Financial services can assist high-level outcomes, such as building resilience and capturing opportunity, as well as intermediate outcomes, including increased financial resources, human capital, and physical capability. Improved wellbeing requires supportive contextual factors at the community and national level that reduce risk and create opportunities. The theory of change (ToC) framework identifies several knowledge gaps that funders and researchers can address to develop a more accurate prediction of when financial inclusion policy will generate positive wellbeing outcomes.

The ToC recognises building resilience and capturing opportunity as the high-level outcomes that enable improved well-being. Building resilience refers to the ability to prepare for risks, cope with shocks and recover afterwards. Capturing opportunities involves an ability to seize investment opportunities. There is a dynamic cycle between building resilience and capturing opportunities, as access to savings and insurance products leads individuals to take risker and more productive investments. An individual’s ability to reach these high-level outcomes are largely determined by achieving the intermediate outcomes of access to financial resources, developed human capital and physical capability. Resilience levels are determined by access to financial resources, including savings, assets, and income stability. Human capital, including education and access to information, can aid in preparing for future shocks. Physical capability, including health and nutrition, allows the execution of strategies to cope and recover from shocks.

Financial services initiatives will often only lead to improved outcomes for a narrow group of people. Wellbeing is not driven entirely by individual decisions, but rather requires conditions at a community and national level that reduce risk and create opportunities. These contextual factors include institutional, social, and cultural norms. The Consultative Group to Assist the Poor (CGAP) recommends that impact studies focus on diversifying the contextual settings in which they are carried out to explore associations between specific context factors and customer outcomes. 

Evidence on the impact of financial services on improved outcomes is mixed, largely because there are knowledge gaps in research that need to be studied further. Little is known about how contextual variables change investment decisions and the impact of social norms on the effectiveness of financial services. Furthermore, there are few studies that focus on outcomes related to human capital and physical mobility, such as educational attainment and access to health services, rather than product focused. This would provide insight into how different combinations of financial services lead to improved wellbeing outcomes. 

The CGAP recommends that funders support further development of new research initiatives outlined in the ToC, to fill these knowledge gaps identified in this report. Efforts to innovate research methodology have already begun and are showing us ways to manage the greater complexity implied by considering various customer segments and contexts. Investment in industry and research innovation has the potential to go far in improving the effectiveness of financial inclusion policies to make financial products and services more valuable for different groups of disadvantaged individuals.

1. The Theory of Change recognises that financial services can support the high-level outcomes of building resilience and capturing opportunity, which enable improved well-being. Building resilience refers to the ability to prepare for risks, cope with shocks, and recover afterwards. Capturing opportunities involves an ability to seize investment opportunities. There is a dynamic cycle between building resilience and capturing opportunities, as access to savings and insurance products leads individuals to take risker and more productive investments.
2. An individual's ability to reach the high-level outcomes of resilience and an ability to capture opportunity are largely determined by achieving the intermediate outcomes of access to financial resources, developed human capital and physical capability. These intermediate outcomes build resilience, aid in preparing for future shocks and allow the execution of strategies to cope and recover from shocks.
3. Improved wellbeing requires supportive contextual factors at the community and national level that reduce risk and create opportunities. These contextual factors include institutional, social, and cultural norms. CGAP recommend that impact studies focus on diversifying the contextual settings in which they are carried out to explore associations between specific context factors and customer outcomes.
4. Evidence on the impact of financial services on improved outcomes is mixed, largely because there are knowledge gaps in research that need to be studied further. These gaps include; how contextual variables change investment decisions, the impact of social norms on the effectiveness of financial services and studies that focus on outcomes rather than products.