Increased financial inclusion — extending financial services like credit, insurance and savings to previously unserved populations — has risen to the fore of the development agenda in recent years.
According to a new report released this week, these efforts are poised to benefit from better data, which combines numbers collected from banks about the services they offer with information collected from households about the services they actually use.
The study, “Financial Access 2012,” was co-authored by teams from the International Finance Corp. and the Consultative Group to Assist the Poor and its findings show a growing trend towards greater financial inclusion worldwide, despite broad variance between high and low-income nations. The data allows policymakers, technical assistance providers and development organizations to view in more detail than ever before the landscape of financial inclusion in the 187 countries surveyed.
One of the authors, IFC operations officer Oya Pinar Ardic, spoke to Devex about why the report, although not the first of its kind, is groundbreaking in the sense that it benefits from a deeper commitment to including more financial services actors and wider data collection, including gathering for the first time financial services information related specifically to SMEs.
Here a few excerpts from our conversation with Ardic to learn more about what this evolving data landscape means for efforts to spur greater financial inclusion:
What should be the take home message from this report to donors and development implementers looking to boost inclusive economic growth?
This year was a milestone year for financial inclusion data, because what the International Monetary Fund has done with the Financial Access Survey is they expanded the scope of the survey and they were able to increase their data coverage in terms of both the types of financial institutions that they included and also the number of countries that responded to the survey. And at the same time on the demand side for data on households, [the World Bank data set] Global Findex was released for the first time. This was actually a big year for financial inclusion data.
Financial inclusion is gaining more prominence in the global development agenda. Policymakers and other stakeholders have started to understand the importance of financial inclusion and finance as an enabler of economic growth and development. Many countries have made commitments to improve access to financial services for households and SMEs. With all these efforts in place we’re getting somewhere.
The IMF has been tracking financial inclusion data for some time through its publicly-available Financial Access Survey. Why should development practitioners, donors and policymakers take note of this report?
So, the financial inclusion data landscape has two very important components — the data that comes from the regulators, which the regulators collect from the suppliers — the financial institutions. And then the other component is from the demand side, the users of the financial services, which are households and firms. That type of data is complementary to what the regulators collect, in the sense that it is possible then to take a look at the demographic composition of the users, or which types of firms use which type of financing. The important issue then is to bring the two sides of the data together to better inform policy.
This report was a first attempt to look at part of this. The other data set that we used [in addition to the IMF’s Financial Access Survey] for this purpose is from the World Bank. It’s called the Global Findex. That’s a household survey that was administered in around 150 countries in the past year, which measures whether the households have access to certain financial services and how they use those services.
The expectation of course is that the demand-side data from households and the supply side data from banks through regulators do not necessarily match one-for-one, but the two sides should tell similar stories in terms of the key messages that they give. That’s what we were able to uncover. The two sides are telling us the same story generally.
This is something that we were not able to do before, because the demand side data on a global scale, such as Global Findex, just came out last year. The supply side data, such as the Financial Access Survey of the IMF, has been out there only for three years. So these data sets are relatively new, and they are developing and improving over time.
The report mentions that many pro-poor institutions are transforming into commercial banks. What trends in microfinance do you see developing, and how will technical assistance providers have to change the way they relate to pro-poor financial institutions?
Many of the microfinance institutions right now have licenses to operate as regular banks, and because of that they are covered as banks from the viewpoint of these regulators. These issues make it a little bit hard for the regulators to differentiate microfinance institutions specifically. To the extent that data was available, the IMF was able to collect that.
It’s not that these institutions are transforming, but that banks as we know them have started to find that serving poorer clients is important. In essence the difference between these types of institutions is not that important anymore, at least from a regulatory point of view, because many microfinance institutions are regulated just as other deposit-taking financial institutions.
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