1. Access to Finance Study (A2FS) Fatimah Afzal Project Coordinator
Good morning everyone! I am Fatimah Afzal, Project Coordinator, responsible for managing the Access to Finance Study, and based in the PMN. My presentation will tell you what all the A2FS is about, and in particular its value to financial service providers such as yourselves. Before I go into the details of the objectives and modalities of this study in Pakistan, I would like to tell you a little bit about the background and genesis of this study. The structure of my presentation is as follows

2. Access to Finance Study (A2FS) Presentation Structure
Background
- Why Interest in access to finance?
- Key players
Objectives and A2FS set-up in Pakistan
Value of the information and how it can help
The Access Indicators
Information at work – examples from Africa
Who are the key players not just in Pakistan, but internationally who are steering and driving this agenda and

3. Background But Consequently
Access to finance  economic growth  poverty alleviation
Interest among international agencies
GoP committed to private sector solutions for economic growth and poverty reduction
But
Limited comprehensive data to guide policy formulators and financial services providers
More supply side and less demand side information
Lack of standardized tools to for measuring access
Consequently
Internationally, research and experience indicate that broader and deeper financial markets generate economic growth which in turn helps address poverty. In Pakistan too since the last few years, there is increasing attention on using private sector as a vehicle of growth and poverty alleviation. Case studies, impact assessments try to document impact of financial access on the poor and Microfinance outreach provides only part of the picture on access of the poor to financial services,More comprehensive data is needed to validate, verify, quantify and define the policy implications as well as business opportunities on access to finance is lacking, particularly from the consumers perspective.
Financial service providers are often discouraged to venture the more non traditional markets due to the lack of market intelligence. Can help identify underserved segments, and adapt their operations to serve those segments accordingly. Given the interest among the interl agencies and governments, monitoring and measuring levels of access to formal financial services can therefore contribute to achieving goals of growth and poverty alleviation in addition to helping policy makers, practitioners researchers and the private sector more fully understand the current and potential supply and demand for financial services, more comparative data will also serve to provide lesson on enhancing access and motivate countries to reform their financial systems to encourage greater access. Such measurements has to date been limited by scarcity of data as well as the lack of standardized tools for measurement. Data collection to date does not permit comparability, there are variations on quality and comprehensiveness and the different approaches in measuring access. Consequently, some of the leading development agencies, most notably WB, DFID, UN
Measures of access fall into 2 broad categories. Recent data collection efforts on the financial access at the hh level undertaken by the WB, DFID and FinMark Trust illustrated the difficulties of comparability due to the lack of a standardized approach. A joint working group was therefore established to prepare proposals for international standardization of core measurements. Solutions need to come from the market, not a blue print imported from somewhere else and for this information is the key. Information asymmetery at the heart of poorly functioning markets World Bank/IMF acknowledge supply side data does not provide sufficient data for FSD policy
Data currently collected focus on supply side:
What is offered by those regulated, in what volumes and at what price …..
Demand side will compliment the information for FSD
tells you about who is using what, from what providers, for what reasons and what are the characteristics of users, what are needs
Policy makers and providers increasingly want to know who has access to what services. Case studies, impact assessments try to document impact of financial access on the poor
Microfinance outreach provides only part of the picture on access of the poor to financial services
More comprehensive data is needed to validate, verify, quantify and define the policy implications as well as business opportunities
“Measuring Financial Access: Outlining the Scope of Current Data Collection Efforts”, World Bank, 2005
Financial Access Indicators Stock take”, DFID 2005
Efforts by WB, DFID, UNCDF to collect better data on financial access – FinScope is key to this
Internationally collaborative efforts to harmonize financial access surveys
WB, DFID, UNCDF, CGAP and FinMark (some of the major players harmonizing research efforts)

