Demographic change is one of the most powerful forces shaping the world’s future. This report examines the implications of demographic change for financial inclusion, particularly across the next decade. It looks at how demographic change will affect the demand for financial services and in particular at how progress toward financial inclusion can help maximize demographic opportunities in the developing world. At this moment in history, demographic transition is opening a unique window of opportunity for countries in development. As life expectancy increases and fertility rates fall, the working-age population grows faster than the young dependent population. In the developed world this demographic dividend provided a tailwind to growth for several decades leading up to the present, but rapid aging and an expanding elderly dependent population have now turned demographics into a headwind. Yet, as the window closes in the developed world it is just opening in the developing world. Demographic transition is an urgent challenge to development policy and action. It calls on policymakers to enable the large generation of workers to maximize their opportunities. Action to support the transition is needed soon. The demographic window in the developing world will only stay open for a few decades. Financial inclusion is an essential component of enabling the developing world to maximize its demographic dividends.

In many countries the majority of households lack access to basic financial services and many more are only partly included or have poor-quality services. Micro, small, and medium enterprises are also often excluded from the financial system. Empirical evidence suggests that not only is financial inclusion pro-growth but it is also pro-poor, helping to reduce income inequality and poverty. An analysis of the connections between demographic changes and financial services also suggests that a close reading of demographic trends can illuminate market segments where new and growing demands for financial services will arise. Accordingly, this report is aimed at financial services providers who may be seeking to identify promising market segments. At the same time, we observe that if countries are to take advantage of the opportunities for economic growth that the demographic window brings, financial inclusion is needed to ensure that the people who will create that growth have the necessary financial tools. For that reason, this report is also aimed at policymakers seeking to identify policy priorities. Demographic considerations not only suggest that financial inclusion is broadly important, they also point toward specific aspects of financial inclusion that may need to be prioritized.