1. GLOBAL FINANCIAL DEVELOPMENT REPORT 2014
Financial Inclusion
Margaret Miller, Senior Economist, FFIMS
Istanbul, Turkey
June 3, 2014
http://www.worldbank.org/financialdevelopment
MJM1
3. Aspirations and Consumption in Turkey:
Access to finance plays a role….
‐ Access to credit can
facilitate higher levels
of current
consumption
‐ Credit and debit cards,
mobile money make
transacting easier
4. Access to finance is also about making
savings more attractive and easy
‐ Commitment accounts
‐ Savings lotteries
‐ Automatic deductions
‐ Preferential tax treatment
5. Long‐Term Productive Investments
Funding for SMEs
“Improve access to long‐term
financing and
develop equity and
venture capital markets,
with a view to unlock
the potential of the
dynamic SME sector.”
World Bank Country
Economic Memorandum,
May 2014
8. Consumer protection and
financial capability
‐ Levels of trust in a society may help to explain financial inclusion
‐ Consumer protection laws and regulations support responsible
finance
‐ Financial education increases awareness of opportunities, ability to
navigate financial markets
9. Intro Measurement and Impact Public MJM8 Policy on Financial Inclusion Focus Areas
Importance of financial inclusion: empirical evidence
• Recent empirical evidence on impact of financial inclusion on economic
development and poverty varies by types of financial services
• Basic payments and savings: evidence on benefits, especially for poor
households, is quite supportive
• Insurance products: also some evidence of a positive impact
• Access to credit—mixed picture: evidence on benefits for smoothing
consumption, but not always for entrepreneurial ventures
– dozens of microcredit experiments, other cross‐country research
– for example Roodman (2011) and Bauchet and others (2011)
– for firms, little effect for micro‐credit but a positive effect on firm growth for small‐and
medium‐size enterprise credit
• Common message from the research: financial inclusion does not mean
pushing access for the sake of access, and it certainly does not mean making
everybody borrow
10. Slide 8
MJM8 I would omit this slide. We've already alluded to the research on the importance of financial inclusion in the early slide. This can be
discussed without a slide.
Margaret J. Miller, 5/29/2013
11. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
Global views: Financial Development Barometer
(% of all respondents) Agree?
"Access to basic financial services is a significant problem for households in my country." 61 %
"Limited access to finance is a significant barrier to the growth of small enterprises in my country." 76 %
"In my country, access to finance has improved significantly over the last 5 years." 78 %
“Social banking (that is, state banks and targeted lending programs to poorer segments of the
population) is potentially a useful tool to increase financial access." 80 %
"Social banking actually plays an important role in financial access in my home country." 43 %
"The lack of knowledge about basic financial services is a major barrier to financial access among
the poor in my country."
78 %
Source: Financial Development Barometer.
Note: The barometer is an informal global poll of country officials and financial sector experts from 21 developed and 54 developing economies.
From 265 polled, 161 responded (61 %). Results are percentages of “fully agree” and “partially agree” responses out of total responses received.
12. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
Global views: Financial Development Barometer
What is the most effective policy to
improve access to finance among low‐income
Financial
education
32%
Promote
new lending
technologies
17%
borrowers?
Other
33%
Better legal
framework
18%
What is the role of new technologies (such
as mobile banking and biometric borrower
identification) in expanding access to
finance in your country?
Very
important
35%
Somewhat
important
25%
Not very
important
24%
Not sure
16%
Source: Financial Development Barometer (informal global poll of officials and experts from 21 developed and 54 developing economies).
13. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
Measuring financial inclusion
• Not all “unbanked” need financial services, but barriers (cost, travel
distance, amount of paperwork and requirements) play an important role
% of adults without
an account
0% 10% 20% 30% 40% 50% 60% 70%
Not enough money to use
Because someone else in the family already has an account
They are too expensive
Too far away
You don't have the necessary documentation
You don't trust them
Because of religious reasons
Source: Global Findex (Demirguc‐Kunt and Klapper 2012). Note: Respondents can choose more than one reason.
MJM7
14. Slide 11
MJM7 This slide provides a good grounding for discussion of the difficulties in getting individuals financial services. I like the following one in
describing the relatively greater challenge for firms in developing countries getting access to finance.
