Fresh from the press, this Policy Research Report takes stock of our current knowledge of access to financial services. It analyzes indicators and determinants of access to finance and discusses the role of government. Be ready to see some of your priors confirmed and others questioned.
In many developing countries, 50 to 80 percent of the population has limited access to finance (the graphic below shows the fraction of households with a banking account).
Finance is not only pro-growth, but also pro-poor. Greater access to credit, through indirect effects in product and labor markets, also benefits the poor who are able to obtain better quality savings and payments services.
But where to start and what should governments do?
Governments should build the necessary contractual and information framework for an effective financial system. Direct government provision of financial services, especially credit, has proven to be a failure. Instead, the government should create an open and competitive environment in which private parties can exploit opportunities offered by technology and globalization to deepen and broaden financial service for all.
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