Financial inclusion improved across most regions over the last year despite a challenging macroeconomic backdrop, with employers and governments providing their citizens with relevant tools, services and guidance.

Principal Financial Group‘s annual research ranks the financial inclusivity of markets based on the support provided by employers, governments and the financial system. The ranking for the Global Financial Inclusion Index is produced alongside the Centre for Economics and Business Research.

Singapore retained the top spot in the ranking, with Hong Kong in second place and Switzerland in third. The U.S. slipped to fourth place from second last year, due to declining employer support, a report of the ranking said.

The 10 countries at the bottom of the ranking were mainly in Latin America and sub-Saharan Africa, despite improvements across these regions. The bottom six countries — Argentina, Ghana, Nigeria, Colombia, Peru and Italy — remained unchanged over the year.

The report said that financial inclusion is advancing most rapidly in markets that are developing technology-enabled financial systems, with Brazil, South Korea, Thailand and Vietnam standing out among the biggest risers. Brazil and South Korea each rose 14 places, to 21st and 13th, respectively — the most improved countries in the ranking.

Principal also said that financial inclusion is strongly and positively correlated to progress in other metrics of social and economic development, including lower levels of corruption and greater economic freedom and productivity.

Northern and Western Europe were broadly flat in terms of changes in the ranking — except for the U.K., which moved into seventh place up from 14th last year. Improvements were made in financial system support, Principal said. Noted as contributing to the financial system improvement were the U.K.’s “presence and quality of fintechs,” its role as “an enabler of SME growth and success,” and as “an enabler of general business confidence.”

However, Seema Shah, chief global strategist at Principal Asset Management, said in a comment accompanying the ranking that while the improvement in the U.K.’s ranking “suggests the U.K. made the largest strides forward in financial inclusion in Europe, this is not the full story. The actions of the U.K.’s financial system to protect the financial well-being of the population — which saw its financial system support ranking improve by six places — was, in large part, a direct response to a self-inflicted wound from the government.”

Shah said the minibudget announced under former Prime Minister Liz Truss and former Chancellor of the Exchequer Kwasi Kwarteng, “created economic chaos and a potential pensions crisis.”

“The banks’ ability to maintain access to credit and provide stability to smaller businesses is reflected in the U.K. data and its rise in the overall ranking. But this is more a case of fixing a problem of its own creation rather than meaningful progress in financial inclusion. We remain very cautious on the U.K.’s economic outlook, and in Q3 2023, we adjusted our portfolios to reduce U.K. exposure,” Shah said.

Principal refers to the World Bank’s definition of financial inclusion, that individuals and businesses have access to useful and affordable financial products and services that meet their needs, and are delivered in a responsible and sustainable way.

Government support looks at the degree to which governments promote financial inclusivity in each market. Financial system support refers to the availability and uptake of financial products and services that are central to financial inclusivity. Employer support relates to the level of support that employers provide to their staffs.