Financial Inclusion and Development: Recent Impact Evidence

This Note studies the impact of financial inclusion on poor households in improving their lives and economic activity. The analysis at the micro and local economic levels focuses primarily on the relatively new evidence from randomized control trials (RCTs) or quasi-randomized impact evaluations. At the macroeconomic level, it highlights studies using country panel data comparisons.

At the microeconomic level, the Note synthesizes the evidence of how the use of different financial products affects the lives of the poor. At the macroeconomic level, it studies the correlation between financial inclusion and growth and employment. In summary, the Note states that the evidence supports policy makers' assessments that developing inclusive financial systems is an important component for economic and social progress on the development agenda. First, financial inclusion can improve the effectiveness and efficient execution of government payment of social safety net transfers (government-to-person payments), which play an important role in the welfare of many poor people. Second, financial innovation can significantly lower transaction costs and increase reach, which is enabling new private-sector business models that help address other development priorities.