What do financial worries mean to people? The answer depends on objective factors such as how much you earn as well as subjective perceptions of what constitutes a financially secure life in your particular society.
So, it may be correct to assume that people who are struggling to make ends meet worry more about money than those who have savings and access to credit. However, there are broader societal factors that also influence concerns beyond income levels, for example, the quality of health systems and the effectiveness of social security programs.
Despite their importance – especially for developing countries – financial worries and their determinants have received little attention from academics and policy makers. In fact, the World Bank’s Global Findex 2021 report is the first attempt to measure financial worries on a global scale and is therefore an essential step in closing the knowledge gap in the field.
The COVID-19 crisis has disproportionately affected the world’s most vulnerable. According to the World Bank, the pandemic has pushed an additional 97 million people into extreme poverty in 2021. During the pandemic, hundreds of millions of people have struggled to meet their medical expenses. 60% of respondents in Nigeria have experienced or continue to experience financial hardship due to the COVID-19 crisis.
Additionally, in Nigeria, a quarter of all respondents said paying for health care was their biggest concern. By contrast, only 1 in 5 respondents in high-income countries said they worry about paying their medical bills.
These responses may partly reflect the quality and accessibility of local health services in some countries. Concerns about medical spending were also generally highest in sub-Saharan Africa (SSA) – where the pandemic has strained limited health services. Better design and performance of health systems and more affordable health care would help alleviate some of these concerns. Expanding financial inclusion – access to and use of formal financial services by households and businesses – can also help reduce financial anxiety. Policymakers see it as a way to help families better protect themselves against shocks.
In many developing economies, a sudden illness or accident that forces a breadwinner to stay home can compound the impact of an external crisis – like the COVID-19 pandemic – with loss of income. The availability of formal financial services such as targeted insurance programs can help vulnerable families weather the immediate crisis.
The COVID-19 pandemic remains an ongoing economic and public health crisis. 60% of Nigerian adults said they were very worried about the continued financial cost of the pandemic. Women, more than men, said they were very worried about financial hardship caused by the pandemic, with 58% of women surveyed in Nigeria reporting this. The data confirms the regressive impact of the pandemic on the most vulnerable segments of the population.
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The survey data also revealed salient regional themes. In Nigeria, for example, 28% of adults are very concerned about school expenses, which is the biggest concern for 33% of adults in sub-Saharan Africa. By contrast, in South Asia, only 18% of adults rank tuition fees as their top concern. The high proportion of adults with children attending school in sub-Saharan Africa may partly explain this concern. This also reflects the high out-of-pocket costs associated with schooling in the region.
There are also regional differences when people assess their future prospects. In East Asia, people are less worried about coping with expenses in their old age, while more than half of adults surveyed in sub-Saharan countries said they were very worried about it. Lack of interest in old-age-related expenses does not necessarily reflect a sense of security about the future. Instead, it could reflect the urgency of more immediate financial demands than planning for retirement.
Financial inclusion has grown in recent years – the Findex report reveals that 3.3 billion people in developing countries had an account in 2021. It revealed that in Nigeria, 45% of respondents had an account . However, only 8% of Nigerians surveyed said they have a mobile money account.
The chasm in financial worry between developed and developing economies remains, however, with half of adults in developing economies saying they are very worried about one or more common financial expenses, while in high-income economies, only about 20% said the same.
Closing the “worrying” gap between income groups and gender issues. Financial worries impact overall well-being and are linked to lower productivity and suboptimal decision-making. It also highlights gaps in the existing global effort to build financial resilience. As a result, hundreds of millions of people in developing countries are still unprepared to deal with the economic shocks of emerging global challenges such as climate change. The findings of the Findex 2021 report underscore the urgency of protecting them.
Carr, director of Flourish Ventures, writes from Lagos