Measuring Financial Inclusion : The Global Findex Database
TL;DR: The first analysis of the Global Financial Inclusion (Global Findex) database is presented in this article, which measures how adults in 148 economies save, borrow, make payments, and manage risk.
Abstract: This paper provides the first analysis of the Global Financial Inclusion (Global Findex) Database, a new set of indicators that measure how adults in 148 economies save, borrow, make payments, and manage risk. The data show that 50 percent of adults worldwide have an account at a formal financial institution, though account penetration varies widely across regions, income groups and individual characteristics. In addition, 22 percent of adults report having saved at a formal financial institution in the past 12 months, and 9 percent report having taken out a new loan from a bank, credit union or microfinance institution in the past year. Although half of adults around the world remain unbanked, at least 35 percent of them report barriers to account use that might be addressed by public policy. Among the most commonly reported barriers are high cost, physical distance, and lack of proper documentation, though there are significant differences across regions and individual characteristics.
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TL;DR: In this article, the authors examined the relationship between financial inclusion and development by empirically identifying country specific factors that are associated with the level of financial inclusion, and found that levels of human development and financial inclusion in a country move closely with each other.
Abstract: An important question raised in the literature is whether development leads to an all-inclusive financial system. This paper attempts to examine the relationship between financial inclusion and development by empirically identifying country specific factors that are associated with the level of financial inclusion. It finds that levels of human development and financial inclusion in a country move closely with each other. Among socio-economic and infrastructure related factors, income, inequality, literacy, urbanisation and physical infrastructure for connectivity and information are important. Health of the banking sector does not seem to have an unambiguous effect on financial inclusion whereas ownership pattern does seem to matter. Copyright © 2010 John Wiley & Sons, Ltd.
663 citations
Posted Content•
TL;DR: In this article, the authors tried to understand the individual and country characteristics associated with the use of formal accounts and what policies are effective among those most likely to be excluded: the poor and rural residents.
Abstract: Financial inclusion -- defined here as the use of formal accounts -- can bring many welfare benefits to individuals. Yet the authors know very little about the factors underpinning financial inclusion across individuals and countries. Using data for 123 countries and over 124,000 individuals, this paper tries to understand the individual and country characteristicsassociated with the use of formal accounts and what policies are effective among those most likely to be excluded: the poor and rural residents. The authors find that greater ownership and use of accounts is associated with a better enabling environment for accessing financial services, such as lower account costs and greater proximity to financial intermediaries. Policies targeted to promote inclusion -- such as requiring banks to offer basic or low-fee accounts, exempting some depositors from onerous documentation requirements, allowing correspondent banking, and using bank accounts to make government payments -- may be especially effective among those most likely to be excluded. Finally, the study the factors associated with perceived barriers to account ownership among those who are financially excluded and find that these individuals report lower barriers in countries with lower costs of accounts and greater penetration of financial service providers. Overall, the results suggest that policies to reduce barriers to financial inclusion may expand the pool of eligible account users and encourage existing account holders to use their accounts with greater frequency and for the purpose of saving.
639 citations
Cites background from "Measuring Financial Inclusion : The..."
...This paper studies the underpinnings of financial inclusion using a new global individual- level database (for a detailed description of the data see Demirguc-Kunt and Klapper, 2012)....
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...The Legal Rights Index variable measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending (World Bank, 2011; Djankov et al., 2007). Political Risk Rating comes from the International Country Risk Guide (ICRG) of the Political Risk Services Group (2010) and assesses the political stability of a country....
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TL;DR: In this article, the authors report initial results of two rounds of a large survey of households in Kenya, the country that has seen perhaps the most rapid and widespread growth of a mobile money product - known locally as M-PESA - in the developing world.
