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Global Financial Development Report 2014 - Financial Inclusion

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As mobile banking and other technological innovations fuel the expansion of financial services in many developing countries, a new World Bank Group report urges policy makers to focus on products that benefit the poor, women and other vulnerable groups the most.

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Global Financial Development Report 2014 - Financial Inclusion

  1. 1. Intro Measurement and Impact Public Policy Focus Areas Main Messages Importance of 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 2
  2. 2. Intro Measurement and Impact Public Policy Focus Areas Main Messages Importance of 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 • Critical role in reducing poverty, boosting shared prosperity 3
  3. 3. Intro Measurement and Impact Public Policy Focus Areas Main Messages Importance of 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 • 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 4
  4. 4. Intro Measurement and Impact Public Policy Focus Areas Main Messages Importance of 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 • 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 5
  5. 5. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 6
  6. 6. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? Not very important 24% Very important 35% Not sure 16% Somewhat important 25% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 7
  7. 7. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? What is the most effective policy to improve access to finance among lowincome borrowers? More state banking, 8% Not very important 24% Very important 35% More microfinance, 8% More competition, 8% Promote new lending technologies, 17% Not sure 16% Somewhat important 25% Financial education, 32 % Better legal framework and credit information, 27% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 8
  8. 8. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? What is the most effective policy to improve access to finance among lowincome borrowers? More state banking, 8% Not very important 24% Very important 35% More microfinance, 8% More competition, 8% Promote new lending technologies, 17% Not sure 16% Somewhat important 25% Financial education, 32 % Better legal framework and credit information, 27% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 9
  9. 9. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? What is the most effective policy to improve access to finance among lowincome borrowers? More state banking, 8% Not very important 24% Very important 35% More microfinance, 8% More competition, 8% Promote new lending technologies, 17% Not sure 16% Somewhat important 25% Financial education, 32 % Better legal framework and credit information, 27% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 10
  10. 10. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? What is the most effective policy to improve access to finance among lowincome borrowers? More state banking, 8% Not very important 24% Very important 35% More microfinance, 8% More competition, 8% Promote new lending technologies, 17% Not sure 16% Somewhat important 25% Financial education, 32 % Better legal framework and credit information, 27% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 11
  11. 11. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global views: Financial Development Barometer What is the role of new technologies in expanding access to finance? What is the most effective policy to improve access to finance among lowincome borrowers? More state banking, 8% Not very important 24% Very important 35% More microfinance, 8% More competition, 8% Promote new lending technologies, 17% Not sure 16% Somewhat important 25% Financial education, 32 % Better legal framework and credit information, 27% Source: Financial Development Barometer (poll of financial sector officials and experts from 21 developed and 54 developing economies). 12
  12. 12. Intro Measurement and Impact Public Policy Focus Areas Main Messages Defining financial inclusion 13
  13. 13. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Globally, about 50 % of adults have a bank account • The other 50 % (2.5 billion) remain “unbanked” Source: Global Financial Inclusion (Global Findex) Database, worldbank.org/globalfindex 14
  14. 14. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • 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 15
  15. 15. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Not all “unbanked” need financial services, but barriers play a key role 16
  16. 16. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Not all “unbanked” need financial services, but barriers play a key role Not enough money 30 Family member already has account Too expensive Too far away Lack of documentation Lack of trust Religious reasons 0 5 10 15 20 25 30 35 Non-account-holders reporting barrier as a reason for not having an account (%) 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. 17
  17. 17. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Not all “unbanked” need financial services, but barriers play a key role Not enough money 30 Family member already has account 25 Too expensive 23 Too far away Lack of documentation Lack of trust Religious reasons 0 5 10 15 20 25 30 35 Non-account-holders reporting barrier as a reason for not having an account (%) 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. 18
  18. 18. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Not all “unbanked” need financial services, but barriers play a key role Not enough money 30 Family member already has account 25 Too expensive 23 Too far away 20 Lack of documentation 18 Lack of trust Religious reasons 0 5 10 15 20 25 30 35 Non-account-holders reporting barrier as a reason for not having an account (%) 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. 19
