Big claims are a fairly regular occurrence in development assistance. How else can you get attention?
Most of us remember the days when Muhammed Yunus and others claimed that ‘microcredit and social enterprises could put poverty in the museum.’ This was followed by two decades of evidence gathering that showed microcredit had limited and inconsistent impacts on poverty reduction – certainly not a headline for a museum to exhibit. Researchers and practitioners in inclusive finance cleaned up their act. For the most part, they were careful about what claims they would make without rigorous evidence. They started to talk about building resilience and creating opportunities. They updated theories of change to show how evidence contributed to their causes.
Who would have thought that in 2026 we are repeating a cycle we’ve been through before. A new crop of claims – this time around financial health – are emerging.
Claim 1: Financial health is an intermediary step toward development outcomes
Every couple of years the Financial Sector Deepening Trust in Kenya, one of the early market facilitators that supports inclusive financial systems, completes a FinAccess study along with the Central Bank of Kenya. These studies look at progress over time to see how individuals are accessing and using financial tools and what this says about their wellbeing.
In the last couple of years, FinAccess has integrated a few questions about ‘financial health’ through an index which they now track. The index captures several key indicators. Paul Gubbins and Amrik Heyer of FSD Kenya note: financial health includes “smoothly managing short-term financial obligations and consumption needs, being capable of absorbing financial shocks and staying on track to reach long-term goals, such as purchasing a home or securing retirement income. A fourth, more subjective element, is often included in the definition and involves feeling confident and in control of one’s finances.”[1]
One of the most significant findings from this research is that financial health has been declining in Kenya, even as financial access has increased. FSD Kenya identified four drivers of declining financial health: inflation, income, declining opportunities and demographic change. Three of these variables are macro in nature (inflation, declining opportunities and demographic change), and one is relevant to the individual or household (income).
Studies like FinAccess point to the relevance of broader market level factors that determine an individual or household’s financial health and broader wellbeing. What an individual or family does with its limited income like saving a bit or planning for a vacation that never comes to fruition, can’t counter bigger societal and economic trends like high inflation or an economy that is not producing enough jobs for the young. Claims that managing short-term financial obligations, absorbing shocks and staying on track to meeting long-term goals, and feeling confident in controlling one’s finances (i.e, the definition of financial health) are precursors to wellbeing just don’t add up. No one can save their way out of poverty. Tamara Cook noted in her reflections on the FinAccess survey 2021 results “do financially healthy people use banks or are banks helping people become financially healthy?” We still don’t know the answer to this question.
What research like FinAccess shows is that financial health is mostly an outcome of events outside of an individual or household’s control; it’s even an outcome beyond the use of financial services. It shows that focusing on behavioral changes at the household level or tweaking financial products is marginal to larger issues that can determine the financial health and wellbeing of people in society.
MicroSave and others have pointed to the difference between determinants and outcomes. The determinants of financial health are many things – income, inflation, macro-economic stability, social benefits, health, etc. A set of behaviors and attitudes that we can monitor that say something about things happening in people’s lives are not preconditions for wellbeing, at most they are just a description of what’s happening in people’s lives as a result of other factors. The fact that financial health can’t be linked to higher level outcomes through any meaningful evidence means that claims that it is an intermediary step toward higher outcomes is illogical. If we can’t show a plausible path of how our interventions lead to the outcomes we are claiming, we really do need to rethink what we’re doing.
Claim 2: Income is not a determinant of financial health
Research shows that income is highly correlated with financial health, albeit not a standalone determinant. FSD Kenya pointed to the drivers that have led to declines in financial health in Kenya, noting that declines in income was one of them. Yet, there are many leading voices advocating for financial health who claim income is not a significant variable in financial health.
Income is the one determinant of financial health that is highlighted by FSD Kenya on which an individual or household may have a certain level of control. Household members can work more hours or take on new work during times of stress; family members can support each other by sending money during times of need, thus augmenting earned income. Individuals with access to social benefits or stable, secure incomes, are more likely to be resilient to shocks and are less likely to exhibit stress. The FinAccess survey undertaken in Kenya tracks income and shows the high correlation between worsening income levels and declines in financial health.
When income is coupled with certain behaviors, like sound financial management, individuals and households can see improvements in financial health.[1] At the same time, higher income households are more likely to exhibit financially healthy behaviors like building savings, managing expenses and planning for the future (the chicken and the egg issue Tamara Cook previously raised). Beyond income, wealth (or accumulated residual income over time) shows higher correlation to financial and psychological wellbeing than income.[2]
Few individuals or households can influence inflation, market opportunities or demographic trends. In light of this, it would seem that addressing income is a necessary first step in helping individuals improve their financial health and ultimately their accumulated residual income (i.e. wealth). We know that finance has a major role in supporting incomes and jobs, especially when it is focused on supporting productive investments in firms.
Needless to say, anyone that de-emphasizes the role of income in financial health and overall wellbeing is playing at the margins, and deflecting from the real issues that the evidence tells us shapes people’s wellbeing.