4. FinMark Trust FinScope
Established in 2002 in South Africa
Agenda to make financial markets work for poor
Several programmatic interventions, including FinScope
FinScope
A survey tool (a questionnaire) developed in 2002
Provides insights into the financial behavior of individuals and SMEs
Supports process of changing financial markets so that individuals and SMEs have better access to financial services
A resource for countries in Africa and elsewhere
South Africa – FinScope developed here in 2002
Lesotho, Swaziland
Zambia, Tanzania
Kenya, Uganda
Nigeria, Egypt
And now Gana & Pakistan - Test cases for WB & FinScope
FinMark is an organization that was established in 2002 by development agencies and its working to improve the financial sector for the benefit of the poor and relatively disadvantaged people. It has several financial market development programs but perhaps one of its most noteworthy accomplishment is that it has pioneered financial access surveys that are called FinScope in South Africa.
FinScope is basically a questionnaire, a very well thought out and comprehensive questionnaire that provides insights into the financial behavior of individuals and smes. The idea of collecting this data is not just to get a snapshot of how things are but more importantly to understand the reasons for financial behaviors. And help understand the gaps and address them so that ultimtely more people can have access to the kind of services they are looking for. Inspired by its success in SA, FinScope is now being carried out in a range of other African countries. The case of Pakistan and Ghana are very important because here for the first time FinScope questionnaire is being harmonized with WB research interests. The idea is for FinMark and WB to use one questionnaire to meet their information and data needs. So these countries represent the test case scenarios, and drawing from lessons in these two countries harmonized efforts will be taken up in other countries as well.
Gathers information that can support process of changing financial markets so that individuals and small businesses have better access to financial services and surveys are either being planned or underway in the following countries.
Various countries have adopted the finscope methodology and

5. A2FS Stakeholders - Pakistan
Department for International Development (DFID)
World Bank
(WB)
Swiss Agency for Development & Cooperation (SDC)
Government of Pakistan (MoF) - The Client
- Close Coordination with SBP
Pakistan Microfinance Network (PMN)
The Implementing Agency
FinMark Trust/FinScope
Technical Experts
Potential Users of Survey Data
AC Nielsen Pakistan Limited
The Market Research Company
Leading funding agency for the study in Pakistan is DFID, and other two partners being the WB and SDC. In addition to funding, WB is also providing technical support in refining the questionnaire. (Get Project budget) The project is housed in PMN which is providing administrative support and that is where I am based. FinMark Trust through its FinScope consultants is providing very interactive guidance and support to PMN to manage the design and implementation of this survey in Pakistan. Nielsen has been appointed as the research firm that will actually conduct this survey in Pakistan. FBS will provide the sample design for this survey. And of course the end users of this survey are the GoP, FBS and other development project and interested stakeholders to whom the questionnaire along with a brief write up on the A2FS has been circulated for their information and record. Some of the important implementation mechanisms are as follows.
Government of Pakistan
MoF, SBP
Financial Service Providers
Federal Bureau of Statistics
(FBS)
(Sample Design Supplier)
Development agencies &
researchers

6. A2FS Implementation Approach - Pakistan
Questionnaire development
Adapting WB-FinScope questionnaire to Pakistan
Inputs from stakeholders
Rigorous concept testing & pilot testing February 2006
Sample Design
FBS to provide sample design
Robust random probability sampling
Actual Field Work
AC Nielsen
Intensive orientation and training of enumerators
Strict guidelines for respondent selection and substitution
Close monitoring and quality checks June, 2007
Data Dissemination and Application
Assistance in mining data and its application Post June 2007
In terms of the implementation approach and where we are in the entire process, Currently the harmonized WB - FinScope questionnaire is being adapted to suit the socio-economic realities of Pakistan. This process is very intensive involves inputs from the
In terms of implementing the study in Pakistan, Including bankers, insurance companies and leasing companies

7. A2FS Sample Coverage - Pakistan
the value proposition….
Market
Continuum
10,500 respondents – rich & poor
Women and men
Urban & rural areas (four provinces & AJK)
Area based sampling

