Global Savings, Assets and Financial Inclusion

Foreword

In 2000, 196 Member States of the United Nations committed themselves to halve extreme poverty in the world by the year 2015. Since then, broad availability of well-designed and appropriately delivered financial services and products, including those that lead to savings and productive assets, has become increasingly recognized as essential to alleviating poverty and fostering economic security and opportunity. Yet eight years later (and with less than eight years remaining to reach this goal), some three billion people worldwide lack access to basic financial services. Much remains to be done.

For three days in June 2007, the Global Assets Project (a joint venture of Center for Social Development at Washington University and the Asset Building Program of the New America Foundation), the National University of Singapore, and the Financial Access Initiative of New York University convened 100 leaders from diverse fields at a Global Symposium on Savings, Assets, and Financial Inclusion. Sponsored by the Citi, Levi Strauss, and F.B. Heron Foundations, the purpose of this first-of-its-kind symposium was to illuminate and inform strategies for universal inclusion in savings and asset-building products, programs, and policies around the world. We paid particular attention to the needs of people with limited resources in developed and, especially, developing countries.

At the Symposium and throughout this document, we commonly use the term "asset building" to refer to efforts to build savings and productive assets, including education, homeownership, land, small businesses, livestock, investments, and pensions. While this term has become commonplace in some countries and fields, there are now a variety of terms - including asset accumulation, asset development, wealth building, etc. - used internationally to describe the concept and efforts emerging from it.

The symposium was organized around three goals. First, we wanted to harness the experience and brainpower of leading practitioners, scholars, policymakers, advocates, corporate leaders, and funders. The idea of asset building has emerged as a major theme in many parts of the world, but this is a relatively young discussion with theory, evidence, policies, and products developing in uneven, often haphazard ways. In bringing together many of the key persons leading this work, we sought to provide some coherence and structure to this emerging field and to capture the lessons and best thinking worldwide. Second, we hoped symposium discussions and results would inform future directions in participants' diverse but overlapping fields. Finally, we aimed to build bridges between the leaders in the savings, assets, and financial inclusion fields, so that they, along with us, could advance savings, asset-building, and financial inclusion efforts around the world.

As an organizing team, we chose an unconventional symposium format - one that eschewed PowerPoint presentations and long speeches by just a few people. Instead, we gave a broad  range of leaders from around the world an active role. This report provides a glimpse into the wealth of information - trends, insights, lessons, and challenges - provided so candidly and generously by our participants at the symposium in Singapore. The report also includes possible  next steps that symposium participants and the rest of the diverse range of actors working within these fields should take to move this emerging body of work forward.

Introduction

There is a growing consensus that all people in the world - the poor as well as the rich, people from all countries, people from all backgrounds and characteristics - should be included in saving and asset-building opportunities. The reasons for this growing consensus are both moral and practical. The moral reasoning is that people should have a fair chance, an opportunity to develop their capacities to lead a stable and satisfying life. The practical reasoning is that we, as individuals, communities, and societies, are all better off when people accumulate assets, invest in themselves and their children, and become more productive and engaged in society and the global economy.

While increasing income that helps the poor to get by day-to-day is important, it is often not enough to pull  them out of poverty. Individuals and families typically get ahead by accumulating small surpluses of savings and assets with which they make small investments that increase their economic well-being. Accumulating assets has many positive economic and social development outcomes for families, communities, and nations. For families, holding assets provides a way to smooth consumption, provides stability in the event of unforeseen costs and income fluctuations, and serves as a stock of  resources to invest for increased future income and long-term development. It is primarily through accumulating and investing assets - in education, homes, enterprise, etc. - that individuals and families do better over the long-term. This is especially true across generations.

Multiple strategies for asset accumulation are possible, although saving typically plays a central role. Public policies, financial products, and related services play important roles in supporting efforts of poor households to save and grow their wealth. Around the world, policies that encourage saving, specialized savings services, tailored loan products, innovative insurance policies, and secure money transfer systems offer poor and low-income people an opportunity to change the economic outlook for their children, their families, and their communities. In particular, more governments are evaluating the benefits of asset-building policy as a way to promote wealth creation for their citizens.

All of this may seem like a well-worn and rather obvious understanding, but savings and asset building have often been underemphasized in economic and social development. This is underscored when looking at the massive global wealth inequality, not only between nations, but within them. A groundbreaking UNU-WIDER study on the World Distribution of Household Wealth has found that approximately half the world's population owns only about one percent of the world's wealth. Moreover, policies in many countries exacerbate these disparities. Welfare systems in many developed countries penalize asset accumulation. Around the world, underdeveloped financial and regulatory systems make financial services inaccessible, either by distance or cost, to the majority of the population. Indeed, only a fraction of the world's population is included in the formal financial system at all. By preventing the poor from accumulating assets, these policies and systems present a major impediment to economic and social advancement.

If we address such inequalities through the underlying philosophy that everyone ought to be included and receive similar life opportunities, then access to public subsidies and financial services should also be equitable and not neglectful of people at the bottom of the economic strata. As demonstrated throughout the symposium, efforts to increase financial inclusion and opportunities for asset building are proliferating around the world. It is through creativity and innovation in these two fields - and their increasing cross-fertilization - that we will find new solutions with the potential of reversing past exclusions.

Following the Introduction, this Report contains the following sections:

• Emerging Trends in Asset Building and Financial Inclusion  
• Key Lessons: Policies, Services, and Products for Savings, Assets, and Financial Inclusion
• Key Challenges to Savings, Assets, and Financial Inclusion
• Next Steps Toward Global Asset Building and Financial Inclusion
• Conclusion
• Appendices