Claim 3: Financial health should be the new north star for inclusive finance
Stepping away from the narrow definition of financial health (managing short-term financial obligations, absorbing shocks and staying on track to meeting long-term goals, and feeling confident in controlling one’s finances), and assuming the proponents mean it to be something more general, equivalent to wellbeing, should it be a north star for donors and practitioners? Let’s differentiate this general goal from the measurement framework and use capital letters – so we want to achieve Financial Health and not the measurement framework called financial health. If so, what does this mean for programmatic priorities? I addressed this north star issue in a prior blog which can be accessed here.
Ignoring my prior advice on the issue of Financial Health as a north star, if Financial Health were a north star, this would mean we would look at the evidence to determine what it would take to achieve Financial Health and focus programmatically on what is needed to get there. Working backwards, like any good theory of change should, we would need to define what it takes to achieve the outcomes we are seeking, and the evidence points us to things like job creation and social safety nets. We would not likely prioritize a focus on product design modifications, increasing usage of financial services, or behavioral interventions at the individual or household levels (i.e. small financial health) even if this seems achievable for those in inclusive finance who are looking for something to do, now that they’ve successfully achieved ‘access.’ In other words, the small financial health doesn’t seem to get us to the big Financial Health.
That is not to say that finance is not a key variable in Financial Health: it is. But it is a different type of finance than the traditional ‘pro-poor’ finance which works directly with low-income people. In other words, working with the financial sector to promote increased investment in production which would in turn enable firms to create jobs might be an important intervention that could plausibly contribute to increased incomes and in turn improved financial health (and wellbeing).
Following the evidence, it’s hard to imagine any theory of change that has Financial Health as a north star that doesn’t directly include income and jobs as a key intermediary step along that path. But it is not a foregone conclusion that small financial health is part of the pathway toward big Financial Health. We would need to see much more rigorous evidence to build that case. For now, it is merely a hypothesis.
Claim 4: A focus on financial health does not detract from other priorities
For decades most people in the development community focused on poverty alleviation. This was a clear north star. The SDGs came into effect in September 2015 at the UN General Assembly with a target date of 2030. Poverty eradication remained an important north star (SDG 1) but new goals were introduced like zero hunger (SDG 2), good health (SDG 3), quality education (SDG 4), gender equality (SDG 4), and many others. There were 17 goals and 169 targets. Inclusive finance was not identified as a goal in itself, but was considered an enabler for many of the goals.[1]
The inclusive finance community developed many publications and evidence maps since then to document how the use of financial services (and digital payments especially) contributes to many of the SDGs. CGAP’s impact pathfinder is one of the latest of these tools.[2] In that tool, the key outcomes where there is evidence supporting a role for inclusive finance include women’s economic empowerment, climate change mitigation, climate resilience, climate adaptation, jobs and entrepreneurship, access to essential services, economic growth and financial stability, and poverty reduction.
With the recent declines in Official Development Assistance (ODA), we have seen massive cuts in funding for many sectors, particularly health, gender equality and governance. The ripple effects of these declines are still playing out. A funder today seeking to leverage their shrinking contributions needs to focus on what gives him/her the biggest bang for the buck (& eq). Clearly a focus on what leads to the outcomes that are most directly aligned with the funder’s goals is where they will turn.
Assuming a funder remains committed to poverty reduction, they are likely to double down on their investments in social safety nets, an area that is solidly studied and where there is substantive evidence that it creates significant impact for poor households. When advocates make claims that financial health will reduce dependency on public assistance, they are making claims that are not substantiated and they are directly detracting funders from proven development interventions like expanding social protection programs.
In the midst of all of the change and turmoil in development assistance, the call to focus on financial health seems confusing. Financial health is a relatively new concept in the international development landscape. As defined by its advocates (managing short-term financial obligations, absorbing shocks and staying on track to meeting long-term goals, and feeling confident in controlling one’s finances), there is insufficient robust evidence to substantiate it. And it is not one of the SDGs nor is there evidence that this intermediary index of behaviors and attitudes contributes to any of the SDGs. Why then would anyone seek to shift attention to financial health today?
One theory is that the concept appeals to the private sector and as funding is shifting from public sources to private sources, development actors are seeking to curry favor with private sector companies. Also, if we focus on Financial Health (in capitals), it is still quite vague and thus less threatening to the private sector than consumer protection issues or anti-competitive behavior which squarely point to the behavior of financial services providers rather than their customers.
However, logic and evidence would lead a donor to prioritize the issues that matter most in helping to advance the SDGs or to support inclusive growth in this highly unstable time. Depending on the funder, there are strong cases to be made for a focus on jobs and income, climate resilience and adaption, and an inclusive and equitable digital economy. Finance plays a role in all of these. Rather than distract donors with a new measurement framework or a new north star, we should be articulating how to achieve the goals the international community has already articulated. Anything else is a distraction at best.
[1] See https://www.cgap.org/research/publication/achieving-sustainable-development-goals
[2] https://www.impactpathfinder.org/
[1] CSFI (renamed Financial Health Network). Understanding and Improving Consumer Financial Health in America (CSFI, 2015).
[2] Korvel, Vaklav and Michael Škvrňák. Residual Income and Mental Health: A Longitudinal Study (Social Indicator Research, 2026).