Since the global financial crisis of 2007, international banking has attracted heightened interest from policy makers, researchers, and other financial sector stakeholders. Perhaps no sector of the economy better illustrates the potential benefits—but also the perils—of deeper integration than banking. Before the crisis, international banks (banks that do business outside of the country they are headquartered in) were generally considered to be an important contributor to financial development as well as economic growth. This belief coincided with a significant increase in financial globalization in the decade prior to the crisis, particularly for banking institutions.
Asli Demirgüç-Kunt's blog
Adults around the world and in all income groups use a variety of financial services, ranging from digital payments and savings accounts to loans and insurance. Many low-income adults, however, rely largely on informal financial services — 2 billion adults worldwide, or 38 percent, reported not having an account at a formal institution in 2014, according to Global Findex data. The World Bank has launched the ambitious goal of Universal Financial Access by 2020. This goal is not an end in itself. Rather, financial inclusion is a means to an end.
Which bring us to the question: What do we know about the link between financial inclusion and inclusive growth benefiting all income groups?
On November 5–6, the Federal Reserve Bank of Chicago hosted its annual International Banking Conference, which we at the Bank co-sponsored. This year’s topic “The Future of Large, Internationally Active Banks,” which we picked to correspond to the topic of our upcoming Global Financial Development Report (GFDR) is very timely and important given that regulatory reforms addressing large, international banks, which will affect the economies around the world, are still ongoing. For example, just a few days after the conference, on November 9, the Financial Stability Board (FSB) issued its final Total Loss-Absorbing Capacity (TLAC) standards, which is expected to make banking systems more resilient by addressing the too-big-to-fail issue and was one of the issues hotly debated throughout the conference.
I am pleased to announce the release of the 2014 Global Findex microdata, which includes individual-level responses from almost 150,000 adults around the world. You can download it all here.
Drawing on interviews with adults in 143 countries, the 2014 Findex database measures account ownership at banks and other financial institutions and with mobile money providers, and explores how adults save, borrow, make payments, and manage risk. For each of these countries, the microdata unpacks about 1,000 individual-level survey observations.
With this data, which was collected by Gallup, Inc. in calendar year 2014, you can dive deeper into the indicators presented in the main Findex database. For example, the country-level indicators explore the income gap by looking at adults in the poorest 40 percent and richest 60 percent of households, but the microdata splits it into quintiles. The microdata also covers topics that weren’t included on the country-level, such as unbanked adults' reasons for lacking an account.
I hope you will make good use of the data, and share your findings with us on Twitter @GlobalFindex.
In recent years, long-term finance has increasingly attracted interest from policy makers, researchers, and other financial sector stakeholders. Policymakers are often concerned when they see limited use of long-term finance in their countries since limited availability may adversely affect growth and welfare. These concerns were further heightened after the global financial crisis since availability of long-term finance was perceived to be reduced following the crisis, adversely affecting the performance of small and medium enterprises and widening financing gaps for investment.
In fact, ensuring more and better long-term finance has become one of the priorities for the post 2015-Agenda (United Nations 2013). Concerns about the detrimental development effects of a potentially constrained supply of long-term finance have been voiced in the Group of Twenty (G-20) meetings and by the Group of Thirty and ensuring more and better long-term finance is one of the priorities for the post 2015-Agenda (United Nations 2013). This year’s Global Financial Development Report (GFDR), the third in the series, is a synthesis of recent and ongoing research aiming to identify those policies that work to promote long-term finance and those that do not, as well as areas where more evidence is still needed.
Today we release our new research paper and the 2014 Global Findex dataset, an updated edition of the world’s most comprehensive gauge of global progress on financial inclusion. It’s based on interviews with almost 150,000 adults in more than 140 countries worldwide.
We have plenty to celebrate:
- Account penetration is deepening in every region. Sixty-two percent of the world’s adult population has an account, up from 51 percent in 2011, when the Global Financial Inclusion database (as it’s known formally) was launched.
- The ranks of the unbanked are shrinking Worldwide, the number of adults without an account tumbled by 20 percent, to 2 billion.
- Mobile money accounts — accessed via mobile phone — is powering Sub-Saharan Africa’s march toward financial inclusion. While just 1 percent of adults globally use a mobile account and nothing else, 12 percent of adults in Sub-Saharan Africa have a mobile account — versus just 2 percent worldwide. Of those adults in Sub-Saharan Africa with a mobile account, 45 percent rely on that account exclusively.
I’m thrilled to announce the April 15 launch of the 2014 Global Findex database, the world’s most comprehensive gauge of global financial inclusion. Drawing on interviews with almost 150,000 adults in over 140 countries, the Global Findex tracks worldwide changes in account ownership and explores how adults save, borrow, make payments, and manage risk. Financial inclusion, measured by the Global Findex as having an account that allows adults to store money and make and receive electronic payments, is critical to ending global poverty. Studies show that broader access to, and participation in, the financial system can boost job creation, increase investments in education, and directly help poor people manage risk and absorb financial shocks.
Our research updates the first Global Findex database, which the World Bank launched in 2011 in partnership with Gallup, Inc. and with funding from the Bill & Melinda Gates Foundation. Their continued support made it possible to add new features to the second edition of the database, including more nuanced questions on mobile banking and an extended module on domestic payments. The 2014 Findex for the first time sheds light on how adults use accounts — and what can be done to have people become more active users of the financial system.
There is much good news to report…. But to learn the details, you’ll need to follow our data launch during the annual World Bank-IMF Spring Meetings.
The Financing for Development conference, organized by the IMF and the CFD, will take place at the Graduate Institute, Geneva, on April 16-17, 2015. The objective of the conference is to discuss new and enduring questions in development finance for Low-Income Developing Countries. The conference will include paper presentations, a policy panel, and a keynote address by Professor Jeffrey Sachs (The Earth Institute, Columbia University). A selection of papers will be published in a special issue of the Oxford Review of Economic Policy. Read more about the call for papers and the conference.
In a new paper, we address this question using detailed manufacturing census data from India. India offers an ideal laboratory for testing the role of institutions on firm lifecycle given the large persistent differences in institutions, business environment, and income across different regions. Specifically, we examine the relationship between plant size, age, and growth and ask: how does local financial development influence the size-age relationship? Are there differences in the size-age relationship across different industry characteristics and between the formal and informal manufacturing sector and does this vary with the extent of local financial development? Does the role of local financial development on firm lifecycle vary with major regulation changes in India such as financial liberalization, changes in labor regulation, and industry de-licensing?
In a recent paper with Luc Laeven and Ed Kane, we have now updated our database of deposit insurance arrangements around the world through 2013. Our starting point was the World Bank’s survey on regulation and supervision conducted in 2010. This survey asked national officials for information on capital requirements, ownership and governance, activity restrictions, bank supervision, as well as on the specifics of their deposit insurance arrangements. We combined this data with the deposit insurance surveys conducted by the International Association of Deposit Insurers in 2008, 2010, and 2011, and in the case of European countries with detailed information on deposit insurance arrangements obtained from the European Commission (2011). Finally we checked discrepancies and data gaps against national sources, including deposit insurance laws and regulations, and IMF staff reports. Following Demirguc-Kunt, Kane, and Laeven (2008), we assume any country that lacks an explicit deposit insurance scheme has implicit deposit insurance given the widespread governmental pressures to provide relief in the event of a widespread banking insolvency.