Methodology

The Index was created by Principal and the Centre for Economics and Business Research (Cebr) to measure the degree to which people in regions around the world have access to useful and affordable financial products and services that meet their needs.

Using publicly available data combined with global consumer and business owner surveying, the Index evaluates the degree to which governments, employers, and financial systems promote financial inclusion in 42 markets.

As a leader in global financial services, Principal is committed to helping more individuals, businesses, and communities become more financially secure. When we launched our first Global Financial Inclusion Index in 2022, our aim was to gain greater insight into the levers that enable and inhibit financial inclusion in different markets around the world. The drive to explore this theme is rooted in our belief that financial inclusion sits at the heart of financial security and global economic progress.

While we’ve made great strides in improving financial security for more people, recent events—the ongoing impact of the pandemic, war in Ukraine, commodity scarcity, rising inflation—have also revealed fragile economic footing for the financially insecure, resulting in increased poverty rates and a widening wealth and income gap.

To progress toward greater financial security, it’s important to first measure and understand financial inclusion. It’s why we’ve partnered with Cebr to develop the Global Financial Inclusion Index to measure the degree to which people have access to useful and affordable financial products and services. By using data-driven insights like those found in the Index, we can help identify the structural gaps and clear opportunities to improve financial inclusion globally—ultimately building a more productive and protected workforce and society.

The insights gained from the Global Financial Inclusion Index will help inform how Principal considers future products, services, and investments, our philanthropic efforts, and the organizations and companies we collaborate with to advance financial security.

Long term, the Index will enable Principal and others to take a more nuanced and informed approach to the ongoing dialogue around financial inclusion as a core component of financial security. Use of data-driven insights will provide clearer understanding of the barriers to financial security and allow all of us to produce alternative pathways that broaden access to financial solutions and support.

The definition of financial inclusion used in the report and the accompanying content is based on the World Bank, which states that financial inclusion entails “individuals and businesses having access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit, and insurance—delivered in a responsible and sustainable way.”

While this is a helpful starting point, the broad-based and complex nature of financial inclusivity implies that there is no single, catch-all metric that can be employed to observe the state of financial inclusion globally. As such, the Index looks at financial inclusion around three clearly defined pillars: the support provided to people by the government, the financial system, and employers.

The Global Financial Inclusion Index draws upon a wide range of data, providing insights into the extent to which governments promote financial inclusion, the availability and uptake of financial products and services, and the level of support employers provide to their employees across 42 markets.

A multitude of factors contribute to an individual’s access to—and understanding of—tools that improve their financial well-being. Historic studies have placed a focus on factors such as access to bank accounts and credit which, though crucial, are not forward-looking metrics. Our Index goes one step further and analyzes markets based on factors that will impact the future productivity and resilience of their economies, such as the prevalence of fintechs, metrics of business confidence, and the availability and use of benefits and investment services. The Global Financial Inclusion Index also goes into more granular detail on the specifics of different corporate sectors.

We have partnered with Cebr to develop a robust measurement framework which uses a unique benchmark based on a proprietary scoring system underpinned by independently-verified, publicly-available data sets and custom survey data. By combining public data with polling of general populations and businesses, the report gives a holistic perspective on financial inclusion.

It’s imperative to work with a credible and respected third party on this research to provide an unbiased view of the challenges facing financial inclusion globally.

Principal has partnered with the Centre for Economics and Business Research (Cebr), a leading economics consultancy that’s research spans the globe. A renowned commentator on business and consumer developments and an expert in producing economic impact studies, Cebr is a leader in developing innovative methodologies to quantify the economic contribution of new technologies and other aspects of the economy. It’s the ideal partner to work with to develop the Global Financial Inclusion Index.

Whereas the Index rankings evaluate a market's level of financial inclusion in relation to other markets in the Index, this year’s research incorporates a new and important metric: regional and global scores on an absolute basis.

As the global and regional scores do not employ rankings, year-over-year comparisons need to be made with absolute scores. To ensure accurate and meaningful comparisons, we conducted a separate modeling exercise to ensure the absolute scores of the 2022 and 2023 iterations of the indices are directly comparable.

The market-specific scores derived as part of this exercise were consolidated into regional scores using population weights, representing distinct geographical areas—namely the Americas, Europe, Asia Pacific, the Middle East, and Africa.

Subsequently, a global score was derived by applying population weights to these regional scores.

This exercise was conducted independently from the composition of the main Index. It ensures consistent comparison across absolute scores for all indicators (and subsequently, for all three pillars, and the overall scores), with scores interpreted on a 0 to 100 scale.

Scores and rankings are only representative of the state of financial inclusion across all 42 markets in the Index, and not across all economies in the world.

The methodology is designed to permit year-over-year comparisons, enabling us to track the changes in financial inclusivity across various markets over time.

To achieve this, we've adapted the methodology to facilitate year-over-year comparisons while preserving the integrity of the 2022 Index results. ​

The indicators constituting the 2022 Index have been retained in their entirety for the 2023 iteration. ​

However, certain adjustments have been made to the source data of a select few indicators, mainly to mitigate a lack of new data or to account for revised data for specific indicators, alongside further methodological refinements.​

We have marginally modified data for indicators that relied on revised historical data: ​

1. Deposit protection schemes​
2. Education levels​
3. Financial literacy​
4. Access to credit​

The change in these data sources occasionally leads to significant variations in year-on-year index scores, although the rankings experience minimal alteration. ​

To prevent any potential confusion, Cebr advises that this report will prioritize rank comparisons (over scores) across all levels, namely indicators, pillars, and the overall index. ​

Given that in the 2022 index target audiences found the rankings to be more meaningful than the scores, we view the impact of these methodological changes as minimal. ​

The Index is built around three clearly defined pillars.

The government support pillar evaluates the degree to which governments promote financial inclusion. It examines:

• the state of public pensions and retirement offerings

• the existence and coverage of deposit protection schemes

• the scope of consumer championing regulations

• employment levels (adjusted to account for informal employment)

• the awareness and use of government-mandated pension schemes

• education levels

• the complexity of corporate taxation systems (used as a proxy for the complexity of income taxation systems due to lack of reliable data for the former)

• the availability and scope of government-provided financial education

• relative levels of financial literacy across societies

• the levels of online connectivity in each market

The financial system support pillar examines the availability and uptake of various types of financial products and services that are central to financial inclusion. It scores markets on:

• volume of real-time payments (weighted by population)

• relative levels of access to credit

• borrowers’ and lenders’ protection rights

• access to bank accounts

• access to capital

• developments made in the financial technology space

• how well the financial system in each market enables small and medium enterprises to thrive

• the overall effectiveness of the financial system in influencing businesses' willingness to participate and engage in financial activities, which in turn fosters a more inclusive and accessible financial environment

The employer support pillar examines the efficacy of business support for employee financial well-being and inclusion across various dimensions such as:

• Provision of guidance and support around financial issues by employers

• employee pension contributions

• employee insurance programs

• employer pay initiatives (delivery, flexibility) to promote financial inclusion