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 market 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. 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, identifying the structural gaps globally. This will help us develop steps to narrow the gaps, 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 our partners 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 through three lenses: support provided to people by the government, the financial system, and employers. 

The Global Financial Inclusion Index draws upon a wide range of verified public and survey-based datapoints, 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 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 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.  

The Global Financial Inclusion Index methodology, developed by Cebr, combines various data sources into one unified measure of financial inclusion at the individual market level. Structurally, the Index is split into three pillars—government, financial system, and employer support—which in turn consist of a varying number of indicators.  

An indicator can consist of a single or multiple variables derived from a combination of publicly available quantitative data sources and survey-based data. To arrive at the indicator score, subsequent pillar score, and headline index ranking, we combine the various data points. 

Scores for each market are generated based on its performance as measured by the particular indicator. We follow the same set of steps for each indicator, allowing us to assign a value between 0 and 100 to each market. The values are relative to each other. 

• Where applicable, we check for outliers in data series by evaluating whether a data point falls outside of the mean +/- 2 standard deviations (SD) range. If it does, the market is assigned a value equal to either mean + 2 SD or mean – 2 SD.

• For each indicator, scores are normalized within a range from 0 to 100. Given that a higher overall index score indicates better performance, for indicators and sub-indicators where a lower figure signifies a better performance (e.g., estimates for informal employment), the inverse of the data point or its negative equivalent will be used.

• Once we assign scores between 0 and 100 to each market for each indicator based on the previous steps, we weight the indicators to calculate the overall pillar score. In turn, we aggregate these into an overall index score. 

Here, our general default approach is to use an equal weighting for indicators and pillars, (e.g., given that the Index has three pillars, each should receive a weight of 33%). However, there are cases when it can be justified to deviate from this default assumption. With the Global Financial Inclusion Index, we employed an unequally weighted approach to give greater weight to the government and financial system pillars because the employer pillar is based exclusively on survey data. 

While survey data is an important part of the data inputs required for the Index, we also acknowledge that the information based on robust secondary data sources should be attributed a greater weight, as it’s more likely to reflect an objective assessment of the respective measures. Under this logic, we have also assigned a lower weight to the survey-based indicators within pillars. This helps minimize any potential bias introduced through market-specific answer patterns in the survey results.

This approach provides a unique market score for each metric, which allows us to present separate figures for each indicator and pillar as well as an overall market score.

The Index is built around three clearly defined pillars (PDF).

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, and 

• 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: 

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

• relative levels of access to credit, 

• borrowers’ and lenders’ protection rights, 

• access to bank accounts, 

• developments made in the financial technology space, 

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

• the overall effectiveness of making financial services and products accessible to businesses, organizations, and individuals.  

The employer support pillar relates to the level of support employers provide their employees. It examines the efficacy of business support to employee financial well-being and inclusion across various dimensions such as: 

• employee pension and retirement contributions, 

• employee insurance programs, and 

• employer pay initiatives.  

The employer support pillar and a small number of indicators within the government and financial system support pillars are based on business survey data.

Government support

• Consumer championing regulation

• Awareness and uptake of government-mandated pensions/savings

• Availability of government-provided financial education

Financial system support

• Enabler of small and medium enterprise (SME) growth and success

• Enabler of general business confidence

Employer support

• Provision of guidance and support around financial issues

• Employee pension contributions

• Employer insurance schemes

• Employer pay initiatives

To provide a complete and holistic picture of global financial inclusion, it’s important also to consider the view of individuals across the 42 markets and analyze the extent to which populations recognize and understand how governments, financial systems, and their employers support their financial well-being.  

The Index is supplemented with a comprehensive consumer survey of 500 people from each of the 42 markets to assess how residents rate the access they have to financial support, products, tools, and services, and to analyze to what extent populations’ understanding of these initiatives reflect the programs, provisions, and performance of these institutions.   

What is the sample size for the B2B (business-to-business) survey?  

• Respondents: Senior manager+, working in companies of two or more employees

• Sample sizes: 250 in most markets except where not possible: Chile (50), Peru (150), Switzerland (150), Norway (50), Denmark (100), Finland (150), Hong Kong (150), Indonesia (100), Malaysia (100), Taiwan (100), Thailand (200), United Arab Emirates (150), Israel (200), and Ghana (50)

What is the same size for the B2C (business-to-consumer) survey?

• 500 adults per market. No weightings applied.

All surveys were conducted online.