Global Financial Development Report 2014 - Financial Inclusion

• Increased policy interest– Over 50 countries: formal targets and strategies for financial inclusion– WBG President: achieving universal financial access by 2020 is possible

Importance of financial inclusionIntro Measurement and Impact Public Policy Focus Areas Main Messages

• Critical role in reducing poverty, boosting shared prosperity

• Enables poor people to save and borrow, allowing them to build assets, invest in education and entrepreneurial ventures, thus improving their livelihoods

• New empirical evidence on financial inclusion and its effects

Global views: Financial Development Barometer

Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies).

Intro Measurement and Impact Public Policy Focus Areas Main Messages

Very important35%

Somewhat important25%

Not sure16%

Not very important24%

What is the role of new technologies in expanding access to finance?

Very important35%

Not sure16%

Financial education; 32%

Better legal framework and credit information,

Promote new lending technologies; 17%

More competition; 8%

More microfinance; 8%

More state banking; 8%

What is the most effective policy to improve access to finance among low-income borrowers?

Very important35%

Not sure16%

Financial education, 32%

Very important35%

Not sure16%

Very important35%

Not sure16%

Very important35%

Not sure16%

Defining financial inclusionIntro Measurement and Impact Public Policy Focus Areas Main Messages

• Globally, about 50 % of adults have a bank account • The other 50 % (2.5 billion) remain “unbanked”

Measuring financial inclusionIntro Measurement and Impact Public Policy Focus Areas Main Messages

Source: Global Financial Inclusion (Global Findex) Database, worldbank.org/globalfindex

• Globally, about 50 % of adults have a bank account • The other 50 % (2.5 billion) remain “unbanked”

Adults with accounts at a formal financial institution

Source: Global Financial Inclusion (Global Findex) Database, worldbank.org/globalfindex

• Not all “unbanked” need financial services, but barriers play a key role

Religious reasons

Lack of trust

Lack of documentation

Too far away

Too expensive

Family member already has account

Not enough money

0 5 10 15 20 25 30 35

Note: Respondents could choose more than one reason. The data for “not enough money” refer to the percentage of adults who reported only this reason. Source: Demirguc-Kunt and Klapper 2012.

Non-account-holders reporting barrier as a reason for not having an account (%)

Religious reasons

Lack of trust

Too far away

Too expensive

Not enough money

0 5 10 15 20 25 30 35

Religious reasons

Lack of trust

Too far away

Too expensive

Not enough money

0 5 10 15 20 25 30 35

Religious reasons

Lack of trust

Too far away

Too expensive

Not enough money

0 5 10 15 20 25 30 35

Correlates of financial inclusion

Source: Based on Allen, Demirguc-Kunt, and others (2012)

yrs of e

-7%-8%

yrs of e

t of w

-7%-8%

yrs of e

ld size

t of w

Source: Calculations based on Demirgüç-Kunt and Klapper 2012; World Development Indicators database, World Bank.Note: Higher values of Gini mean more inequality. Data on Gini are for 2009 or the latest available year. Account penetration is share of adults who had an account at a formal financial institution in 2011.

Financial inequality and economic inequality

0 5 10 1520

account penetration in the richest 20% as a multiple of that in the poorest 20%

0 5 10 1520

Sweden

Philippines

0 5 10 1520

Sweden

Philippines

Evidence on impacts of financial inclusionIntro Measurement and Impact Public Policy Focus Areas Main Messages

• Basic payments, savings: strong evidence on benefits, especially for the poor

• Insurance products: also some evidence of a positive impact

• Access to credit: mixed picture – firms: a positive effect on growth, especially start ups, small and medium

enterprises

• Access to credit: mixed picture – firms: a positive effect on growth, especially start ups, small and medium

enterprises– microenterprises and individuals: evidence on benefits for smoothing

consumption, but not always for entrepreneurial ventures

Financial inclusion policy – overall findings from researchIntro Measurement and Impact Public Policy Focus Areas Main Messages

• Policy should focus on addressing market and government failures

• Not on promoting financial inclusion for inclusion’s sake, and certainly not on making everybody borrow

• Direct government interventions in credit markets tend to be politicized and less successful, particularly in weak institutional environments

• Role for government in creating legal and regulatory framework – Examples: protecting creditor rights, regulating business conduct,

overseeing recourse mechanisms to protect consumers

Competition policy: important part of consumer protection• Healthy competition among providers increases consumers’ market power• New evidence: lack of bank competition diminishes firms’ access to finance

Source: Love and Martinez Peria 2012

Financial inclusion policy – overall findings from research

effect at maximum government ownership

effect at minimum credit information

effect at minimum financial development

average effect (all countries)

-3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0

Effect of bank mark-up (Lerner index) on probability of a firm having access to finance

-3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0

• Role in supporting information environment (standards for disclosure, transparency, promoting credit bureaus, collateral registries)

Source: Love, Martínez Pería, and Singh 2013.