Margaret J. Miller, 5/29/2013
15. Intro Measurement and Impact Public MJM10 Policy on Financial Inclusion Focus Areas
Correlates of financial inclusion/exclusion
Source: Based on Allen and others (2013)
Note: Results from a probit regression of a financial inclusion indicator on country fixed effects and individual characteristics,
for 124,334 adults (15 years and older) covered by the Global Findex in 2011. The financial inclusion indicator is a 0/1 variable
indicating whether person had an account at a formal financial institution in 2011.
16. Slide 12
MJM10 I like this graphic - lots to discuss here in a talk.
Margaret J. Miller, 5/29/2013
17. Intro Measurement and Impact Public MJM25 Policy on Financial Inclusion Focus Areas
Need for “responsible” financial inclusion
• … highlighted by financial vulnerability of many people, even in middle‐income countries
Source: World Bank Survey of Financial Capability (2012)
18. Slide 13
MJM25 I think this is a very interesting graphic - I would keep unless we're tight on slides, then I think it could be discussed without the
visual. We might also want to redo and simplify -- take out the education levels and simply give each country an observation.
Margaret J. Miller, 5/29/2013
19. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
Measuring financial inclusion
• Among firms, the younger and smaller ones face greater constraints, and
their growth is affected relatively more by constraints
% of firms identifying access to finance as a major constraint
35
Developing economies Developed economies
29
25
16 15
8
Source: World Bank Enterprise Surveys. Sample includes 137 countries from 2005 to 2011.
Country income groups are based on World Bank definition (high income is gross national income of at least $12,476).
40
35
30
25
20
15
10
5
0
firms with <20 employees 20‐99 employees >100 employees
20. Intro Measurement and Impact Public MJM13 Policy on Financial Inclusion Focus Areas
Promoting inclusion: special focus areas
I. The promise of technology
II. Business models, product design
III. Financial literacy / capability
21. Slide 15
MJM13 I like these three focus topics and would keep this slide to clarify the final stage of the presentation and highlight these issues.
Margaret J. Miller, 5/29/2013
22. Intro Measurement and Impact Public MJM14 Policy on Financial Inclusion Focus Areas
I. The promise of technology
• Recent innovations in technology
– Mobile payments, mobile banking
– Borrower identification using biometric data (fingerprinting, iris scans, …)
• Can help reduce transaction costs while increasing financial security
• Example: rapid growth in number of phone subscriptions per 100 people
Source: World Development Indicators.
23. Slide 16
MJM14 I would eliminate this slide.
Margaret J. Miller, 5/29/2013
24. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
Public policy on financial inclusion
• Example: new evidence that collateral registries spur access to finance
Share of firms with
access to finance
0.50
0.73
0.41
0.54
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Treatment Group
(Registry reform)
Control Group (No
reform)
Pre reform Post reform
Source: Love,
Martinez Peria and
Singh (2012)
Note: The effect is
larger among
smaller firms
25. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
I. The promise of technology
• Another example: fingerprinting in Malawi (% of balances repaid on time)
88%
79%
91% 93%
89%
26%
74%
92%
96%
98%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Worst 2nd quintile 3rd quintile 4th quintile Best
Fingerprinted
Control
Source:
Calculations based on
Gine, Goldberg, and
Yang (2012).
Note:
The repayment rates
among fingerprinted
(red) and control
(blue) groups by
quartiles of the ex‐ante
probability of
default. Individuals in
the "worse" quintile
are those with highest
probability of default,
and those for whom
fingerprinting had the
largest effect.
26. Intro Measurement and Impact Public MJM16 Policy on Financial Inclusion Focus Areas
II. Business models, product design
• Improvements in lending to micro and small firms can be achieved by
leveraging existing relationships
• Example: Banco Azteca, Mexico
– in 2002, opened >800 branches in stores of its parent company, a consumer goods retailer
– caters to low and middle‐income groups mostly excluded from commercial banking
Source: Bruhn and Love
(forthcoming)
27. Slide 19
MJM16 This is a good slide for business model discussion.
