By Tilman Ehrbeck
What does financial worry mean for people globally? The answer depends on objective factors such as how much you earn along with subjective perceptions about what constitutes a financially secure life in a particular society. So, it may be correct to assume that people struggling to make ends meet worry more about money than those with savings and access to credit. However, there are broader societal factors that also influence worry beyond income levels: for example, the quality of healthcare systems and the effectiveness of social security programs.
Despite their importance—especially for developing countries—financial worry and its determinants have received little attention from academics and policymakers. In fact, the World Bank’s Global Findex 2021 report is one of the first attempts to measure financial worry globally and thus is an essential step in filling the knowledge gap in the area. The following reflections on the Global Findex report are in part thanks to the research from World Bank lead researcher Leora Klapper. Flourish funded the 2021 Global Findex research on financial worrying.
The Covid-19 crisis disproportionately impacted the most vulnerable around the world. According to the World Bank, the pandemic pushed an additional 97 million people into extreme poverty in 2021. The responses to the Findex 2021 survey reflect the increased hardship in the developing world. During the pandemic, hundreds of millions found it challenging to meet their medical expenses.
More than half—52 %—of the adults surveyed in developing countries reported being very worried about covering health expenses in the event of a significant illness or accident. For nearly 1 in 3 respondents in developing countries, paying for healthcare ranked as their biggest worry. In sharp contrast, only 1 in 5 respondents in high-income countries reported worrying about paying their medical bills.
These responses may partly reflect the quality and accessibility of local healthcare services in some countries. Concerns about medical expenses were highest in sub-Saharan Africa (SSA) and South Asia—like South Sudan, Malawi, Mali and Afghanistan—where the pandemic tested the limited healthcare services. Not only were the majority of respondents in developing countries worried about meeting healthcare costs, but it was also their top financial worry. In 63 of the 82 developing economies surveyed, respondents ranked lack of money to pay medical bills as their biggest worry.
Better health systems design and performance and more affordable healthcare would help alleviate some of these worries. Expanding financial inclusion—the 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, sudden illness or an accident that forces a breadwinner to stay home can compound the impact of an external crisis—like the Covid-19 pandemic—with a loss of income. Availability of formal financial services like targeted insurance programs can help vulnerable families tide over the immediate crisis.
The Covid-19 pandemic remains an ongoing public health and economic crisis. Eighty-two percent of adult respondents in developing countries reported being very worried about the continued financial toll of the pandemic. Women, more than men, reported being very worried about financial hardship caused by the pandemic. The data confirms the regressive impact of the pandemic on the most vulnerable sections of populations.
Data from the survey also uncovered salient regional themes. In SSA, for example, 54% of adult respondents are very worried about school expenses, which represents the biggest worry for 29% of adult respondents. By contrast, in South Asia, only 18% of adult respondents rank school fees as a top worry. The high proportion of adults with school-going children in SSA may partly explain this worry. It also reflects the high out-of-pocket costs associated with schooling in the region.
There are also regional differences when people assess their future outlook. In East Asia, people are least worried about meeting expenses in their old age, whereas over half of the adults surveyed in SSA and South Asia reported being very worried about it. The lack of concern about old-age expenses doesn’t necessarily reflect a sense of security about the future. Instead, it could reflect the urgency of more immediate financial demands than planning for retirement. Even within developing countries, high-income groups have less to worry about. In Brazil, an extreme example, 72% of adult respondents in the poorest 40% of households reported being very worried about meeting monthly expenses. However, in the wealthiest 60% of households, only 35% of respondents echoed this concern.
Financial inclusion has expanded in recent years—the Findex report finds 3.3 billion people in developing countries had an account in 2021—yet the chasm in financial worry between developed and developing economies remains. Half of the adults in developing economies reported being very worried about one or more common financial expenses; in high-income economies, only about 20% of respondents said the same.
Closing the “worry” gap between income groups and gender matters. Financial worrying impacts overall well-being and is linked with lower productivity and suboptimal decision-making. It also points to gaps in the existing global effort toward building financial resilience. As a result, hundreds of millions in developing countries remain perilously unprepared to face economic shocks from emerging global challenges such as climate change. The findings from the Findex 2021 report underline the urgency of protecting them.
The Findex 2021 survey asked over 130,000 respondents in more than 120 economies to rank their fears about financial security on four main issues: securing living expenses for old age, meeting medical costs from illness or accident, paying monthly expenses and providing education for their children. Flourish Ventures provided financial support and thought partnership for the Financial Well-being chapters.
The author wrote these reflections on the Global Findex thanks to the research from World Bank lead researcher Leora Klapper. Flourish funded the 2021 Global Findex research on financial worrying.