The importance of financial inclusion is increasingly recognized by policymakers around the world. Small and medium-sized enterprise (SME) financial inclusion, in particular, is at the core of the economic diversification and growth challenges many countries are facing. In the Middle East and Central Asia (MENAP and CCA) regions, SMEs represent an important share of firms, but the regions lag most others in terms of SME access to financing.

The importance of financial inclusion is increasingly recognized by policymakers around the world. Small and medium-sized enterprise (SME) financial inclusion, in particular, is at the core of the economic diversification and growth challenges many countries are facing. In the Middle East and Central Asia (MENAP and CCA) regions, SMEs represent an important share of firms, but the regions lag most others in terms of SME access to financing.

The importance of financial inclusion is increasingly recognized by policymakers around the world. Small and medium-sized enterprise (SME) financial inclusion, in particular, is at the core of the economic diversification and growth challenges many countries are facing. In the Middle East and Central Asia (MENAP and CCA) regions, SMEs represent an important share of firms, but the regions lag most others in terms of SME access to financing.

Asia has made significant progress in financial inclusion, but both its across-country and intra-country disparities are among the highest in the world. The gaps between the rich and the poor, rural and urban populations, and men and women remain deep. Income is the main determinant of the level of financial inclusion; but other factors, such as geography, financial sector structure, and policies, also play important roles. While some countries in the Asia-Pacific region are leaders in fintech, on average the region lags behind others in several important areas such as online (internet) purchases, electronic payments, mobile money, and mobile government transfers. This Departmental Paper aims to take stock of the development and current state of financial inclusion and shed light on policies to advance financial inclusion in the region. The research focuses on the impact of financial inclusion on economic growth, poverty reduction, and inequality, linkages between financial inclusion and macroeconomic policies, as well as structural policies that are important for improving financial inclusion. Given the increasing importance of financial technologies (fintech), the paper also provides a snapshot of the fintech landscape in the Asia-Pacific.

Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.

In 2011 the World Bank—with funding from the Bill and Melinda Gates Foundation—launched the Global Findex database, the world's most comprehensive data set on how adults save, borrow, make payments, and manage risk. Drawing on survey data collected in collaboration with Gallup, Inc., the Global Findex database covers more than 140 economies around the world. The initial survey round was followed by a second one in 2014 and by a third in 2017. Compiled using nationally representative surveys of more than 150,000 adults age 15 and above in over 140 economies, The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution includes updated indicators on access to and use of formal and informal financial services. It has additional data on the use of financial technology (or fintech), including the use of mobile phones and the Internet to conduct financial transactions. The data reveal opportunities to expand access to financial services among people who do not have an account—the unbanked—as well as to promote greater use of digital financial services among those who do have an account. The Global Findex database has become a mainstay of global efforts to promote financial inclusion. In addition to being widely cited by scholars and development practitioners, Global Findex data are used to track progress toward the World Bank goal of Universal Financial Access by 2020 and the United Nations Sustainable Development Goals. The database, the full text of the report, and the underlying country-level data for all figures—along with the questionnaire, the survey methodology, and other relevant materials—are available at www.worldbank.org/globalfindex.

Prior to the COVID-19 shock, the key challenge facing policymakers in the Middle East, North Africa, and Central Asia region was how to generate strong, sustainable, job-rich, inclusive growth. Post-COVID-19, this challenge has only grown given the additional reduction in fiscal space due to the crisis and the increased need to support the recovery. The sizable state-owned enterprise (SOE) footprint in the region, together with its cost to the government, call for revisiting the SOE sector to help open fiscal space and look for growth opportunities.