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financial inclusion

A Global Wave of Financial Inclusion Targets?

Douglas Pearce's picture

Credit: IITA

On October 23, Nigeria joined a fast-growing list of countries making headline commitments to financial inclusion targets and actions,by launching a new Financial Inclusion Strategy. 

A total of 35 countries have now made commitments through the ‘Maya Declaration’ of the Alliance for Financial Inclusion (a global network of financial regulators), including 19 as recently as September 2012. 17 countries committed in June 2012 to targets, actions, and coordination platforms through the new G20 Financial Inclusion Peer Learning Program.  These new commitments and targets could have a significant impact in advancing financial inclusion, if the challenges in meeting them can be overcome.

Is Pakistan’s microfinance sector serving women entrepreneurs?

The idea for looking into the issue of microfinance outreach to women in Pakistan had been of interest to the World Bank for some time.  Outreach of the microfinance sector to women borrowers had always been extremely low – hovering between 50 to 60 percent of borrowers.  Compared to the rest of the region, where we see outreach to women in the 90 percent range in India, Bangladesh, and Nepal, it raised the question as to why similar targets could not be achieved in Pakistan.   We reviewed a number of  possible explanations, but none of them seemed satisfactory.  On top of that, Pakistan is probably one of the most progressive microfinance sectors in the World.  The central bank has developed the most enabling regulations possible, Pakistan continues to top the Economist Intelligence Unit  list of the most enabling regulatory environment, innovations in branchless banking and new modes of financial service delivery are being incubated here, and the microfinance network in Pakistan continues to be regarded as world class.  So, given all the positive attributes around the sector, why was it not possible to more effectively reach this important constituency? 

Banking on Women in Egypt

Empowering women entrepreneurs is good for development and business. Tune in to World Bank Live on October 11, 2012 10:30 a.m JST. to hear Liberia President Ellen Johnson-Sirleaf and World Bank Group President Jim Kim talk #womenbiz at this year's Annual Meetings.

Research has shown that gender equality makes good business sense, and is key to promoting economic growth. But women continue to be excluded from the economic sphere. This is certainly the case in Egypt, which could use an economic boost in a time of transition—especially as millions of famAccess to finance is changing lives of Egyptian women, and their families for the better. (Credit: World Bank)ilies that rely on the slumping tourism industry are having trouble making ends meet.
Indeed, our research has found that would-be Egyptian women entrepreneurs face many obstacles.  For one, being approved for financing can be a challenge for Egyptian women entrepreneurs. Businesswomen in Egypt are also disadvantaged when it comes to the cost of finance. Banks have stricter collateral requirements for loans to women entrepreneurs, which are perceived as higher-risk. Providing collateral is also an obstacle for many women who are under the guardianship of male relatives and unable to independently manage their assets.

Why does the legal environment matter for women’s access to capital?

When asked about what she thought was key in advancing women’s rights, Cherie Blair, lawyer and founder of the Cherie Blair Foundation for Women, replied, “I believe that actually financial independence is very important so we need a financial framework that recognizes women as equals, that enables them to have access to finance, access to capital to have their own financial independence.”  For women in the developing world, property rights can be a factor in getting access to finance. (Credit: World Bank Photos)

And this brings to the table another question: What are the hurdles that women face when trying to access capital?

For many women entrepreneurs across the world, getting a loan to start or expand their business can prove challenging. This is particularly true in the developing world where banks often require borrowers to pledge their home or land as collateral. Women, who tend to lack such assets, are placed at a disadvantage. Legal restrictions on women’s property rights can exacerbate the problem.

An analogy about cars, trust and financial capability

Siegfried Zottel's picture

Imagine you need a car to commute long distances to your workplace or the closest supermarket, to visit your parents and to bring your child to school. Therefore, you want to spend the money you have been able to put aside on a large purchase: a new and reliable car.  However, you do nFinancial education enables the unbanked to participate in financial markets.  (Credit: The Advocacy Project, Flickr Creative Commons)ot know how to drive, nor how do you have even a basic understanding of any technical aspects of a car, not to mention any knowledge about how to maintain a car.
Also, imagine that everything you have heard so far about car dealers from your family, friends and neighbors is that they have a very bad attitude, do not act in your best interest and try to sell you overpriced vehicles with hidden fees and features you do not need. Given your lack of knowledge of how to choose and use a car and your lack of trust, would you still feel confident about approaching a car dealer? Most probably not.

