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FINANCIAL INCLUSION: IMPORTANCE, KEY FACTS, AND DRIVERS
from onerous documentation requirements, allowing correspondent banking, and using bank accounts to make government payments—are especially effective among those people who are most likely to be excluded: the poor and rural residents.
BARRIERS TO FINANCIAL INCLUSION Income levels and individual characteristics clearly help explain some of the differences in the use of accounts around the world. What do people say when asked why they do not have an account? The Global Findex survey provides novel data on the barriers to financial inclusion, based on the responses of more than 70,000 adults who do not have a formal account.18 Globally, the reason most frequently cited for not having a formal account is the lack of enough money to have and use one (figure 1.14). Thirty percent of adults who are without a formal account cite this as the only reason. The next most commonly cited reason for not having an account is that another family FIGURE 1.14 Reported Reasons for Not Having a Bank Account
Not enough money
30 25
Family member already has account Too expensive
23
Too far away
20
Lack of documentation
18
Lack of trust
13 5
Religious reasons 0
5
10
15
20
25
30
Adults without an account, % Source: Global Financial Inclusion (Global Findex) Database, World Bank, Washington, DC, http://www.worldbank.org/globalfindex. Note: Respondents could choose more than one reason.
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GLOBAL FINANCIAL DEVELOPMENT REPORT 2014
member already has an account. The other reasons reported (in order of importance) are bank accounts being too expensive, excessive distance of banks, lack of the necessary documentation, lack of trust in banks, and religious reasons. Adults in developing economies are significantly more likely to cite distance, cost, documentation, and lack of money compared with adults in developed economies. The second most frequently cited reason was that another member of the family already has an account, a response that identifies indirect users. Women and adults living in high-income and upper-middle-income economies (where relatives are most likely to have an account) were substantially more likely to choose this reason. A recent study shows that lack of account ownership (and personal asset accumulation) limits women’s ability to pursue self-employment opportunities (Hallward-Driemeier and Hasan 2012). Hence, while such voluntary exclusion may be linked to individual preferences or cultural norms, it may also indicate a lack of awareness of financial products or a lack of financial literacy more generally.19 Affordability is a key barrier to account ownership. High costs are cited by a quarter of unbanked respondents, on average, and by 32 percent of unbanked respondents in lowincome economies. Fixed transaction costs and annual fees tend to make small transactions unaffordable for large parts of the population. For example, annual fees on a checking account in Sierra Leone are equivalent to 27 percent of GDP per capita. Not surprisingly, 44 percent of adults without accounts in the country cite high cost as a reason for not having a formal account. Analysis finds a significant relationship between cost as a self-reported barrier and objective measures of costs (Demirgüç-Kunt and Klapper 2012). Even more importantly, the high costs of opening and maintaining accounts are associated with a lack of competition and underdeveloped physical or institutional infrastructure in a country. This is a key point: it suggests that the high costs associated with a small account do not simply represent the