Financial Inclusion in the Europe and Central Asia Region : Recent Trends and a Research Agenda

Financial inclusion can help promote development. Inclusive financial systems allow people to invest in their education and health, save for retirement, capitalize on business opportunities, and confront shocks. In the Europe and Central Asia region, there is great variation in financial inclusion. In the euro area, most adults already own an account. Account ownership -- which is the first step of entry into the formal financial system has increased in the developing countries in the region, to 65 percent of the adult population from 45 percent in 2011. Tajikistan, Armenia, Moldova, the Kyrgyz Republic, and Georgia are among the countries that have seen the greatest increases globally, despite starting from a very low base. These experiences underline the potential role of digital payments in driving financial inclusion. Nevertheless, almost 30 percent of unbanked adults report lack of trust in banks as a barrier, which is nearly double the developing country average. And in some countries, gender and income gaps in account ownership remain significant. For example, the gender gap is close to 30 percentage points in Turkey, which is three times the average gap in developing countries. And in Romania, the gap between richest 60 percent of the population and poorest 40 percent is 33 percentage points, which is more than twice the average gap in developing countries. But there are many opportunities to increase account ownership. Over 80 percent of the unbanked have a mobile phone, and simply moving public sector pension payments into accounts would reduce the number of unbanked adults in the region by up to 20 million, including 8 million in the Russian Federation alone. Given the heterogeneity of experiences, there are ample opportunities for countries in the region to learn from each other, which lays out a rich research and operational agenda going forward.