Beyond financial inclusion: financial health?

I have just spent two days at the EMERGE 2016 Conference in New Orleans, organized by US based non-profit resource center CFSI. This annual event brings together some 700 people from across the US financial sector with a particular interest in extending the reach of appropriate financial services. Tellingly, the event used to be called “The Underbanked Symposium” a few years ago, but changed its name, and added a tagline “The Consumer Financial Health Forum” which has come to be represent the new core mission of CFSI–the pursuit of widespread financial health. Last year, CFSI reported on the results of a large survey that a majority of Americans were financially unhealthy–as defined by a set of attributes which included their ability to meet bill payments on time, their credit score which affects access to new credit and their use of insurance. Since then, CFSI has further refined its set of measures of financial health to eight key ones in four categories. A pilot group of US financial providers are now applying these measures to their client bases to understand their financial health and seek to improve it.

At the conference, we heard about parallels from the field of public health–which has moved in developed countries at least from mainly addressing evidence hazards (such as unsafe drinking water or malaria eradication) to issues of behavior change (such as around obesity). One doctor quipped that “as McDonald’s is to public health, so are payday lenders to financial health”: widely accessible, even needed at times, but with consequences to overusing which are negative.

Moving beyond thinking about access and usage makes sense in a country like the US where most people have access to financial services, especially consumer credit. In these settings, the lens of financial health can serve as an integrative measure which places the focus more on outcomes, and can speak to behaviors (of consumers and providers) which contribute towards greater health. Dan Schulman, CEO of Paypal, spoke at the event, shown here, committing his company to the financial health of its consumers.

Schulman said that while financial inclusion had been a helpful focus up to now, they at least were moving on from this goal. Other large US financial providers–Metlife, JP Morgan–echoed this theme in different ways.

But is the concept of financial health relevant in developing countries? I chaired a panel on this question, with panelists Arjuna Costa from Omidyar Network, Michael Schlein of international microfinance NGO Accion and Dave Kim of the Gates Foundation. The conclusion: the concept has potential to move the debate forward in developing countries too, but needs to be done with care. In particular, more research is needed to understand how to apply it and measure it in contexts with very different health systems–no credible credit scores for example, and limited availability of insurance, or even of formal financial products in general. The Gates Foundation is now funding a study into the international application of the concept, so we can expect to hear more on this front over the next year. I personally remain interested in the potential to use the financial health concept to frame the debate on the role of financial services better, as my colleague Julie Zollmann and I wrote in this article on financial health in an international setting published in the journal EDM recently.

 

By David Porteous