8. Consumers, Consumers, Consumers, Consumers, Consumers
What A2FS Offers
the value proposition….
Consumers, Consumers, Consumers, Consumers, Consumers
Reflection of consumers demand & use for financial products and services
Who is engaging with financial services sector & how?
Why people are not using financial services?
Inclusion of psychographics – exploring beyond the traditional reasons for non-access
A Segmentation Model – which is not just income based
Its value proposition lies in the fact that it’s the first survey that is focusing on demand side. Cost, needs, physical and legal access
What are the drivers that influence consumers decision making, financial literacy, knowledge, attitude to life, aspirations, connectedness to community – cultural, social and economic environment how do these shape the person’s decision making. A bit like marriage. Couples may come from the same socio-economic backgrounds but if they don’t understand each other and
Segmentation model segments consumers according to their usage, access, financial sophistication, and their quality of life allows banks to understand fully how consumers interact with the financial sector industry. Because FinScope uses area based sampling method, it is possible to represent the population by FSM geographically practically down to street level, providing the bases for very accurate and strategic level marketing.

9. A2FS – Data Priorities Questionnaire focuses on….
Informal &
Formal Financial
Products &
Services
Demographics
Socio Economic Lifestyle Characteristics
Household and Individual Respondent’s Income
Financial Behavior of a Household and Individual
Savings (including National Saving Scheme Products)
Loans, Credit and Insurance
Payment and Receipts
All other categories of financial products & services
Financial Services Provider Differentiators
Technology
Financial literacy
Psychographics/Attitudes

10. A2FS’s Value Proposition….
Documentation of barriers
Development of policy lessons
Benchmarking and tracking change
Mobilization of support for policy change
Product development & targeting new segments
Cross country comparisons
Identification of areas for further research & analysis

11. Access Strand of Financial Services - SA
This is an example of the kind of graphical representation of the access strand that will be available through the A2FS.
Developmental frontier (45%)
Formally served (55%)
Banked
Financially excluded
Black
Female
30 – 44 years
Tribal land
LSM 1- 4
Black and colored
16 – 29 years
Tribal, rural and urban informal
LSM 1 - 6

12. Functionality Measures – Landscape of Access
Landscape of access Botswana and Namibia 51 21 33 43 25 50 75
100
Transactions
Savings
Credit/loans
Insurance
% of the respondents (%of adult pop)
FinScope 2004 41 23
Botswana
Namibia

13. % who are formally included among the poor
Sub-Indicators may be constructed, such as…
% receiving savings or credit through informal providers
% who are formally included among the poor
% saving in certain financial instruments
Due to the complexity of defining concepts of access that differ from usage it is proposed that current users provide the basis for defining the core indicators of access but defined with the objective of identifying and tracking the boundaries of exclusion. Again to If a single headline indicator is to be selected from this group

14. Exposed information gaps Previously unidentified segments
Information - Deepening and broadening financial markets
Financial Service Providers innovate and develop new products and explore new markets
Governments create improved policy and regulatory environment
International Development Agencies assist creation of inclusive markets which cater to financial services needs of poor
Researchers and others Stakeholders identifying areas of deeper inquiry
New partnerships
More communications
Exposed information gaps
Previously unidentified segments
& niches
Changed paradigms
Systemic change
New partnerships, communications, more information around the gaps in the market the outcomes that are expected are

15. 2005 syndicate members
In South Africa the Survey is completely paid for by a syndicate of a dozen financial organizations and this includes the South African National Treasury.