Abstract: Mobile money is a tool that allows individuals to make financial transactions using cell phone technology. In this paper, we report initial results of two rounds of a large survey of households in Kenya, the country that has seen perhaps the most rapid and widespread growth of a mobile money product - known locally as M‐PESA - in the developing world. We first summarize the mechanics of M-PESA, and review its potential economic impacts. We then document the sequencing of adoption across households according to income and wealth, location, gender, and other socio‐economic characteristics, as well as the purposes for which the technology is used, including saving, sending and receiving remittances, and direct purchases of goods and services. In addition, we report findings from a survey of M‐PESA agents, who provide cash‐in and cash‐out services, and highlight the inventory management problems they face.
512 citations
01 Jan 2015
TL;DR: Work, not just jobs or employment, is crucial for human progress: of the world's 7.3 billion people, 3.2 billion are in jobs, and many others engage in unpaid care, creative and voluntary work as well as other activities or prepare themselves as future workers as mentioned in this paper.
Abstract: Work, not just jobs or employment, is crucial for human progress: of the world's 7.3 billion people, 3.2 billion are in jobs, and many others engage in unpaid care, creative and voluntary work as well as other activities or prepare themselves as future workers. [This report] examines the links, both positive and negative, between work and human development in a rapidly changing world of work. Fast globalization, technological revolution, demographic transitions and many other factors are creating new opportunities, but also posing risks. The report examines how the benefits of this new world of work are not equally distributed, generating winners and losers. The report argues for a broader notion of work, one that goes beyond the jobs framework, to confront both persistent challenges such as human deprivations, inequalities, unsustainability, and gender imbalances in paid and unpaid work - as well as emerging ones - erosion of jobs, skills gaps, climate change and others. It concludes with a series of policy recommendations on how to enhance human progress through promotion of workers' rights and broader access to social protection.
478 citations
TL;DR: In this paper, the authors tried to understand the individual and country characteristics associated with the use of formal accounts and what policies are effective among those most likely to be excluded: the poor and rural residents.
444 citations
References
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TL;DR: In this paper, the authors examined a cross-section of about 80 countries for the period 1960-89 and found that various measures of financial development are strongly associated with both current and later rates of economic growth.
Abstract: Joseph Schumpeter argued in 1911 that the services provided by financial intermediaries - mobilizing savings, evaluating projects, managing risk, monitoring managers, and facilitating transactions -stimulate technological innovation and economic development. The authors present evidence that supports this view. Examining a cross-section of about 80 countries for the period 1960-89, they find that various measures of financial development are strongly associated with both current and later rates of economic growth. Each measure has shortcomings but all tell the same story: finance matters. They present three main findings, which are robust to many specification tests: The average level of financial development for 1960-89 is very strongly associated with growth for the period. Financial development precedes growth. For example, financial depth in 1960 (the ratio of broad money to GDP) is positively and significantly related to real per capita GDP growth over the next 30 years even after controlling for a variety of country-specific characteristics and policy indicators. Financial development is positively associated with both investment rate and the efficiency with which economies use capital. Much work remains to be done, but the data are consistent with Schumpeter's view that the services provided by financial intermediaries stimulate long-run growth.
8,204 citations
"Measuring Financial Inclusion : The..." refers background in this paper
...See, for example, King and Levine (1993); Beck, Demirguc-Kunt, and Levine (2007); Beck, Levine, and Loayza (2000); Demirguc-Kunt and Levine (2009); Klapper, Laeven, and Rajan (2006); and World Bank (2008a)....
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TL;DR: In this paper, the authors study the effect of market entry regulations on the creation of new limited-liability firms, the average size of entrants, and the growth of incumbent firms.
1,501 citations
"Measuring Financial Inclusion : The..." refers background in this paper
...See, for example, King and Levine (1993); Beck, Demirguc-Kunt, and Levine (2007); Beck, Levine, and Loayza (2000); Demirguc-Kunt and Levine (2009); Klapper, Laeven, and Rajan (2006); and World Bank (2008a)....
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Book•
09 Nov 2007
TL;DR: In this article, finance for all, the authors present first efforts at developing indicators illustrating that financial access is quite limited around the world and identify barriers that may prevent small firms and poor households from using financial services.
