July 2010, Asli Demirgüç-Kunt (DECFP)
How well do financial systems serve households and enterprises in different countries? Who has access to which financial services – such as savings, loans, payments, insurance? Just a short while ago, we didn’t know the answer to these questions. The IMF recently launched a new online database on financial access, which should start measuring access to and use of financial services systematically. Following our research (Beck, Demirguc-Kunt and Martinez Peria; JFE, 2007), the database measures the reach of financial services by bank branch network, availability of automated teller machines, and by four key financial instruments: deposits, loans, debt securities issued, and insurance. The website contains annual data from about 140 respondents for the six-year period, including data for all G-20 countries.
Those of us who spend their days trying to find ways of influencing policy decisions know that one of the most effective ways of focusing policy attention on an issue is by measurement. This database will help researchers and policymakers by broadening our understanding of the reach and impact of basic financial services provision around the world. Better understanding the determinants and implications of financial access and usage can help identify knowledge gaps and appropriate policies for broadening financial access and enable the authorities to monitor the effectiveness of policies over time.
In our group, we had started thinking about the issue of access to finance in the beginning of the decade, so when the UN announced 2005 as the Year of the Microcredit, giving more impetus to the work on access, we were more than ready to rise to the challenge. Our work has influenced the UN Advisors Group on Inclusive Financial Sectors, which was a multinational body of government, private sector, development institution and academic representatives, established by the UN in 2006 for a two year term to advise the UN and member states on global issues relating to inclusive finance. During its last meeting in 2008, the Group issued a final statement calling on collection of better data on access to finance in support of research and policy formulation.
We worked with the IMF on preparing a small set of indicators based on our research, which the IMF will be collecting on a regular basis. With the enthusiastic support of Her Royal Highness Princess Maxima of the Netherlands, the government of Netherlands provided the initial funding for the start-up costs of the project, while the IMF will absorb the costs in the subsequent years. The project’s annual surveys make use of the IMF’s broad network for its International Financial Statistics publication, and the definitions, types of financial institutions, and financial instruments covered are all consistent, which makes it an invaluable source for research and analysis. This is an initial step, but certainly a very important one in measuring and tracking financial access. There is still a lot to do – for example, collecting better data on barriers to use of financial services – but we have certainly come a long way from the early days.