Special_Address_Asli

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					           Finance For All?
             Policies and Pitfalls
            in Expanding Access


        Asli Demirguc-Kunt
          February, 2008
A World Bank Policy Research Report
Development Research Group (DECRG)
 Why are we interested in access?
• Financial exclusion is likely to act as a
  brake on development
  – Theoretical models have shown that financial
    market frictions can be the critical mechanism for
    generating poverty traps and slower growth
  – An extensive empirical literature exists on the
    links between financial development and growth
• But, limited evidence linking access to
  financial services to outcomes, due to lack
  of data

                                                         2
  Questions addressed in this PRR
• Just how limited is access around the world?
• What are the chief obstacles and barriers to
  broader access?
• How important is access to finance as a
  constraint to growth or poverty reduction?
• What is the role of government in building
  inclusive financial systems?

                                                 3
Fraction of households with an account




                                         4
                    …varies by region…
Percent
100                         High
        75th percentile
                              Median
          25th percentile
80                          Low


60


40


20


  0
      Sub-Saharan                  East    Europe       Latin     Middle   South
         Africa                    Asia   & Central    America    East &    Asia
                                            Asia        & the     North
                                                      Caribbean   Africa
                                                                                   5
  …and increases with income
Households using financial services (percent)
100


 80


 60


 40


 20


  0
      0            10              20           30         40     50
                         GDP per capita (thousands of 2000 USD)

                                                                       6
Firms’ use of external finance varies by size…


            Firms using external funding (percent)

            40

            30

            20

            10

             0
                      Small           Medium         Large
                      firms            firms         firms

                                                             7
             ...and region and income


       East Asia & Pacific

    Europe & Central Asia

             High income

Latin America & Caribbean

Middle East & North Africa

               South Asia

      Sub-Saharan Africa
                             0           20           40            60           80
                         External finance as a percent of total funding for new investments

                                                                                              8
    ...and access is seen as a problem

                                         Access to finance
             High income                  Cost of finance

       East Asia & Pacific

    Europe & Central Asia

Latin America & Caribbean

Middle East & North Africa

               South Asia

      Sub-Saharan Africa

                             0      10        20         30       40         50        60       70
                                 Share of firms reporting cost of/access to finance (percent)


                                                                                                     9
     Defining “access” is not easy

Access versus use
• Usage is much easier to measure
• However, access is likely to be wider – some may
  have access, yet may not wish to use services
• Understanding usage requires information on both
  demand and supply
• Thus need to collect indicators that measure both:
  –Actual use of various services (savings, payment, credit)
  –Barriers to access, to identify boundaries and causes of
   exclusion
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