Showing papers by "Asli Demirguc-Kunt published in 2013"
22 Mar 2013
TL;DR: In this article, the first publicly available, user-side data set of indicators that measure how adults in 148 countries save, borrow, make payments, and manage risk is presented.
Abstract: This paper summarizes the first publicly available, user-side data set of indicators that measure how adults in 148 countries save, borrow, make payments, and manage risk We use the data to benchmark financial inclusion—the share of the population that uses formal financial services—in countries around the world, and to investigate the significant country- and individual-level variation in how adults use formal and informal financial systems to manage their day-to-day finances and plan for the future The data show that 50 percent of adults worldwide are "banked," that is, have an account at a formal financial institution, but also that account penetration varies across countries by level of economic development and across income groups within countries For the half of all adults around the world who remain unbanked, the paper documents reported barriers to account use, such as cost, distance, and documentation requirements, which may shed light on potential market failures and provide guidance to policymakers in shaping financial inclusion policies
419 citations
305 citations
TL;DR: In this paper, gender differences in the use of financial services using individual-level data from 98 developing countries were analyzed and found that women are less likely to own an account relative to men, as well as to save and borrow.
Abstract: This paper documents and analyzes gender differences in the use of financial services using individual-level data from 98 developing countries. The data, drawn from the Global Financial Inclusion (Global Findex) database, highlight the existence of significant gender gaps in ownership of accounts and usage of savings and credit products. Even after controlling for a host of individual characteristics including income, education, employment status, rural residency and age, gender remains significantly related to usage of financial services. This study also finds that legal discrimination against women and gender norms may explain some of the cross-country variation in access to finance for women. The analysis finds that in countries where women face legal restrictions in their ability to work, head a household, choose where to live, and receive inheritance, women are less likely to own an account, relative to men, as well as to save and borrow. The results also confirm that manifestations of gender norms, such as the level of violence against women and the incidence of early marriage for women, contribute to explaining the variation in the use of financial services between men and women, after controlling for other individual and country characteristics.
223 citations
TL;DR: The Global Financial Development Database (GFDB) as discussed by the authors provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of financial depth, degree to which individuals and firms can and do use financial services (access), efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and stability of financial institutions and markets (stability).
Abstract: This paper describes our construction of the Global Financial Development Database and uses the data to compare financial systems around the world. The database provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals and firms can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and (4) stability of financial institutions and markets (stability).
184 citations
Posted Content•
TL;DR: This paper found that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual-and country-level characteristics.
Abstract: In recent years, the Islamic finance industry has attracted the attention of policy makers and international donors as a possible channel through which to expand financial inclusion, particularly among Muslim adults. Yet cross-country, demand-side data on actual usage and preference gaps in financial services between Muslims and non-Muslims have been scarce. This paper uses novel data to explore the use of and demand for formal financial services among self-identified Muslim adults. In a sample of more than 65,000 adults from 64 economies (excluding countries where less than 1 percent or more than 99 percent of the sample self-identified as Muslim), the analysis finds that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual- and country-level characteristics. But the analysis finds no evidence that Muslims are less likely than non-Muslims to report formal or informal borrowing. Finally, in an extended survey of adults in five North African and Middle Eastern countries with relatively nascent Islamic finance industries, the study finds little use of Sharia-compliant banking products, although it does find evidence of a hypothetical preference for Sharia-compliant products among a plurality of respondents despite higher costs.
141 citations
TL;DR: The authors found that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual-and country-level characteristics.
Abstract: In recent years, the Islamic finance industry has attracted the attention of policy makers and international donors as a possible channel through which to expand financial inclusion, particularly among Muslim adults. Yet cross-country, demand-side data on actual usage and preference gaps in financial services between Muslims and non-Muslims have been scarce. This paper uses novel data to explore the use of and demand for formal financial services among self-identified Muslim adults. In a sample of more than 65,000 adults from 64 economies (excluding countries where less than 1 percent or more than 99 percent of the sample self-identified as Muslim), the analysis finds that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual- and country-level characteristics. But the analysis finds no evidence that Muslims are less likely than non-Muslims to report formal or informal borrowing. Finally, in an extended survey of adults in five North African and Middle Eastern countries with relatively nascent Islamic finance industries, the study finds little use of Sharia-compliant banking products, although it does find evidence of a hypothetical preference for Sharia-compliant products among a plurality of respondents despite higher costs.