Abstract: This book, finance for all, presents first efforts at developing indicators illustrating that financial access is quite limited around the world and identifies barriers that may be preventing small firms and poor households from using financial services. Based on this research, the report derives principles for effective government policy on broadening access. The report's conclusions confirm some traditional views and challenge others. For example, recent research provides additional evidence to support the widely-held belief that financial development promotes growth and illustrates the role of access in this process. Improved access to finance creates an environment conducive to new firm entry, innovation, and growth. However, research also shows that small firms benefit the most from financial development and greater access-both in terms of entry and seeing their growth constraints relaxed. Hence, inclusive financial systems also have consequences for the composition and competition in the enterprise sector. This report reviews and synthesizes a large body of research, and provides the basis for sound policy advice in the area of financial access. The findings in this report also underline the importance of investing in data collection: continued work on measuring and evaluating the impact of access requires detailed micro data both at the household and enterprise level.
793 citations
"Measuring Financial Inclusion : The..." refers background or methods in this paper
...For a detailed literature review, see World Bank (2008a) and references therein. Campbell (2006) also provides an overview of the household finance field....
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...Gallup’s regional-level statistics on population shares living on less than $2 a day are calculated using Gallup World Poll household data on monthly income, which is converted to international dollars using household consumption data from the World Bank’s International Comparison Program 2005 report (World Bank 2008b) adjusted for inflation relative to the United States. The regional averages are broadly consistent with the 2008 poverty line estimates from the World Bank’s Development Research Group (see http://iresearch.worldbank.org/PovcalNet/ index.htm?0,0). The two estimates are within 5 percentage points of each other for East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, and Sub-Saharan Africa. For the Middle East and North Africa, Gallup’s regional estimate is 37 percentage points higher than the World Bank’s, though both estimates omit several populous countries in the region. For South Asia, Gallup’s estimate is 15 percentage points lower than the World Bank’s. The World Bank measures are based mostly on pre-2008 data and cover 127 economies. The 2005 World Bank estimates are discussed at length in Chen, Ravallion, and Sangraula (2010)....
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...For a detailed literature review, see World Bank (2008a) and references therein....
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TL;DR: In this paper, the authors present estimates of the fraction of the adult population using formal financial intermediaries using bank and micro-finance data. And they compare these estimates with household surveys for a smaller set of countries.
Abstract: This paper presents estimates, for more than 160 countries, of the fraction of the adult population using formal financial intermediaries. The estimates are constructed by combining information on account numbers at banks and microfinance institutions (together with banking depth and GDP data) with estimates from household surveys for a smaller set of countries. An illustrative application of the data compares them with information on poverty: there is a correlation, but it is not clearly causal.
565 citations
"Measuring Financial Inclusion : The..." refers methods in this paper
...In addition, Honohan (2008) and World Bank (2008a) used these indicators as well as other data to estimate a headline indicator of access. In a separate exercise Beck, Demirguc-Kunt, and Martinez Peria (2008) documented cross-country eligibility, affordability, and geographic access barriers by surveying banks....
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...In addition, Honohan (2008) and World Bank (2008a) used these indicators as well as other data to estimate a headline indicator of access....
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TL;DR: In this article, the authors report initial results of two rounds of a large survey of households in Kenya, the country that has seen perhaps the most rapid and widespread growth of a mobile money product - known locally as M-PESA - in the developing world.
Abstract: Mobile money is a tool that allows individuals to make financial transactions using cell phone technology. In this paper, we report initial results of two rounds of a large survey of households in Kenya, the country that has seen perhaps the most rapid and widespread growth of a mobile money product - known locally as M‐PESA - in the developing world. We first summarize the mechanics of M-PESA, and review its potential economic impacts. We then document the sequencing of adoption across households according to income and wealth, location, gender, and other socio‐economic characteristics, as well as the purposes for which the technology is used, including saving, sending and receiving remittances, and direct purchases of goods and services. In addition, we report findings from a survey of M‐PESA agents, who provide cash‐in and cash‐out services, and highlight the inventory management problems they face.
512 citations
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...Jack and Suri 2011....
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