The Foundations of Financial Inclusion : Understanding Ownership and Use of Formal Accounts
Financial inclusion -- defined here as the use of formal accounts -- can bring many welfare benefits to individuals. Yet we know very little about the factors underpinning financial inclusion across individuals and countries. Using data for 123 cou...
| Main Authors: | , , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/12/17067074/foundations-financial-inclusion-understanding-ownership-use-formal-accounts http://hdl.handle.net/10986/12203 |
| Summary: | Financial inclusion -- defined here as
the use of formal accounts -- can bring many welfare
benefits to individuals. Yet we know very little about the
factors underpinning financial inclusion across individuals
and countries. Using data for 123 countries and over 124,000
individuals, this paper tries to understand the individual
and country characteristics associated with the use of
formal accounts and what policies are effective among those
most likely to be excluded: the poor and rural residents.
The authors find that greater ownership and use of accounts
is associated with a better enabling environment for
accessing financial services, such as lower account costs
and greater proximity to financial intermediaries. Policies
targeted to promote inclusion -- such as requiring banks to
offer basic or low-fee accounts, exempting some depositors
from onerous documentation requirements, allowing
correspondent banking, and using bank accounts to make
government payments -- are especially effective among those
most likely to be excluded. Finally, the authors study the
factors associated with perceived barriers to account
ownership among those who are financially excluded and find
that these individuals report lower barriers in countries
with lower costs of accounts and greater penetration of
financial service providers. Overall, the results suggest
that policies to reduce barriers to financial inclusion may
expand the pool of eligible account users and encourage
existing account holders to use their accounts to save and
with greater frequency. |
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