Pre-reform Post-reform0

Registry reformers

Non-reformers (matched by region and income)

• Role in supporting information environment (standards for disclosure, transparency, promoting credit bureaus, collateral registries)

Source: Love, Martínez Pería, and Singh 2013.

Pre-reform Post-reform0

Registry reformers

Non-reformers (matched by region and income)

Promoting financial inclusion: focus areas

Promoting financial inclusion

I. Promise of technology

II. Product design, business models

III. Financial capability

• Technological innovations reduce transaction costs, increase financial security• Scope for scaling up, illustrated e.g. by growth in phone subscriptions

Source: World Development Indicators.

World High income

Middle income Low income

World High income

Middle income Low income

High income

Middle income

Low income

Example: fingerprinting in Malawi (% of balances repaid on time)

Source: Calculations based on Giné, Goldberg, and Yang (2012).

Worst 2nd quintile 3rd quintile 4th quintile Best0%

91% 93%89%

92%96% 98%

FingerprintedControl

Example: fingerprinting in Malawi (% of balances repaid on time)

Source: Calculations based on Giné, Goldberg, and Yang (2012).

Worst 2nd quintile 3rd quintile 4th quintile Best0%

91% 93%89%

92%96% 98%

FingerprintedControl

• To harness the promise of new technologies…

I. Promise of technologyIntro Measurement and Impact Public Policy Focus Areas Main Messages

• …. regulators need to allow competing financial service providers and consumers to take advantage of technological innovations…

• …coupled with strong prudential regulation and supervision to prevent overextension.

• Product design that addresses market failures, meets consumers’ needs and overcomes behavioral problems can foster wider use of financial services

II. Product design, business modelsIntro Measurement and Impact Public Policy Focus Areas Main Messages

Note: The exchange rate was MK145/USD during the study period.Source: Brune, Giné, and others (2011).

• Example 1: commitment accounts

Land under cultivation0.00

Ordinary account

Commitment account

Total value of inputs

Value of crop output

Farm profit0

10,000

15,000

20,000

25,000

30,000

35,000

Ordinary account

Commitment account

• Example 1: commitment accounts

Land under cultivation0.00

Ordinary account

Commitment account

Total value of inputs

Value of crop output

Farm profit0

10,000

15,000

20,000

25,000

30,000

35,000

Ordinary account

Commitment account

• Example 2: index insurance

Source: Giné and Yang, 2009

• New evidence: lack of trust, liquidity constraints constrain demand (field experiment in India by Cole and others, 2012)

• What helps: designing products to pay often and fast, an endorsement by a well-regarded institution, simplification and consumer education

• Example of an innovative business model: Banco Azteca, Mexico• Improved access can be achieved by leveraging existing relationships

Source: Bruhn and Love (forthcoming)

2000-II

2000-III

2000-IV2001-I

2001-II

2001-III

2001-IV2002-I

2002-II

2002-III

2002-IV2003-I

2003-II

2003-III

2003-IV2004-I

2004-II

2004-III

2004-IV12.0

Municipalities without Azteca Municipalities with Azteca

2000-II

2000-III

2000-IV2001-I

2001-II

2001-III

2001-IV2002-I

2002-II

2002-III

2002-IV2003-I

2003-II

2003-III

2003-IV2004-I

2004-II

2004-III

2004-IV12.0

Banco Azteca opening

2000-II

2000-III

2000-IV2001-I

2001-II

2001-III

2001-IV2002-I

2002-II

2002-III

2002-IV2003-I

2003-II

2003-III

2003-IV2004-I

2004-II

2004-III

2004-IV12.0

Banco Azteca opening

• Classroom-based financial education for general population do not work

III. Financial capabilityIntro Measurement and Impact Public Policy Focus Areas Main Messages

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions• More likely to work in “teachable moments” (e.g., new job, new mortgage)

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions• More likely to work in “teachable moments” (e.g., new job, new mortgage)• Especially beneficial for people with limited financial skills

