Bankable Frontier Weblog

John Caskey is the doyen of researchers on being unbanked in the US. His 1994 book on Fringe Banking launched a veritable cottage industry of research into what was then an emerging phenomenon in the US: people who lived their lives on the fringe of the formal banking sector, and made use of alternative providers such as check cashers to receive income, money orders to pay bills and payday lenders for short term credit.

He recently published a paper with Tova Maria Solo of the World Bank and Clemente Ruiz Duran of Universidad Autonoma de Mexico which compared the characteristics of the US unbanked in certain urban areas (Los Angeles and New York) with the results of a recent World Bank survey of financial service needs and usage among 2000 Mexico City households. The results were presented at the World Savings Bank Institute Conference in late 2004 discussed before in this blog.

FinScope data in South Africa is not directly comparable with the Mexican data—for one thing, it is a nationwide statistical sample of 3000 SA adults, rather than just one region. But, if one controls for urban residents only, it does provide an interesting counterpoint to the Caskey et al findings. I am currently engaged on a larger exercise of segmenting the unbanked in SA as part of illustrating the market access frontier approach, which was presented in Manila recently. However, here are some flash findings which compare in general terms the reasons for being unbanked in each of the three cases among the urban population. I have grouped the reasons given into four major categories as shown below.

Stated reasons for not having a bank account

% of respondents citing the factor stated (from FinScope/ Mexican study)

(FinScope: never banked only)

At a category level, even these high level findings make interesting reading:

• The shortage or lack of income is the biggest single factor in each case;
• However, the proportion who are unbanked by choice is much higher (28% versus 10-16%) in the richer society.

Most unbanked people in SA and Mexico want to be banked! But to achieve this outcome sustainably, profitable strategies have to be developed which increase the value of being banked relative to the cost.

Flags courtesy of www.theodora.com/flags used with permission