74 citations
TL;DR: In this paper, the authors provide evidence on regulatory and supervisory practices around the world in the context of the global financial crisis, using data from a new World Bank survey covering 143 countries, and find that crisis countries had less stringent and more complex definitions of capital but exhibited lower actual capital ratios, faced fewer restrictions on non-bank activities, were less strict in the regulatory treatment of bad loans, and were less able to demand banks to adjust their equity, provisions or compensation schemes, and had greater disclosure requirements but weaker incentives for private agents to monitor banks.
70 citations
Posted Content•
TL;DR: The Global Financial Development Database (GFDB) as discussed by the authors provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of financial depth, degree to which individuals and firms can and do use financial services (access), efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and stability of financial institutions and markets (stability).
Abstract: This paper describes our construction of the Global Financial Development Database and uses the data to compare financial systems around the world. The database provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals and firms can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and (4) stability of financial institutions and markets (stability).
54 citations
Posted Content•
TL;DR: This article found that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual-and country-level characteristics.
Abstract: In recent years, the Islamic finance industry has attracted the attention of policy makers and international donors as a possible channel through which to expand financial inclusion, particularly among Muslim adults. Yet cross-country, demand-side data on actual usage and preference gaps in financial services between Muslims and non-Muslims have been scarce. This paper uses novel data to explore the use of and demand for formal financial services among self-identified Muslim adults. In a sample of more than 65,000 adults from 64 economies (excluding countries where less than 1 percent or more than 99 percent of the sample self-identified as Muslim), the analysis finds that Muslims are significantly less likely than non-Muslims to own a formal account or save at a formal financial institution after controlling for other individual- and country-level characteristics. But the analysis finds no evidence that Muslims are less likely than non-Muslims to report formal or informal borrowing. Finally, in an extended survey of adults in five North African and Middle Eastern countries with relatively nascent Islamic finance industries, the study finds little use of Sharia-compliant banking products, although it does find evidence of a hypothetical preference for Sharia-compliant products among a plurality of respondents despite higher costs.
45 citations
TL;DR: In this paper, the authors used quantile regressions to assess the relationship between economic and financial development at each percentile of the distribution of economic development, and provided information on how the associations between economic development and both bank and securities market development change as countries grow richer.
Abstract: In this article the authors use quantile regressions to assess the relationship between economic and financial development at each percentile of the distribution of economic development. Thus, the quantile regressions provide information on how the associations between economic development and both bank and securities market development change as countries grow richer.
24 citations
Posted Content•
TL;DR: This article examined how corporate governance and executive compensation affected bank capitalization strategies for an international sample of banks in 2003-2011 and found that good corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalisation.
Abstract: This paper examines how corporate governance and executive compensation affected bank capitalization strategies for an international sample of banks in 2003-2011."Good"corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalization. Boards of intermediate size, separation of the chief executive officer and chairman roles, and an absence of anti-takeover provisions, in particular, lead to low bank capitalization. However, executive options and stock wealth invested in the bank are associated with better capitalization except just before the crisis in 2006. In that year, stock options wealth was associated with lower capitalization, which suggests that potential gains from taking on more bank risk outweighed the prospect of additional loss. Banks'tendencies to continue payouts to shareholders after experiencing negative income shocks are shown to reflect executive risk-taking incentives.
TL;DR: In this paper, the authors examined how corporate governance and executive compensation affect bank capitalization strategies for an international sample of banks over the 2003-2011 period and found that shareholders' friendly corporate governance, in the form of boards of intermediate size, separation of the CEO and chairman roles, and an absence of anti-takeover provisions, is associated with lower bank's capitalization.