  19. 19. Intro Measurement and Impact Public Policy Focus Areas Main Messages Measuring financial inclusion • Not all “unbanked” need financial services, but barriers play a key role Not enough money 30 Family member already has account 25 Too expensive 23 Too far away 20 Lack of documentation 18 Lack of trust 13 Religious reasons 5 0 5 10 15 20 25 30 35 Non-account-holders reporting barrier as a reason for not having an account (%) 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. 20
  20. 20. Intro Measurement and Impact Public Policy Focus Areas Main Messages Correlates of financial inclusion effect on probability of owning an account (%) Fourth 20% Middle 20% Second 20% 5% Poorest 20% 10% 0% -5% -6% -10% -9% -13% -15% -16% -20% Source: Based on Allen, Demirguc-Kunt, and others (2012) 21
  21. 21. Intro Measurement and Impact Public Policy Focus Areas Main Messages Correlates of financial inclusion 0% Age effect on probability of owning an account (%) 3% 0-8 yrs of education Fourth 20% Middle 20% Second 20% 5% Poorest 20% 10% -5% -6% -10% -9% -13% -12% -15% -16% -20% Source: Based on Allen, Demirguc-Kunt, and others (2012) 22
  22. 22. Intro Measurement and Impact Public Policy Focus Areas Main Messages Correlates of financial inclusion 0% Employed Age effect on probability of owning an account (%) Out of workforce 7% Unemployed 3% 0-8 yrs of education Fourth 20% Middle 20% Second 20% 5% Poorest 20% 10% -5% -6% -10% -7% -8% -9% -13% -12% -15% -16% -20% Source: Based on Allen, Demirguc-Kunt, and others (2012) 23
  23. 23. Intro Measurement and Impact Public Policy Focus Areas Main Messages Correlates of financial inclusion 0% -6% -10% -9% -13% -12% Employed -3% Married -5% -2% Log of household size Age effect on probability of owning an account (%) 2% Out of workforce 7% Unemployed Rural 3% 0-8 yrs of education Fourth 20% Middle 20% Second 20% 5% Poorest 20% 10% -7% -8% -15% -16% -20% Source: Based on Allen, Demirguc-Kunt, and others (2012) 24
  24. 24. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inequality and economic inequality 70 60 50 40 30 20 0 5 10 15 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. 25
  25. 25. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inequality and economic inequality 70 60 50 40 30 20 0 5 10 15 account penetration in the richest 20% as a multiple of that in the poorest 20% 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. 26
  26. 26. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inequality and economic inequality Income inequality (Gini coefficient) 70 60 50 40 30 20 0 5 10 15 account penetration in the richest 20% as a multiple of that in the poorest 20% 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. 27
  27. 27. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inequality and economic inequality Income inequality (Gini coefficient) 70 Haiti 60 50 40 Philippines 30 Sweden 20 0 5 10 15 account penetration in the richest 20% as a multiple of that in the poorest 20% 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. 28
  28. 28. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inequality and economic inequality Income inequality (Gini coefficient) 70 Haiti 60 50 40 Philippines 30 Sweden 20 0 5 10 15 account penetration in the richest 20% as a multiple of that in the poorest 20% 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. 29
  29. 29. Intro Measurement and Impact Public Policy Focus Areas Main Messages Evidence on impacts of financial inclusion 30
  30. 30. Intro Measurement and Impact Public Policy Focus Areas Main Messages Evidence on impacts of financial inclusion • Basic payments, savings: strong evidence on benefits, especially for the poor 31
  31. 31. Intro Measurement and Impact Public Policy Focus Areas Main Messages Evidence on impacts of financial inclusion • Basic payments, savings: strong evidence on benefits, especially for the poor • Insurance products: also some evidence of a positive impact 32
  32. 32. Intro Measurement and Impact Public Policy Focus Areas Main Messages Evidence on impacts of financial inclusion • 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 33
  33. 33. Intro Measurement and Impact Public Policy Focus Areas Main Messages Evidence on impacts of financial inclusion • 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 – microenterprises and individuals: evidence on benefits for smoothing consumption, but not always for entrepreneurial ventures 34
  34. 34. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research 35
  35. 35. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • Policy should focus on addressing market and government failures 36
  36. 36. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • 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 37
  37. 37. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • 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 38
  38. 38. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • 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 39
  39. 39. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research 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 40
  40. 40. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research 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 average effect (all countries) -0.6 effect at minimum financial development -1.3 effect at minimum credit information -2.8 effect at maximum government ownership -3.1 -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 Source: Love and Martinez Peria 2012 41
  41. 41. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research 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 average effect (all countries) -0.6 effect at minimum financial development -1.3 effect at minimum credit information -2.8 effect at maximum government ownership -3.1 -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 Source: Love and Martinez Peria 2012 42
