A population’s “financial well-being”, or “financial health”, is primarily dependent on its economic development (see Chart 1). Financial health, defined as the ability to meet short or long-term financial obligations (GPFI, 2024), is significantly weaker in low-income countries (LICs, 43%) and in Sub-Saharan Africa (SSA, 47%) than in advanced economies (AEs, 83%). In LICs and SSA, long-term financial health (i.e. the ability to meet educational and retirement costs) is also weaker than short-term financial health (the ability to meet day-to-day expenses and cope with adverse shocks), reflecting more limited access to education and less developed social safety nets. In these countries characterized by a strong preference for cash and where confidence in the formal financial system is low, a large share of financial activity still takes place via informal support networks (Guerineau, 2014). This is due notably to social, legal and cultural barriers, and, in some cases, difficulties accessing the formal financial system (too expensive, too far away, etc.). It also reflects a less developed financial system, where the offering of financial services, especially credit, is constrained by information asymmetries and by the high cost of developing infrastructure (identification of customers and creation of contact points).
However, “mobile banking” (i.e. the provision of banking services via a mobile phone) has generated significant catch-up effects in these countries. In SSA, the banked population has more than doubled in ten years, from 23% in 2011 to 55% in 2021 (41% in the WAEMU and CEMAC in 2021, compared with 8% and 12% respectively in 2011), thanks to the rapid spread of mobile banking (used by 33% of the SSA population in 2021 compared with 12% in 2014). Yet there is still room for progress in the use of certain financial services. In 2021, only 16% of the SSA population (7% in the WEAMU and 8% in CEMAC) said they held savings with a financial institution, compared with 23% in medium-income countries (MICs). Moreover, in SSA, only 10% had access to formal credit (7% in the WAEMU and CEMAC), compared with 22% in MICs. In SSA, recent rapid advances in financial inclusion could help to increase the use of financial services and improve the population’s financial health, provided this inclusion is sustainable (Dufresne, Jacolin, Salmon, 2024).
To improve populations’ financial health, financial inclusion must be sustainable
The impact of financial inclusion on financial health depends critically on the quality of the financial services offered. For SSA citizens that have only recently become banked, transparent conditions of use for digital financial services (DFS), especially regarding pricing (see Chart 2), and financial literacy are all crucial for minimising the risks linked to account ownership. The rapid spread of DFS can expose these populations to risks of fraud and overindebtedness. According to the Consultative Group to Assist the Poor (CGAP), nearly three-quarters of DFS users in Côte d’Ivoire experienced at least one scam attempt in 2022 (Ponzi scheme, phishing attack, etc.). In Kenya, a pioneer in digital finance in Africa, financial health is estimated to have deteriorated recently in the inflationary environment, with households turning increasingly to short-term loans which are linked to a rise in non-performing loans in the banking sector’s loan portfolio (Gubbins and Heyer, 2022).
Chart 2: Correlation between unexpected account-holding fees and financial health in emerging and developing countries