Access or exclusion?
Alan Roe of Oxford Policy Management and Stephen Peachy of TOTAL CONCEPT published a comprehensive paper on the topical issue of Access to Finance for the World Savings Bank Institute, which was presented at the October Brussels conference.
The paper aims to give an “overview of the importance of access to finance for all and to record the main obstacles to access in different parts of the world”. The paper provides a useful compendium both of the theory of financial development and of available statistics across a wide spectrum of developing and developed countries. A minor quibble is perhaps that the title is not correct: they are really dealing with financial services, broadly speaking, rather than finance narrowly, even though the issue of Small and Medium Enterprise (SME) finance gets some special attention. A further quibble is that they do not distinguish between usage and access: they cite access figures when they are in fact usage figures. Access is typically higher; and the reasons why access does not equal usage are often illuminating.
More relevant, however, to the bankable frontier is the distinction which they draw between efforts to combat financial exclusion, which they associate with developed countries trying to target especially vulnerable groups, versus efforts to improve access to financial services. The latter they associate with emerging economies which typically have much lower levels of access to start with; and in which the policy challenges are therefore very different. They point out that the figures for exclusion in developed countries (typically affecting 10-15% of the population in older European Union countries) are the mirror image of figures for inclusion in less developed countries, where 5-15% of people may use the banking system. In between, lie a group of middle income countries such as
Among the overarching themes they identify are the need for better data on access; and the need to promote financial literacy. However, I am not fully convinced by the helpfulness of the distinction drawn between exclusion and access in developed and developing countries respectively. There are clearly differences in the scale of the issue (it is a different order of challenge when 10% of your population are unbanked versus 90%) and in the level of institutional robustness. But neither of these distinctions is new. In fact, the profile of the unbanked in developed and less developed economies often looks remarkably similar: it is the poorer, often unemployed or informally employed, more vulnerable members of these societies. Whether tackling exclusion or increasing access, the central policy challenge is still how to incentivize private players such as banks to do this efficiently. As the authors state, proximity-based institutions such as postal or savings banks which are state supported can play an important role if they function efficiently. But these are not fundamental differences in approach which merit the emphasis placed on the distinction in the paper.
