Graham Macmillan

Bridging the ‘Financial Capability Gap’ to Financial Inclusion

The fact that between 500 million and 800 million of the world’s poor have gained access to finance in recent years is a significant accomplishment. But 25 percent or less of these individuals have received any form of financial training that would help them make informed decisions about their borrowing, their savings and their entire financial future. This lack of instruction represents the “financial capability gap,” which is both massive and rapidly growing.

Addressing it is an urgent priority for the field. It’s the reason why today we are releasing Bridging the Gap: The Business Case for Financial Capability.

This study, commissioned by the Citi Foundation and researched by the Monitor Group & Partners for Sustainable Development, seeks to understand what is needed to strengthen the client capability side of financial inclusion efforts.

Increasingly, financial inclusion is defined as a balanced approach of providing access to appropriate financial products and services, while ensuring clients have the skills, knowledge, and understanding how to best use the products and services.[1] Without this balance, financial inclusion efforts are at best ineffective, or at worst, risk-provoking.

We undertook this research to ask some critical questions and find some important answers. How could financial services providers be incentivized to pay for Financial Capability provision themselves, not just as an expense driver, but as a revenue driver? Are there Financial Capability models that make good business sense? What kinds of solutions and models must be developed that achieve this ‘win-win’ for financial service providers and their clients – not just in the world of MFIs, but beyond? Given current resource constraints, it would be a mistake to assume the public sector will cover these costs and address these issues entirely. Any solution will require a mix of funding sources and efforts from many stakeholders—but financial institutions will have a strong, if not central, role to play through more innovative models that both deliver client capability and recover their costs.

The research and analysis contained here is the result of interviews with more than 90 organizations involved in financial capability; site visits to six countries; extensive secondary research; and the critical input of 30 key stakeholders whom we convened in Madrid in November 2011 to discuss how to strengthen the provision of financial capability and make it more scalable. We are grateful to all those who contributed their data and experiences to inform the conclusions.

Some of the report’s key findings are:

  • Of the roughly 500 – 800 million people that have some form of access to formal financial services, only 25% have had even the most basic financial education—a figure that is dwarfed by the estimated 2.7 billion people who remain unbanked or under-banked.
  • Depending on the combination of models used, it could cost anywhere from $7 billion to $10 billion to begin to provide financial capability just for those who already have access to finance.
  • Addressing the gap will require new and innovative capability models – that are ‘out of the classroom’, designed with customer needs and capabilities squarely in mind and where possible, have a business case – both in the world of MFIs and beyond.
  • The report provides a current snapshot of the field, including costs, provision models, attitudes and preferences of financial services providers, as well as key trends affecting the future evolution of capability-building. It provides a business case analysis of five financial education models in the field and profiles several more promising innovations.
  • The report ends with a set of recommendations for a shared action plan that can guide all stakeholders forward in more coordinated ways – and outlines detailed steps for more coordination, innovation and support.

We are excited by the dialogue this research has stimulated and the timing of important discussions on Financial Capability and Financial Education at meetings like the G20 in Mexico and APEC in Russia. Similarly, we are seeing alignment with the important client-focused work that CGAP is undertaking. Most importantly, however, we see the long-term benefit to clients as the more financial services providers incorporate capability-building, the more clients will be active and engaged consumers.

The full report and an executive summary are available at: and We welcome your questions and comments here on NextBillion.

You also may feel free to contact us directly:

Citi Foundation

Graham Macmillan:

Monitor Inclusive Markets

Anamitra Deb:; Mike Kubzansky:

[1] Scottish Financial Services Authority, 2005

financial inclusion, skill development