

• Providers need to create profitable customer relationships and maintain a favorable position in a rapidly changing retail financial services market;
• Providers will have to understand how prospective customers who now use mainly informal financial services are likely to transition to formal services;
• To actively foster financial inclusion, policymakers can reduce barriers to entry for providers;
• Policymakers can set proportional know-your-customer requirements, encourage interoperability between institutions, and allow new players with new business models to enter the market.