Financial inclusion progress and possibilities in South Asia

Afghan Sikh Jagtar Singh Laghmani, 50, accepts money from a customer at his traditional herb shop in Kabul, Afghanistan June 19, 2016.
Editor's note:

This post is part of a series on the 2016 Brookings Financial and Digital Inclusion Project (FDIP), which was released at a Brookings public event in August. Following posts on financial inclusion developments in Mexico, other FDIP countries in the Latin America and Caribbean region, and FDIP countries in Southeast and Central Asia, this blog explores progress toward financial inclusion across the four FDIP countries in South Asia—Afghanistan, Bangladesh, India, and Pakistan—and highlights opportunities for further growth.

While none of the FDIP countries in Asia were among the top-five scoring countries in the 2016 Brookings Financial and Digital Inclusion Project (FDIP) Report, the region features a dynamic financial inclusion landscape that is increasingly leveraging non-traditional channels to extend access to formal financial services among those at the margins of, or outside of, the formal financial system.

In particular, South Asia’s robust mobile ecosystem is contributing to enhanced engagement with digital financial services. For example, South Asia accounted for more than a third of all registered mobile money accounts opened in 2015, and the annual growth in registered accounts has surpassed annual growth of “over-the-counter” (OTC) mobile money usage. By transitioning from OTC usage to registered accounts, customers are equipped with opportunities to exert greater control over their accounts and engage in a broader variety of financial activities.

The strengthening of mobile infrastructure and the mobile money ecosystem across many countries in South Asia helped contribute to several countries’ enhanced FDIP scores. In addition to mobile capacity, the 2016 FDIP Report also assessed the 26 FDIP focus countries on several other key dimensions of financial inclusion, including country commitment, regulatory environment, and the adoption of selected traditional and digital financial services.

Below, we examine a few highlights from the four FDIP countries in South Asia—India, Pakistan, Bangladesh, and Afghanistan—in order of their overall scores.


The launch of the Pradhan Mantri Jan Dhan Yojana (PMJDY) program in 2014, one of the world’s largest financial inclusion initiatives to date, is one prominent example of India’s national-level commitment to advancing financial inclusion. This initiative contributed to India’s country commitment score of 100 percent. PMJDY’s objective is to ensure access to financial services such as basic savings accounts, credit, remittances, insurance, and pension products among individuals who are often excluded from the formal financial sector.

In addition to the country commitment dimension, India also performed strongly on the regulatory environment component of the scorecard, earning a score of 94 percent. One regulatory development that demonstrates India’s drive to enhance its digital financial ecosystem was that in August 2015, the first provisional “payments bank” licenses were approved in-principle (i.e., applicants must fulfill a list of requirements within an 18 month period in order to receive a full license). These licenses enable non-bank entities to leverage their distribution networks and marketing expertise to advance access to and usage of selected financial services (e.g., these entities are not permitted to offer lending services).

Yet while PMJDY has dramatically expanded access to formal financial services, further efforts remain in terms of ensuring that individuals can effectively leverage these services to enhance their financial health and well-being. As of late August 2016, about a quarter of accounts were dormant, indicating untapped potential for increasing the accessibility and utility of these products for customers. With respect to mobile money services, greater awareness is needed to foster enhanced adoption: As of October 2015, mobile money awareness among adults age 15 and older was at about 10 percent, according to InterMedia.


Among the FDIP countries in South Asia, Pakistan demonstrated the greatest improvement on the FDIP scorecard, boosting its score by four percentage points between 2015 and 2016. Increases in unique mobile subscribership and expansion of 3G network coverage contributed to Pakistan’s robust performance on the mobile capacity dimension and should support increased adoption of digital financial services in the future.

Mobile money has continued to serve as a driver of financial inclusion in Pakistan, which increased by about 2 percentage points (from 7 to 9 percent) between 2014 and 2015. Mobile money registration is increasing, growing by 44 percent between the first and second quarters of 2015. Interestingly, among the demographic groups in Pakistan assessed by research group InterMedia, financial inclusion grew the most among women, doubling from 3 percent in 2014 to 6 percent in 2015.

Still, in absolute terms financial inclusion remains limited, and significant disparities remain—including with respect to financial account ownership among men and women, the latter of whom are more likely to be excluded from the formal financial ecosystem. As of 2014, the gap between adoption of accounts at formal financial institutions or with mobile money providers among men and women was about 16 percentage points. Concerted efforts by public and private sector financial inclusion stakeholders, as well as civil society actors and consumers, are needed to close this gap.


With its strong commitment to advancing financial inclusion (as evidenced by its participation in the Alliance for Financial Inclusion’s Maya Declaration, among other initiatives) and its increasing rates of registered mobile money users, Bangladesh is well-positioned to augment adoption of formal financial services among marginalized populations. However, Bangladesh also faced challenges with respect to its financial ecosystem over the previous year, including the theft in February 2016 of funds placed by Bangladesh’s central bank (Bangladesh Bank) in the Federal Reserve Bank of New York, which led to the resignation of the central bank governor.

In terms of the FDIP scorecard, Bangladesh’s strongest score was its country commitment score, at 89 percent. A number of factors contributed to this score. For example, Bangladesh publicly solidified its commitment to promoting digital finance by joining the Better Than Cash Alliance in June 2015. Moreover, Bangladesh Bank established the Financial Inclusion Department in July 2015. The Bank has also engaged in a number of efforts to mitigate the disparity in financial account ownership among men and women, including by supporting efforts to advance financial literacy and capability among women entrepreneurs.

Moving forward, Bangladesh should finalize and implement its national financial inclusion strategy in order to accelerate access to and usage of quality, affordable financial services. One hurdle to financial and digital inclusion in Bangladesh is that mobile phone competency has been identified as a barrier to digital financial services use. It is possible that increased smartphone adoption in the future will help promote greater accessibility and ease of use with respect to mobile financial services; in the interim, technological and financial literacy initiatives could help reduce barriers to engagement with mobile-based services.


With the lowest Gross Domestic Product (in current USD) among the FDIP countries in South Asia, as well as limited banking infrastructure and a legacy of political instability, Afghanistan faces a number of challenges in its efforts to promote financial inclusion. These factors contributed to Afghanistan’s placement as the lowest-scoring FDIP country in Asia on the 2016 scorecard. With that said, Afghanistan’s fairly robust level of mobile capacity, which earned the third-highest score among all the FDIP countries, is helping to lay the groundwork for enhanced adoption of digital financial services.

Moreover, the country has increasingly engaged in efforts to raise awareness and adoption of digital financial services, including by participating in an electronic money summit in October 2015 and launching a public awareness campaign in February 2016 regarding mobile financial services. As part of this interest in expanding the availability and usage of digital services, government agencies in Afghanistan have been directed to deploy electronic payments where possible.

Moving forward, developing a national financial inclusion strategy could help solidify the country’s financial inclusion commitments, identify key priorities, and establish a framework for coordinating the implementation of Afghanistan’s national financial inclusion objectives. Additionally, instituting agent banking regulations could help foster greater regulatory clarity and facilitate the expansion of the country’s financial services network into underserved areas.