01 Feb 2013
TL;DR: In India 35 percent of adults have a formal account and 8 percent a formal loan, according to new data from the Global Financial Inclusion (Global Findex) database as discussed by the authors, which can be used to track the effects of financial inclusion policies in India and develop a deeper and more nuanced understanding of how people save, borrow, make payments, and manage risk.
Abstract: In India 35 percent of adults have a formal account and 8 percent a formal loan, according to new data from the Global Financial Inclusion (Global Findex) database. The data allow comparison with other South Asian and BRICS economies as well as within India, where they reveal deep disparities by gender and other individual characteristics in how adults use financial services. The database can be used to track the effects of financial inclusion policies in India and develop a deeper and more nuanced understanding of how people save, borrow, make payments, and manage risk.
TL;DR: In this article, the authors propose a pragmatic approach to re-orienting financial regulation to have at its core the objective of addressing incentives on an ongoing basis, which could help in identifying incentive misalignments in the financial sector.
Abstract: A large body of evidence points to misaligned incentives as having a key role in the run-up to the global financial crisis. These include bank managers' incentives to boost short-term profits and create banks that are "too big to fail," regulators' incentives to forebear and withhold information from other regulators in stressful times, and credit rating agencies' incentives to keep issuing high ratings for subprime assets. As part of the response to the crisis, policymakers and regulators also attempted to address some incentive issues, but various outside observers have criticized the response for being insufficient. This paper proposes a pragmatic approach to re-orienting financial regulation to have at its core the objective of addressing incentives on an ongoing basis. Specifically, the paper proposes "incentive audits" as a tool that could help in identifying incentive misalignments in the financial sector. The paper illustrates how such audits could be implemented in practice, and what the implications would be for the design of policies and frameworks to mitigate systemic risks.
TL;DR: The state does have very important roles, especially in providing well-defined regulations and enforcing them, ensuring healthy competition, and strengthening financial infrastructure as discussed by the authors. But evidence also points to negative longer-term effects of direct interventions on resource allocation and quality of intermediation.
Abstract: The global financial crisis has given greater credence to the idea that active state involvement in the financial sector can be helpful for stability and development. There is now evidence that, for example, lending by state-owned banks has helped in mitigating the impact of the crisis on aggregate credit. But evidence also points to negative longer-term effects of direct interventions on resource allocation and quality of intermediation. This suggests a need to rebalance the state's roles from direct to less direct involvement, as the crisis subsides. The state does have very important roles, especially in providing well-defined regulations and enforcing them, ensuring healthy competition, and strengthening financial infrastructure. One of the crisis lessons is the importance of getting the basics right first: countries with complex but poorly enforced regulations suffered more during the global crisis. Evidence also suggests that instead of restricting competition, the state needs to encourage contestability through healthy entry of well-capitalized institutions and timely exit of insolvent ones. There is also new evidence that supports the state's key role in promoting transparency of information and reducing counterparty risk. The challenge of financial sector policies is to better align private incentives with public interest, without taxing or subsidizing private risk-taking.
TL;DR: In this article, the authors present the stylized facts about firms in developing nations as well as the legal, financial, and broader institutional framework in which these firms operate, focusing on the financing choices available to small and medium firms.
Abstract: This chapter reviews and synthesizes theoretical and empirical research on the role of finance in developing countries. First, the paper presents the stylized facts about firms in developing nations as well as the legal, financial, and broader institutional framework in which these firms operate. Next, the paper focuses on the financing choices available to small and medium firms in developing countries and highlights areas needing additional research.
Posted Content•
TL;DR: The Global Financial Development Database (GFDB) as discussed by the authors provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of size of financial institutions and markets (financial depth), degree to which individuals and firms can and do use financial services (access), efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency).
Abstract: This paper describes our construction of the Global Financial Development Database and uses the data to compare financial systems around the world. The database (available at www.worldbank.org/financialdevelopment) provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals and firms can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency) and (4) stability of financial institutions and markets (stability).
TL;DR: The authors examined the relation between establishment size and age in the formal sector and found that the average plant in developing countries that is more than 40 years old employs almost five times as many workers as the average plants that are five years old or younger.
