Indicators of Access to Finance Through Household Level Surveys Concepts and Measures for Six Countries Presented by: Anjali Kumar, World Bank Based on the collaboration of a Joint Working Group of the World Bank/DFID/Finmark Trust Prepared by: Anne-Marie Chidzero, FinMark Trust, Karen Ellis, DFID, & Anjali Kumar, World Bank with contributions from Mukta Joshi and Adam Parsons World Bank/Brookings Institution Global Conference World Bank Headquarters, Washington, DC May 30-31, 2006

Individual and Household Consumers: present focus  ‘Specialized’ surveys of financial access:  Brazil, India, Colombia, Mexico, and new surveys in Nepal, Pakistan, Jordan and proposed for West Africa (World Bank)  South Africa, Botswana, Lesotho, Swaziland, Namibia, Zambia, Uganda, and proposed for Ghana, Tanzania (Finscope)  Compatibility Desirable with Broad Based Income and Expenditure Surveys:  LSMS, US, UK, many other developed countries

What should be Measured? Dimensions of Access  Institutional Dimension - Across providers; e.g.:  Formal /Informal  Public / Private  Domestic / Foreign  Functional Dimension – Across services:  Transactions: check cashing to cross border remittances  Savings: from safekeeping to investment  Loans and credits: Infrequent to readily available  (Insurance / risk transformation)  Product Dimension / Across devices / interfaces:  Types of bank accounts, types of loans, credit cards, etc

Institutional Core Indicators % Adult Population with access to:  A1: Banks and Bank like providers:  Broad-spectrum intermediaries (including some credit unions, niche banks) Criteria: deposit taking, access to national payments network, supervision and oversight, standard terms Criteria: deposit taking, access to national payments network, supervision and oversight, standard terms  A2: Other formal financial institutions:  More specialized, e.g. insurance, money transfer agents, finance/ credit companies Also regulated, vary by country and by service, tradeoff of comparability / comprehensiveness  A3: Informal financial service providers:  No financial regulation, but organized ROSCAs, tontines, moneylenders, pawn shops, ususus, stokvels etc. ROSCAs, tontines, moneylenders, pawn shops, ususus, stokvels etc.

The Access Strand: Formal to Informal Institutions Financially Excluded Informally Served (only) Financially Served BankFormal otherInformalExcluded Bank 0%20%40%60%80%100% Country X Formally Included Formal other (only)

Functional Core Indicators % Adult Population who:  A4 = Payments:  Receive money regularly through formal financial instruments Income, remittances Income, remittances  A5 = Savings:  Keep money in formal financial instruments which allow them to safeguard and accumulate money Transactions accounts, savings accounts, time deposits / CDs, bonds, stocks, funds, voluntary pension plans, etc. Transactions accounts, savings accounts, time deposits / CDs, bonds, stocks, funds, voluntary pension plans, etc.  A6 = Loans and Credits:  Have obtained / have outstanding a loan or credit facility from a formal financial institution now or over the past 12 months.

Sub Indicators: Poverty and Financial Access:  S1 = % Adults who are Formally Served in the Bottom Quintile Household Financial Access:  S2 = Individuals vs Households: % Adults formally served either directly or indirectly through another household member

A1: The Banked Country% Brazil (  P = 2000) 43.0 Colombia (  P = 1217) § 39.2 Mexico (  P = 1198) 23.0 Botswana43.2 Namibia51.1 South Africa 47.0 Percentage of total adult population with a bank account § Each Individual is randomly selected from every household

A2: Headline Indicator – The Formally Included Percentage of total adult population which uses the services of any formal financial institution Country% Brazil (  P = 2000) ± 79.3 Colombia (  P = 1217) 48.1 Mexico (  P = 1198) 52.0 Botswana49.0 Namibia53.9 South Africa 55.0 ± Formal access high due to large number of people of accessing lottery shops