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions• More likely to work in “teachable moments” (e.g., new job, new mortgage)• Especially beneficial for people with limited financial skills• It helps to leverage social networks (e.g., involve both parents and children)

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions• More likely to work in “teachable moments” (e.g., new job, new mortgage)• Especially beneficial for people with limited financial skills• It helps to leverage social networks (e.g., involve both parents and children)• “Rule of thumb” training helps by avoiding information overload

• Classroom-based financial education for general population do not work• Financial literacy can be increased by well-designed, targeted interventions• More likely to work in “teachable moments” (e.g., new job, new mortgage)• Especially beneficial for people with limited financial skills• It helps to leverage social networks (e.g., involve both parents and children)• “Rule of thumb” training helps by avoiding information overload• New delivery channels show promise—example: messages in soap operas

• Financial literacy messages seem to have a real-world effect…

Source: Berg and Zia (2013)

Has someone in the household used hire purchase in the past 6 months?

Has someone in the household gambled money in the past 6 months?

31TreatmentControl

• … but the effect is short-lived – need to repeat / reinforce

31TreatmentControl

• Poverty and Shared Prosperity• Technology, Business Models• Policy• Regulations, Information, Competition, Education and Protection

Global Financial Development Report 2014

Source: AFP

• Second in a series– New data, recent research, lessons from operational work– Collaboration within WBG and with external contributors

• Each report focuses on a theme– 2013: rethinking the role of the state in finance– 2014: financial inclusion

• More than a report– Updated and expanded Global Financial Development Database– Little Data Book on Financial Development 2014– Other datasets, surveys, underlying research studies– All at worldbank.org/financialdevelopment

Global Financial Development Report 2014

Source: AFP

Global Financial Development Report 2014 - Financial Inclusion

Economy & Finance

Global Financial Inclusion - Columbia Business School › leadership › sites › ...Global Financial Inclusion. Fall 2010. In the past decade, the goal of financial inclusion—

2014 global-financial-development-report-financial-inclusion

Addressing the Global Challenge of Financial Inclusion Universal... · 2019-04-10 · 4 Toward Universal Access: Addressing the Global Challenge of Financial Inclusion it was launched

Global Forum on Financial Inclusion for Development

National Financial Inclusion and Financial Literacy ... · Global Policy Forum in 2013. The basis for this commitment is the National Financial Inclusion ... Policy 2011-2015. Research

FINANCIAL INCLUSION GLOBAL INITIATIVE (FIGI)...The Financial Inclusion Global Initiative (FIGI) is a three-year program implemented in partnership by the World Bank Group (WBG), the

2017 Global Financial Inclusion and Consumer Protection Surveypubdocs.worldbank.org/en/938591513654472935/2017... · 2017 Global Financial Inclusion and Consumer Protection Survey

Beyond Financial Inclusion: Financial Health as a …...Center for Financial Services Innovation Beyond Financial Inclusion: Financial Health as a Global Framework 5 Dalberg’s Design

Global Standard and Financial Inclusion for the Poor Toward

FINANCIAL INCLUSION GLOBAL INITIATIVE (FIGI) · 2017-11-29 · inclusion in developing countries, the Financial Inclusion Global Initiative (FIGI), was launched by the World Bank

2014 Global Financial Development Report - Financial Inclusion

Addressing the Global Challenge of Financial Inclusion

Global Microscope 2020 The role of financial inclusion in

GLOBAL STANDARD SETTING BODIES AND FINANCIAL INCLUSION · Brazil, Kenya, Mexico, the Philippines, and South Africa GLOBAL STANDARD SETTING BODIES AND FINANCIAL INCLUSION A contribution

FINANCIAL INCLUSION REPORT December 2009 de IF/Fin… · Financial Inclusion The Alliance for Financial Inclusion (AFI) is a global network of central banks, banking supervisors and

Global Symposium for Innovative Financial Inclusionpubdocs.worldbank.org/en/382331476811910628/Session-5C... · Global Symposium for Innovative Financial Inclusion ... Pre-Event Event

Toward Universal Access: Addressing the Global Challenge of Financial Inclusion

FINANCIAL INCLUSION GLOBAL INITIATIVE (FIGI)€¦ · The Financial Inclusion Global Initiative (FIGI) is a three-year program implemented in partnership by the World Bank Group (WBG),

Measuring Financial Inclusion the Global Findex

Global Financial Inclusion and Consumer Protection Survey