A ferry boat sails across the Victoria Harbour on Sept 7, 2023. (SHAMIM ASHRAF / CHINA DAILY)

HONG KONG – Hong Kong has moved up two places to become the second most financially inclusive market out of 42 markets analyzed globally, according to the 2023 Global Financial Inclusion Index. 

The special administrative region ranked in the top 10 for all three pillars of financial inclusion – government support, financial system support, and employer support, shows the index released on Tuesday by investment management giant Principal Financial Group.

ALSO READ: HK continues to rank among top in Global Innovation Index

Singapore retains No. 1 position, occupying a top three position across all three pillars, while Switzerland rounds out the top three, jumping five places with improved scores across all pillars. 

In line with the rise in rankings, Hong Kong saw improvement in public perception of financial inclusion with 89% of respondents saying they feel financially included

Last year’s second-place market, the United States, dropped to fourth place, driven by a decline in its ranking within employer support pillar (rank down 10 places) and government support (rank down four places).

"Recovering at full speed from the impacts of COVID-19, Hong Kong remains a strong regional leader in driving financial inclusion," said Thomas Cheong, president of Asia Pacific and Middle East, Principal Financial Group.

The government support pillar has seen the most significant improvement in driving the state of financial inclusion in Hong Kong, rising six spots. The city continues to rank first for "online connectivity", and topped the ranking for "financial literacy levels", rising 17 spots.

In line with the rise in rankings, Hong Kong saw improvement in public perception of financial inclusion with 89 percent of respondents saying they feel financially included.

Five of the top 10 markets are European – Switzerland, Sweden, Denmark, United Kingdom and Norway.

The UK and Thailand emerged as new entrants in the top 10, replacing Finland and the Netherlands which have slipped from their 2022 positions of fifth and 10th, respectively. Brazil and South Korea experienced the largest improvements in rankings, each rising 14 places to 21st and 13th, respectively. 

Some of the largest, oldest global economies risk backsliding on financial inclusion, according to the report.

READ MORE: HK one of world's most competitive economies, says report

“In this year’s data, we see a widening gulf between the two, with levels of financial inclusion in large developed markets stagnating or even deteriorating. Those that have built their financial systems from the ground up with technology at their foundation are now making leaps forward,” said Seema Shah, chief global strategist for Principal Asset Management. 

The index’s top ranked markets – Singapore and Hong Kong – are good examples of this contrast. Both improved or held steady their high ranking for volume of real time transactions and sit in the top 10 for the access to capital indicator, the report said, adding that their positions as enablers of business confidence also increased year over year.

“Singapore and Hong Kong may be moving into a new cycle in their own unique ways, where the actions of the government and the financial system enable and empower employers to provide enhanced levels of support to their workforces to promote financial inclusion,” reads the report.

ALSO READ: Hong Kong ranks second globally in economic freedom

The Global Financial Inclusion Index ranks 42 markets on three pillars of financial inclusion using data points across public and survey-based sources. These pillars represent the key stakeholders responsible for promoting financial inclusion across the population. 

The Index was conducted in partnership with the Center for Economics and Business Research, one of Britain's leading economics consultancies.

With inputs from Xinhua