Asli Demirgüç-Kunt's blog

More than 1.3 billion women are excluded from the formal financial system. These women – the overwhelming majority of whom reside in developing countries – lack the basic financial tools critical to asset ownership and economic empowerment. Even something as simple as a deposit account provides a safe place to save and creates a reliable payment connection with family members, an employer, or the government. A formal account can also open up channels to formal credit critical to investing in education or in a business. Yet women are 15 percent less likely than men to be financially included.  Why?

In a new study and summary companion note we document and analyze gender differences in the use of financial service using new data from the Global Financial Inclusion (Global Findex) Database. Our analysis is based on almost 100,000 interviews with adults in 98 developing economies in 2011. We also combine the Global Findex data with cross-country data on legal discrimination against women from the World Bank’s Women and Law Database and on cultural norms from the OECD’s Gender, Institutions, and Development database to examine their relationship with financial inclusion. Because the later country-level variables show no variation across high income economies, our econometric analysis focuses on a sample of up to 98 developing countries.

Those who live in fragile and conflict-affected states face limitations that most of us simply cannot comprehend. Not only do the larger cycles of conflict and insecurity often lie beyond the control of individual adults, but the weak institutions that characterize these economies also severely restrict the opportunities for adults to manage their risks and improve their own lives. Amartya Sen has written that the central aspect of well-being is 'functioning,' defined as the freedom of choice and control over one's life. For adults living in fragile and conflict-affected states, the inability to smooth consumption and make investments through formal savings and credit systems is one of many restrictions on their 'functioning'.

Just 15 percent of adults in these economies have an account at a formal financial institution, compared to 24 percent, on average, in low-income countries and 43 percent in the rest of the developing world. This is the cruel paradox of financial inclusion in fragile and conflict-affected states: it is in precisely these countries that having a safe place to save or a reliable method to receive remittances is most important, yet access to and usage of basic financial services remains incredibly low.

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The failure of the investment banking giant Lehman Brothers on September 15, 2008 marked the onset of the largest global economic meltdown since the Great Depression. The crisis has prompted many people to reassess state interventions in financial systems, from regulation and supervision of financial institutions and markets, to competition policy, to state guarantees and state ownership of banks, and to enhancements in financial infrastructure. But the crisis does not necessarily negate the considerable body of evidence on these topics accumulated over the past few decades. It is important to use the crisis experience to examine what went wrong and how to fix it. This is the motivation of the World Bank’s Global Financial Development Report, released this week, on the fourth anniversary of the Lehman failure.

In today’s New York Times, Nicholas Kristof gives the example of a family in Malawi that improved their lives as the result of a village savings group.  We know that access to banks, cooperatives, and microfinance institutions has allowed many adults like the Nasoni family to safely save for the future, invest in an education or insure against risk, but just how widespread is the use of formal financial products worldwide? How do the barriers to access vary across regions? And how do the unbanked manage their finances?

In the past, the view of financial inclusion around the world had been incomplete. With the release of the Global Financial Inclusion (Global Findex) Database we now have a comprehensive, individual-level, and publicly-available database that allows for comparisons across 148 economies of how adults around the world manage save, borrow, make payments and manage risk. As cited in the article, the Global Findex data shows that more than 2.5 billion adults around the world don’t have a bank account.

The global financial crisis reignited the interest of policymakers and academics in assessing the impact of bank competition on stability and rethinking the role of the state in shaping competition policies. Competition in the financial sector has a long list of obvious benefits: greater efficiency in the production of financial services, higher quality financial products and more innovation. When financial systems become more open and contestable, generally this results in greater product differentiation, a lowering of the cost of financial intermediation and more access to financial services. But when we turn to the issue of financial stability, it is no longer so obvious whether competition is beneficial or not, with a continuing debate among academics and policymakers alike. Some believe that increasing financial innovation and competition in certain markets like sub-prime lending contributed to the recent financial turmoil. Others worry that as a result of the crisis and the actions of governments in support of the largest banks, concentration in banking increased, reducing the competitiveness of the sector and potentially contributing to future instability as a result of moral hazard problems associated with “too big to fail” institutions.