September 16, 2010--Despite an environment dominated by tight credit markets and slowing economies, more people in developing countries gained access to financial services in 2009. An estimated 2.7 billion people around the world have no access to formal financial services, which are both safer and less expensive than the informal alternatives. But new technologies are introducing more cost-effective retail infrastructure, and the picture of financial inclusion is shifting.
Still, regulators will need to ensure that the capacity to implement sound regulations keeps pace with the introduction of new laws, so that increased outreach maximizes the benefits for poor people.
This is the emerging picture of global financial inclusion contained in Financial Access 2010, the second annual survey of financial regulators in more than 140 countries by the Consultative Group to Assist the Poor (CGAP) and the World Bank Group. The survey found that the number of bank accounts around the world was growing even as the volume of loan and deposit accounts dropped.
Sixty-five deposit accounts were added per 1,000 adults in 2009, representing 4.3% average growth in the number of deposit accounts. The impact of the financial crisis could be more clearly seen in the use of credit services, with the number of loans per 1,000 adults broadly unchanged between 2008 and 2009.
A need for data
The majority of the world’s poor resort to informal services to manage their family’s financial lives─saving under the mattress, borrowing from family and friends, or money lenders. But around the world, policymakers are committing to an agenda that supports financial inclusion and offers greater access to safe, formal financial services.
Financial Access 2010 is one piece of a broader worldwide effort to improve the measurement of financial access by providing key data on policies promoting financial inclusion. And with a global push to improve the measurement of small and medium enterprise (SME) finance led by the Group of 20, the report also presents the first comparable global data on lending to SMEs, estimated at $10 trillion in 2009.
“As there are increasing calls for more and better data around financial inclusion, including from the G20, the annual Financial Access survey will provide key data and help monitor progress over time,” said Alexia Latortue, CGAP’s Deputy Chief Executive Officer.
Data for 2009 showed that the largest median increase in new accounts was seen in the poorest one-fifth of countries, showing that access is improving more rapidly in less-developed countries.
“Access to simple savings and payments accounts is a basic need,” said Nataliya Mylenko, lead author of Financial Access 2010. “The fact that people are using deposit services more, even as world financial markets were experiencing high volatility, confirms how essential these services are to help families manage through risky and uncertain periods.”
Policy reform
The data also confirm the need for lawmakers and regulators to pay even closer attention to consumer protection and financial sector regulation as the number of users grows.
The painful lessons of the lengthy global financial crisis appear to be sinking in with regulators worldwide. Two-thirds of the regulators included in Financial Access 2010 reported that reforms were under way, targeting consumer protection.
While this trend is good news for future savers and borrowers, Financial Access 2010 shows that regulators are often hampered by a lack of resources to implement the policies or, in the case of consumer protection legislation, lack of enforcement powers.
New technologies
Despite the numerous hurdles to implementing sound policies, there are promising trends in financial inclusion, including the expansion of retail infrastructure and use of new technologies to deliver financial services cost effectively. Globally, one bank branch, five ATMs, and 167 point-of-sale terminals were added per 100,000 adults in 2009.
For the first time, the number of ATMs exceeded the number of bank branches in low-income countries last year. But low- and middle-income countries still lag behind high-income countries in terms of physical outreach. Burundi doubled its number of ATMs, but still only has a total of four ATMs in the entire country.
“The growing adoption of new technologies, such as mobile payments and Internet banking, are likely to sustain and hopefully accelerate the pace of financial inclusion,” said Oya Pinar Ardic, an author of the report.
A promising direction
Whether it is countries’ commitment to policy change or the numbers of people gaining services who were previously “unbanked,” Financial Access 2010 suggests a promising direction for financial inclusion.
“The fact that financial access grew modestly in a crisis year is a sign of the commitment many policymakers around the world have made to ensuring that their citizens get better access to better financial services,” said Janamitra Devan, World Bank Group’s Vice President of Financial and Private Sector Development.
“We hope that policymakers around the world will use this data to inform their approach as they work to close the financial access gap."