Abstract: Survey data from 120 developing countries are used to examine the relation between establishment size and age in the formal sector. Existing research suggests that manufacturing establishments in developing countries do not grow over time, most likely because of market imperfections and regulations. To the contrary, this paper finds that the average plant in developing countries that is more than 40 years old employs almost five times as many workers as the average plant that is five years old or younger. The analysis finds consistent evidence when it looks within a large country, India, based on detailed manufacturing census data over 23 years. It also finds that differences in financial development across Indian states, while substantial, have a minor effect on firm growth, consistent with inefficiency of state-owned financial systems. These results hold controlling for differences in labor regulations across states, capital intensity, labor regulations, and firms born before and after the major reforms.
Posted Content•
TL;DR: In this paper, gender differences in the use of financial services using individual-level data from 98 developing countries were analyzed and found that women are less likely to own an account relative to men, as well as to save and borrow.
Abstract: This paper documents and analyzes gender differences in the use of financial services using individual-level data from 98 developing countries. The data, drawn from the Global Financial Inclusion (Global Findex) database, highlight the existence of significant gender gaps in ownership of accounts and usage of savings and credit products. Even after controlling for a host of individual characteristics including income, education, employment status, rural residency and age, gender remains significantly related to usage of financial services. This study also finds that legal discrimination against women and gender norms may explain some of the cross-country variation in access to finance for women. The analysis finds that in countries where women face legal restrictions in their ability to work, head a household, choose where to live, and receive inheritance, women are less likely to own an account, relative to men, as well as to save and borrow. The results also confirm that manifestations of gender norms, such as the level of violence against women and the incidence of early marriage for women, contribute to explaining the variation in the use of financial services between men and women, after controlling for other individual and country characteristics.
TL;DR: This paper examined how corporate governance and executive compensation affect bank capitalization strategies for an international sample of banks over the 2003-2011 period and found that good corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalisation.
Abstract: This paper examines how corporate governance and executive compensation affect bank capitalization strategies for an international sample of banks over the 2003-2011 period. ‘Good’ corporate governance, which favors shareholder interests, is found to give rise to lower bank capitalization. Boards of intermediate size, separation of the CEO and chairman roles, and an absence of anti-takeover provisions, in particular, lead to low bank capitalization. However, executive options and stock wealth invested in the bank is associated with better capitalization except just before the crisis in 2006. In that year stock options wealth was associated with lower capitalization which suggests that potential gains from taking on more bank risk outweighed the prospect of additional loss. Banks’ tendency to continue payouts to shareholders after experiencing negative income shocks are shown to reflect executive risk-taking incentives.
Journal Article•
TL;DR: In this article, a symposium on financial structure and development is organized in following headings: water nationalization and service quality, mass media and public policy, global evidence from agricultural policies, liability structure in small-scale finance, evidence from a natural experiment, financial structure, economic development: a reassessment; the evolving importance of banks and securities markets.
Abstract: This paper is organized in following headings: water nationalization and service quality;mass media and public policy: global evidence from agricultural policies; liability structure in small-scale finance: evidence from a natural experiment; symposium on financial structure and development; financial structure and economic development: a reassessment; the evolving importance of banks and securities markets; notes on financial system development and political intervention; financial development: structure and dynamics; job growth and finance: are some financial institutions better suited to the early stages of development than others?
TL;DR: This paper examined the relation between establishment size and age in the formal sector using survey data from 120 developing countries and found consistent evidence when they look within a large country, India, using detailed manufacturing census data over 23 years.
Abstract: We examine the relation between establishment size and age in the formal sector using survey data from 120 developing countries. Existing research suggests that manufacturing establishments in developing countries do not grow over time, most likely due to market imperfections and regulations. To the contrary, we find that the average plant in developing countries that is over 40 years old employs almost five times as many workers as the average plant five years or younger. We find consistent evidence when we look within a large country, India, using detailed manufacturing census data over 23 years. We also find that differences in financial development across Indian states, while substantial, have a minor effect on firm growth, consistent with inefficiency of state-owned financial systems. These results hold controlling for differences in labor regulations across states, capital intensity, labor regulations, and for firms born before and after the major reforms.