This analogy also applies to one’s participation in financial markets. Especially in developing economies, where most globally unbanked people live. If you do not have knowledge of features and risks associated with financial products, do not know how to choose and use these products, lack any basic understanding of inflation, interest rates and compound interest, it is unlikely that you will participate in financial markets, or that you will benefit from them if you do. A lack of trust in financial service providers will do the same.

What banking regulators might be usefully discussing at Capetown

Ignacio Mas's picture

As regulators from across the developing world prepare to gather at the Alliance for Financial Inclusion’s annual Global Policy Forum which will be held in Capetown on 26-28 September, may I offer some thoughts on where we are at in the excellent financial inclusion journey and what is required to take it forward.

Financial inclusion by halves
Half the world is unbanked. In developing countries, half How can we move financial inclusion forward and bring more financial services to the people that need them? (Credit: Austin Yoder, Flickr Creative Commonsof accounts are inactive. And half of the active ones have the equivalent of just a few days of household income. (How do I know this is roughly the picture? I make it a point to throw that into conversations with bankers and mobile money operators, and eyes are cast down. The global Findex survey, though it is silent on account balances, does reveal a large gap between those who say they have an account and those who say they save in it.) Getting banked is hardly a quantum leap for most people in the informal sector.

Why should governments care about improving their payment programs?

Massimo Cirasino's picture

In Portuguese

In Spanish

Regardless of a country’s stage of economic development, their governments make payments to, and collect payments from individuals and businesses. Financial resources are also transferred between government agencies. These flows cover a wide range of economic sectors and activities, and in most cases, the overall amount of such flows is significant – normally ranging between 15% to about 45% of the GDP.Pensioners can benefit from safer, efficient and more transparent payment programs. (Credit: World Bank)

However, only 25% of low-income countries worldwide process cash transfers and social benefits electronically and this percentage is only slightly higher for public sector salaries and pensions—and this has considerable cost implications. By going electronic, governments can save up to 75% on costs, a significant amount in an era of stretched resources.

Nick Kristof on microfinance, banking access and a way out of poverty

Asli Demirgüç-Kunt's picture

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.

Data Makes a Difference in Financial Inclusion

Leora Klapper's picture

These are exciting times in the world of financial inclusion. In the past few years, policymakers and private-sector leaders have made some bold and innovative moves to modernize financial infrastructures and expand financial access. Mobile money products have seen impressive growth in parts of Sub-Saharan Africa; bank agents are expanding access to underserved populations; and governments are increasingly disbursing payments via formal bank accounts.
Nevertheless, large challenges remains in the financial inclusion agenda: 76 percent of adults – almost 500 million people - in Sub-Saharan Africa remain outside the formal financial system and 36% of these unbanked report that having a formal account is too expensive. To continue moving forward we need to assess financial behavior and understand where the challenges and opportunities lie for the future. To do that, we need high-quality, multi-dimensional, comparable financial inclusion data.Savings groups are one of the ways people are saving money (Photo credit: mckaysavage, Flickr Creative Commons)

And so, in April the World Bank Development Research Group released the Global Findex, an individual-level dataset that measures how adults in 148 economies save, borrow, make payments, and manage risk. The Global Findex is just one of the foundations of the G20 Basic Set of Financial Inclusion Indicators that was formally proposed by the Global Partnership for Financial Inclusion (GPFI) in Los Cabos this week. 

G20 Summit’s Commitment to Action Will Help Promote Financial Inclusion

Amid the chronic chasm between the world’s wealthy and its excluded, almost half of the adult population worldwide – an estimated 2.5 billion people – lack access to basic financial services. The global economic crisis has intensified the plight of the financially excluded, preventing even more of the world’s poor from gaining a foothold on an important ladder out of poverty.

 


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