16. The Survey at Work - Examples from Africa
Bank Windhoek, Namibia – Serving the Bottom of the Pyramid
ABSA Bank, South Africa – Understanding segments within the poor
Insurance industry and Banks, SA - Understanding Financial Literacy requirements
Botswana – helping to improve the policy environment
South Africa’s National Treasury – reaching a trade off between financial stability and financial access
So in terms of bringing about changed paradigms and new ways of communication and information sharing what has been the experience of access of finance surveys in Africa? Certainly very encouraging and let’s look at a few examples. Case studies on experiences of banks using
IT is capitablized on the Joberg stock exchange. Headline earnings of 5.5 billion rand in Barclays acquired it and it is now Africa’s preeminent financial service groups. Also co-signatory to Financail Services Charter under which banks have commited to racial transformation and to extending access to financial services to the poor. The banking industry aims to ensure that 80% of the low segments have effective access to bank accounts by The banks need to comply with the charter and the growing recognition that this part of the market is an econom opportunity has created the urgent need to understand the underserved better and Finscope is supporting this process. Used Finscope segmentation model to look at poor not as a globulous mass of poor but to understand the nuances of the formal and informal activities of the mass market which may have limited incomes but have a range of unmet financial needs. FinScope
Bank Windhoek is Namibia’s leading bank with over 43 branches and 61 ATMs across the country, profits were 27 million in Using a DFID grant the bank expanded branches and used FinScope to design two new products for the poor in the far flung areas far North and south of the country. Their desire to engage in Finscope was to understand the needs and the market potentail of serving those were traditionally excluded from Namibia’s formal banking system.
Size of the problem, For example only 34% of the South African’s knew the right word to describe annual price increase and that the lack of financial sophistication reached high up the income curve. And FinScope was also able to point out where geographically, financial sophistication was the weakest. able to identify consumer financial needs and valuable information available to others for their consumer financial education program. Particularly the insurance industry benefited since they found out the low short term insurance penetration in the lower market segments thus needed to find out more about the marekt and to educate them about insurance products. Namibia’s leading bank
EasySave: Within 5 months more than 20K savers & US$1million saving
EasyCredit: Being piloted and already 80 loans takenup
Financial Literacy
Size of the problem defined
ABSA
South Africa’s largest retail bank
Segmentation Model helping to understand segments within poor
In Botswaana 57% of the population is unbanked and banks earning an exceptionally high return on equity by even international standards so there is an opportunity for banks to reinvest some of that earning to extend banking services to the unbanked. FinScope was able to guide the merger of two private banks one of which has a 35% market share in rural areas. FinScope information assisted in ensuring that in the merger the bank’s role in serving the lower markets is not overlooked.
SA govt is faced with the challenge of supporting sustained economic growth while eliminating SA’s historical imbalances. SANt will use Finscope data over the years to benchmark and monitor financial sector development review impact of stauturory and legal reforms and define policies to support financial sector development without compromising stablity.

17. What A2FS is Not “Sit-on-the-shelf ” research!
A specific product/market potential sizing research
An answer to everything – it’s a macro study that should inform other studies
FinScope is one tool in the “Information toolkit” – but vital as a foundation
This is macro level information – not specific product/market potential sizing, nor feature planning
Its extremely powerful and should inform other studies e.g. service excellence, customer orientation, communication checks, brand awareness studies ….
Use of non-bank other and informal can be misinterpreted – actual levels will be higher because many bank people will also have informal or non-bank products
Should be complemented with other analysis

18. Thank You!

19. The Financial Access Indicators
Challenges in constructing the indicators
Access and usage
Unit of response – individual or household?
Measuring Access: Institutions, services or products?
Degree of Access

20. Are the Lower Markets Profitable?
The Prahalad view – a fortune at the bottom of the pyramid?
May not be obvious at first – the ICICI experience
A source of incremental profit where traditional markets are mature
Where the low unit cost: high volume economics can be made to work
Where the cost of the R&D has already taken place – leveraging/replicating know-how
Where infrastructure improvements bring a market within reach
Where the long term reward is sufficiently exciting to merit sub-optimal profits in the short term
Where are the incentives for business?
Is pro-poor bad – clearly sometimes yes but sometimes it isn’t bad for business.
Citigroup in India – first to offer a savings product allowing people to save $25 – they had 150,000 in twelve months
Absa/Barclays