By Maren Duvendack and Philip Mader
The impacts of financial inclusion and microfinance in developing countries have been hotly debated for many years. With so many systematic reviews having been published over the last decade, it is hard for anyone to keep an overview, let alone come to a summary conclusion. With this systematic review of reviews, we sought to address this issue.
Financial inclusion programmes aim to increase poor people’s access to financial services such as credit, savings, insurance and money transfers to allow them to grasp opportunities, mitigate shocks, and ultimately escape poverty. This sounds good in principle, but we found that the evidence on whether these impacts occur is very unclear.
Our study reviewed other meta-studies (systematic reviews and meta-analyses), which used both qualitative and quantitative synthesis approaches, to examine the impacts of different financial inclusion interventions on a range of economic, social, gender and behavioural outcomes. We identified a total of 32 relevant meta-studies, but data quality concerns led us to narrow the dataset to 11 high-quality studies.
Our review found that impacts of financial inclusion, where they occur, are indeed more likely to be positive than negative. However, the effects vary, they often mixed (positive for some, negative for others), and above all, do not appear transformative in scope or scale. The effects of financial services on women’s empowerment appear to be generally positive, but they strongly depend upon elements of programmes that are often unrelated to the financial service itself. For instance, education about rights, delivered in the context of financial inclusion, or membership in a regularly-meeting group have clear empowering effects, but financial services themselves do not.
Overall, we find that the effects of financial inclusion on core economic poverty indicators such as incomes, assets or spending, and on health status and other social outcomes, are small and inconsistent. Moreover, there is no evidence for positive impacts driven by behaviour changes, despite behavioural interventions in financial inclusion having received much policy attention in recent years.
There is a silver lining: Access to savings opportunities has a fairly small but much more consistently positive effect than other financial services. Moreover, savings bear fewer downside risks for clients than credit, which can lead to over-indebtedness. Calling this a savings "revolution" is too strong, but clearly, savings do some good and little harm.
What have we learnt?
- Not all high-level evidence is strong evidence; the meta-study evidence we found had numerous weaknesses.
- The sad truth about financial inclusion is: It is not transforming poor people's lives, and it does not have macro-level effects on low- and middle-income countries.
- Working at this high level of systematisation generates a whole set of unique methodological challenges.
"Impact of financial inclusion in low- and middle-income countries" is the first Campbell review of reviews. There is a two-page plain language summary in Hindi, Spanish and English: click here.