A3: The Financially Served Percentage of total adult population which uses any formal and/or informal financial institution Country% Brazil (  P = 2000) 83.8 Colombia (  P = 1217) 50.6 Mexico (  P = 1198) 78.6 Botswana54.0 Namibia55.8 South Africa South Africa 63.0

A4: Payments Country% Brazil (  P = 2000) 25.1 Colombia (  P = 1217) 24.1 Mexico (  P = 1198) 20.8 Botswana - Transactions 43.1 Namibia - Transactions Namibia - Transactions 41.1 South Africa - Transactions 31.0 Percentage of adults receiving money regularly through formal financial institutions

A5: Savings Country% Brazil (  P = 2000) 39.7 Colombia (  P = 1217) 36.4 Mexico (  P = 1198) 44.1 Botswana - Savings 51.3 Namibia - Savings 51.3 South Africa - Savings South Africa - Savings 29.0 The percentage of adults who keep money in formal financial instruments which allow them to safeguard and accumulate money

A6: Loans and Credit Country% Brazil (  P = 2000) 22.5 Colombia (  P = 1217) 6.4 Mexico (  P = 1198) 7.4 Botswana - Credit/loans 20.6 Namibia - Credit/loans 22.7 South Africa - Credit/loans 19.0 Percentage of persons who have obtained/have outstanding a loan or credit facility from a formal financial institution

S1: The Poverty Dimension – The Formally Served in the Bottom Quintile Country% Brazil (  P = 2000)  Quintile based on Income  Quintile based on Bedroom per person Colombia (  P = 1217) - Mexico (  P = 1198)  Quintile based on Income  Quintile based on Rent Botswana Namibia South Africa Percentage of total adult population in the bottom income quintile which uses the services of any formal financial institutions

S2: Individuals vs. Households – Direct and Indirect Access Country% Brazil (  P = 2000) 80.7 Colombia (  P = 1217) 67.2 Mexico (  P = 1198) 67.3 Botswana Namibia South Africa Percentage of total adult population formally served either directly or indirectly through another household member

Comparison of the Core Access to Finance Indicators across Countries ∫ ∫Data in percentages ∫ Data in percentages ± includes AFORES Quintile calculation based on * income, ‡ on bedrooms per person, § on income, ﾈ on rent Country Banked (A1) Formally Served (A2) Financially served (A3) Payments (A4) Savings (A5) Loans and Credit (A6) Formally served in bottom quintile (S1) Direct and indirect access (S2) Brazil * 43.4 ‡ 80.7 Colombia Mexico Botswana Namibia South Africa

Financial Access Strand: Botswana 2004 A3- Financially Served – 54% Financially Excluded Bank Formal Other A2 - Formally Included – 49% A1- Banked Informal Only

Financial Access Strand: Brazil 2002 Bank A3- Financially Served – 83.8% Financially Excluded Formal Other A2 - Formally Included – 79.3% A1- Banked Informal Only

Financial Access Strand: Colombia 2002 Bank A3- Financially Served – 50.6% Financially Excluded Informal Only Formal Other A2 - Formally Included – 48.1% A1- Banked

Financial Access Strand: Mexico 2002 Financially Excluded A3- Financially Served – 78.6% Informal Only Formal Other A2 - Formally Included – 52.0% A1- Banked Bank

Financial Access Strand: Namibia 2004 A3- Financially Served % Financially Excluded Bank Informal Only Formal Other A2 - Formally Included – 53.9% A1- Banked

Financial Access Strand: South Africa 2005 A3- Financially Served - 63% Financially Excluded Informal Only Formal Other A2 - Formally Included – 55% A1- Banked Bank

The Formally Served – S1: Total population vs Bottom quintile

The Formally Served – S2: Direct and Indirect Access

The International Community Information, Involvement, Support  From the next small steps..  Incorporation of access indicators in multiple forms of investigations, with different donor / national partners  Undertaking a set of follow up surveys across a range of countries  The Vision: Mapping Access in the developing world  To the final major goals  Incorporating Access indicators into stronger policies for financial inclusion  Achieving growth and poverty reduction through financial deepening