Margaret J. Miller, 5/29/2013
28. Intro Measurement and Impact Public MJM17 Policy on Financial Inclusion Focus Areas
II. Business models, product design
• Product design that addresses market failures, meets consumers’ needs and
overcomes behavioral problems can foster wider use of financial services
– Commitment accounts, reminders, labeled accounts, group lending, investment games, timing of
repayments, index‐based insurance
• Example 1: commitment accounts
– Deposit a certain amount, relinquish access for a period of time or until a goal has been reached
– Randomized evaluations on Philippines (Ashraf, Karlan, Yin 2006) and Malawi (Brune et al 2011)
– Commitment “treatment” led to increases in bank deposits and caused increases in agricultural
input use, crop sales, and household expenditures over the next agricultural year
– It seemed primarily to have helped farmers by shielding funds from their social network
• Example 2: index‐based insurance
– Clear benefits for lenders (lower risk of weather‐related credit defaults), potential to increase
financial inclusion and agricultural production
– But take‐up often low: 20% for loans with rainfall insurance vs. 33% for loans without insurance
(randomized experiment with farmers in Malawi by Gine and Yang, 2009)
– New evidence: lack of trust and liquidity constraints are significant non‐price frictions that
constrain demand (field experiment in India by Cole and others, 2012)
– What has been shown to help: designing products to pay often and fast, an endorsement by a
well‐regarded institution, simplification and consumer education
29. Slide 20
MJM17 This slide provides some good additional discussion with more detail of the topic - I would keep if possible.
Margaret J. Miller, 5/29/2013
30. Intro Measurement and Impact Public MJM18 Policy on Financial Inclusion Focus Areas
Research shows
III. Financial literacy / capability
• Standard, classroom‐based financial education programs aimed at general
population do not work, at least not for adults
• In microenterprises, business training programs have been found to lead to
improvements in knowledge, but relatively small impact on business
practices and performance
31. Slide 21
MJM18 I would omit this slide. It has a very condensed approach to the topic - the following one is more nuanced and better introduces our
findings.
Margaret J. Miller, 5/29/2013
32. Intro Measurement and Impact Public MJM19 Policy on Financial Inclusion Focus Areas
III. Financial literacy / capability
Recent evidence suggests
• It is possible to increase financial literacy through well‐designed and
targeted interventions
• Financial education has a measurable impact when reaching people during
“teachable moments” (e.g. starting a job, purchasing a financial product)
• … and is especially beneficial for groups with limited financial skills
• Leveraging social networks enhances the impact of financial education
– Examples: involve both parents and children, both sender and recipient of remittances
• Delivery mode matters too
– “Rule of thumb” training helps (avoids information overload)
– Engaging delivery channels show promise
33. Slide 22
MJM19 I would keep this slide and the following one from the TV show with financial messages for the discussion of financial literacy /
capability.
Margaret J. Miller, 5/29/2013
34. A Focus on Two Interventions
1) School‐based financial education
in Brazil
2) Mass media in Mexico and South
Africa
35. Brazil’s Financial Education Program
for High Schools
• Give financial education to young Brazilians
• Change understanding and knowledge of the relationship
between present choices and future outcomes
• Change current behavior: increase savings and improve
planning and spending
• Change financial attitudes towards future behavior:
improve financial independence and intentions to save
• Change household outcomes: spillover effects on
parental financial knowledge and behavior
36. Pedagogical Approach
Key points
• Complementary to
educational system, strategy
• Financial capability taught
within other subjects
• Attractive for students and
teachers
41. Opportunity for entertainment
education to strengthen
financial capability
• Helps address selection bias, where only most
interested, informed seek financial training
• Can be used to inform, change attitudes, model skills
and support changes in normative behavior
• Cost effective way to reach large numbers
• Well suited to new financial consumers in developing
countries with limited literacy, numeracy, lack of
experience with basic products
42. Mucho Corazon ‐ A Mexican Soap Opera
with Financial Messages
45. Impacts on Seeking Financial Advice
Daily call volume data from the NDMA call centers shows a spike in
incoming calls immediately following the episode where the NDMA
was introduced into the soap storyline.
46. Intro Measurement and Impact Public Policy on Financial Inclusion Focus Areas
III. Financial literacy / capability
• Example of a promising delivery mechanism: entertainment education
• But effects of literacy programs tend to be short‐lived … need to be repeated
Source: Berg and Zia (2013)
Note: “Hire purchase” refers
to contracts where people
pay for goods in installments
0.35
0.30
0.25
0.20
0.15
0.10
Someone in Household Has Used
Hire Purchase in the Past 6
Months?
Someone in Household Has
Gambled Money in the Past 6
Months?
Control
Treatment
Share of respondents