  42. 42. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research 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 average effect (all countries) -0.6 effect at minimum financial development -1.3 effect at minimum credit information -2.8 effect at maximum government ownership -3.1 -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 Source: Love and Martinez Peria 2012 43
  43. 43. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • Role in supporting information environment (standards for disclosure, transparency, promoting credit bureaus, collateral registries) 80 % of firms with access to finance Registry reformers 70 60 Non-reformers (matched by region and income) 54 50 41 40 30 20 10 0 Pre-reform Source: Love, Martínez Pería, and Singh 2013. Post-reform 44
  44. 44. Intro Measurement and Impact Public Policy Focus Areas Main Messages Financial inclusion policy – overall findings from research • Role in supporting information environment (standards for disclosure, transparency, promoting credit bureaus, collateral registries) 80 73 % of firms with access to finance Registry reformers 70 60 50 Non-reformers (matched by region and income) 54 50 41 40 30 20 10 0 Pre-reform Source: Love, Martínez Pería, and Singh 2013. Post-reform 45
  45. 45. Intro Measurement and Impact Public Policy Focus Areas Main Messages Promoting financial inclusion: focus areas Promoting financial inclusion I. Promise of technology II. Product design, business models III. Financial capability 46
  46. 46. Intro Measurement and Impact Public Policy Focus Areas Main Messages Promoting financial inclusion: focus areas Promoting financial inclusion I. Promise of technology II. Product design, business models III. Financial capability 47
  47. 47. Intro Measurement and Impact Public Policy Focus Areas Main Messages Promoting financial inclusion: focus areas Promoting financial inclusion I. Promise of technology II. Product design, business models III. Financial capability 48
  48. 48. Intro Measurement and Impact Public Policy Focus Areas Main Messages Promoting financial inclusion: focus areas Promoting financial inclusion I. Promise of technology II. Product design, business models III. Financial capability 49
  49. 49. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • Technological innovations reduce transaction costs, increase financial security • Scope for scaling up, illustrated e.g. by growth in phone subscriptions 125 World High income Middle income 75 Low income 50 25 0 1… 1… 1… 1… 1… 1… 1… 1… 1… 1… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… Subscriptions per 100 people 100 Source: World Development Indicators. 50
  50. 50. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • Technological innovations reduce transaction costs, increase financial security • Scope for scaling up, illustrated e.g. by growth in phone subscriptions 125 World High income Middle income 75 Low income 50 25 0 1… 1… 1… 1… 1… 1… 1… 1… 1… 1… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… Subscriptions per 100 people 100 Source: World Development Indicators. 51
  51. 51. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • Technological innovations reduce transaction costs, increase financial security • Scope for scaling up, illustrated e.g. by growth in phone subscriptions 125 World High income Middle income 75 Low income 50 25 0 1… 1… 1… 1… 1… 1… 1… 1… 1… 1… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… 2… Subscriptions per 100 people 100 Source: World Development Indicators. 52
  52. 52. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology Example: fingerprinting in Malawi (% of balances repaid on time) 100% 91% 92% 93% 98% 96% 90% 89% 79% 80% 74% 70% 60% 50% Fingerprinted Control 40% 30% 20% Source: Calculations based on Giné, Goldberg, and Yang (2012). 10% 0% Worst 2nd quintile 3rd quintile 4th quintile Best 53
  53. 53. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology Example: fingerprinting in Malawi (% of balances repaid on time) 100% 90% 91% 92% 88% 93% 98% 96% 89% 79% 80% 74% 70% 60% 50% Fingerprinted Control 40% 30% 26% 20% Source: Calculations based on Giné, Goldberg, and Yang (2012). 10% 0% Worst 2nd quintile 3rd quintile 4th quintile Best 54
  54. 54. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • To harness the promise of new technologies… 55
  55. 55. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • To harness the promise of new technologies… • …. regulators need to allow competing financial service providers and consumers to take advantage of technological innovations… 56
  56. 56. Intro Measurement and Impact Public Policy Focus Areas Main Messages I. Promise of technology • To harness the promise of new technologies… • …. 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. 57
  57. 57. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Product design that addresses market failures, meets consumers’ needs and overcomes behavioral problems can foster wider use of financial services Note: The exchange rate was MK145/USD during the study period. Source: Brune, Giné, and others (2011). 58
  58. 58. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Product design that addresses market failures, meets consumers’ needs and overcomes behavioral problems can foster wider use of financial services • Example 1: commitment accounts 30,000 25,000 0.45 0.40 Commitment account Ordinary account 0.35 Ordinary account Commitment account 0.30 acres Local currency (Malawi Kwacha, MK) 35,000 20,000 0.25 0.20 15,000 0.15 10,000 0.10 5,000 0.05 0 0.00 Total value of inputs Value of crop output Note: The exchange rate was MK145/USD during the study period. Source: Brune, Giné, and others (2011). Farm profit Land under cultivation 59
  59. 59. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Product design that addresses market failures, meets consumers’ needs and overcomes behavioral problems can foster wider use of financial services • Example 1: commitment accounts 30,000 25,000 0.45 0.40 Commitment account Ordinary account 0.35 Ordinary account Commitment account 0.30 acres Local currency (Malawi Kwacha, MK) 35,000 20,000 0.25 0.20 15,000 0.15 10,000 0.10 5,000 0.05 0 0.00 Total value of inputs Value of crop output Note: The exchange rate was MK145/USD during the study period. Source: Brune, Giné, and others (2011). Farm profit Land under cultivation 60
