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Measurement, Promotion and Impact of Access to Financial Services

March 2009, Robert Cull,  (DECRG)

Washington, DC, March 12-13, 2009—Expanding access to financial services is a key element in any strategy that aims to reduce poverty in a developing country. A prerequisite for stronger policies in this area is more data from the national to the household level to draw a more accurate picture of how poor people currently use financial services. A conference organized by Robert Cull, Asli Demirguc-Kunt, and Patrick Honohan emphasized issues of measurement, promotion and impact of access to financial services. The conference assumes an added importance at a time when the current global financial crisis has constrained credit markets, further limiting opportunities for households, and small and medium enterprises seeking access to finance.

Her Royal Highness Princess Máxima of the Netherlands, a UN Advisor on Inclusive Financial Sectors, spoke of the need to close large data gaps that are thwarting progress toward inclusive development: “The fact is that no one knows the number of unbanked people in the world. And without that number, it is impossible to identify the right policies or to track progress.”

Conference participants agreed that having high quality, comparable data on access to financial services is important for three reasons: First, it helps identify priorities for policies; second, it allows researchers to monitor the effectiveness of policies over time; and third, it provides them a platform to better understand the impact of financial access on poverty reduction.

Much of the discussion focused on a coordinated strategy between the World Bank, the International Monetary Fund, the Consultative Group to Assist the Poor, and the Inter-American Development Bank with respect to data collection to ensure comparability across surveys and across countries.

Steps are being taken in the right direction. Nevertheless, a paper using the existing financial access datasets from several populous countries in Sub-Saharan Africa, presented by Patrick Honohan and Michael King of Trinity College, Dublin, revealed that despite the common conceptual framework employed in each case, mapping the different questions asked in different countries into reliably consistent variables on a cross-country basis is difficult.

A number of scholars presented papers at the conference focusing on ways to further access.  One paper by Shawn Cole and Bilal Zia discussed how financial literacy training has affected the use of bank accounts in Indonesia. Using two new surveys from India and Indonesia, Cole and Zia presented new evidence that financial literacy programs have no effect for the population overall, but have an important impact on the uneducated and financially illiterate households.

However, some participants voiced concerns about the appropriate content of such programs. They cautioned, with reference to the ongoing global financial crisis that originated in the United States, that too much access to finance can be counterproductive in the absence of the right regulations.

A paper by Xavier Gine and Dean Yang looked at how biometric identification techniques have affected the financial services in rural Malawi. The study found that fingerprinting of borrowers can improve repayment rates for the worst risk borrowers and act as a catalyst for the establishment of a national credit bureau in Malawi and other developing countries.

Mirium Bruhn and Inessa Love of the World Bank, who presented a paper on grassroots banking in Mexico highlighted the finding that expanding access to finance to low income individuals can have a positive effect on economic activity by fostering the survival and creation of informal businesses.

A key recommendation from the conference was the possible establishment of a central electronic data bank on access to finance. Through such a databank, online data could be disseminated in a coordinated and centralized manner.

Links to the conference papers and presentations can be found at:  http://go.worldbank.org/V7IJJ2VI70




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