  60. 60. Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Example 2: index insurance take-up of loans (% of farmers) Intro 35 33 30 25 20 15 10 5 0 loans without rainfall insurance with rainfall insurance loans Source: Giné and Yang, 2009 61
  61. 61. Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Example 2: index insurance take-up of loans (% of farmers) Intro 35 33 30 25 20 20 15 10 5 0 loans without rainfall insurance with rainfall insurance loans Source: Giné and Yang, 2009 62
  62. 62. Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Example 2: index insurance take-up of loans (% of farmers) Intro 35 33 30 25 20 20 15 10 5 0 loans without rainfall insurance with rainfall insurance loans Source: Giné and Yang, 2009 • New evidence: lack of trust, liquidity constraints constrain demand (field experiment in India by Cole and others, 2012) 63
  63. 63. Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models • Example 2: index insurance take-up of loans (% of farmers) Intro 35 33 30 25 20 20 15 10 5 0 loans without rainfall insurance with rainfall insurance loans 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 64
  64. 64. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models 15.0 9.0 14.5 8.8 8.6 14.0 8.4 13.5 8.2 13.0 8.0 7.8 12.0 7.6 2000-II 2000-III 2000-IV 2001-I 2001-II 2001-III 2001-IV 2002-I 2002-II 2002-III 2002-IV 2003-I 2003-II 2003-III 2003-IV 2004-I 2004-II 2004-III 2004-IV 12.5 % of individuals who are informal business owners (municipalities with Azteca) % of individuals who are informal business owners (municipalities without Azteca) • Example of an innovative business model: Banco Azteca, Mexico • Improved access can be achieved by leveraging existing relationships Municipalities without Azteca Source: Bruhn and Love (forthcoming) Municipalities with Azteca 65
  65. 65. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models 15.0 Banco Azteca opening 9.0 8.8 14.5 8.6 14.0 8.4 13.5 8.2 13.0 8.0 7.8 12.0 7.6 2000-II 2000-III 2000-IV 2001-I 2001-II 2001-III 2001-IV 2002-I 2002-II 2002-III 2002-IV 2003-I 2003-II 2003-III 2003-IV 2004-I 2004-II 2004-III 2004-IV 12.5 % of individuals who are informal business owners (municipalities with Azteca) % of individuals who are informal business owners (municipalities without Azteca) • Example of an innovative business model: Banco Azteca, Mexico • Improved access can be achieved by leveraging existing relationships Municipalities without Azteca Source: Bruhn and Love (forthcoming) Municipalities with Azteca 66
  66. 66. Intro Measurement and Impact Public Policy Focus Areas Main Messages II. Product design, business models 15.0 Banco Azteca opening 9.0 8.8 14.5 8.6 14.0 8.4 13.5 8.2 13.0 8.0 7.8 12.0 7.6 2000-II 2000-III 2000-IV 2001-I 2001-II 2001-III 2001-IV 2002-I 2002-II 2002-III 2002-IV 2003-I 2003-II 2003-III 2003-IV 2004-I 2004-II 2004-III 2004-IV 12.5 % of individuals who are informal business owners (municipalities with Azteca) % of individuals who are informal business owners (municipalities without Azteca) • Example of an innovative business model: Banco Azteca, Mexico • Improved access can be achieved by leveraging existing relationships Municipalities without Azteca Source: Bruhn and Love (forthcoming) Municipalities with Azteca 67
  67. 67. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • Classroom-based financial education for general population do not work 68
  68. 68. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • Classroom-based financial education for general population do not work • Financial literacy can be increased by well-designed, targeted interventions 69
  69. 69. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • 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) 70
  70. 70. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • • • • 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 71
  71. 71. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • • • • • 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) 72
  72. 72. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • • • • • • 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 73
  73. 73. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • • • • • • • 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 74
  74. 74. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • • • • • • • 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 75
  75. 75. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • Financial literacy messages seem to have a real-world effect… 35 Treatment % of respondents 30 31 Control 25 20 19 15 10 5 0 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? Source: Berg and Zia (2013) 76
  76. 76. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • Financial literacy messages seem to have a real-world effect… 35 Treatment % of respondents 30 31 Control 26 25 19 20 15 15 10 5 0 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? Source: Berg and Zia (2013) 77
  77. 77. Intro Measurement and Impact Public Policy Focus Areas Main Messages III. Financial capability • Financial literacy messages seem to have a real-world effect… 35 Treatment % of respondents 30 31 Control 26 25 19 20 15 15 10 5 0 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? Source: Berg and Zia (2013) … but the effect is short-lived – need to repeat / reinforce 78
  78. 78. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global Financial Development Report 2014 • • • • Poverty and Shared Prosperity Technology, Business Models Policy Regulations, Information, Competition, Education and Protection Source: AFP 79
  79. 79. Intro Measurement and Impact Public Policy Focus Areas Main Messages Global Financial Development Report 2014 • 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 Source: AFP 80

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