Data on Access of Poor and Low Income People to Financial Services
This presentation explores the following three themes with reference to the poors access to financial services:
- What is the price of access?
- Why is there not enough access?
- What can we do to solve the problem of access?
The presentation provides the following data about access:
- Price is a critical component;
- Two critical spreads are:
- Formal sector banking rates versus the informal sector rates;
- Lending minus savings rates.
The presentation finds that:
- Price depends on the interest rate spread among banks, microfinance institutions (MFIs) and informal lenders;
- The reason for spreads could be information asymmetries;
- Credit bureaus could help in this area.
The presentation then makes the following points:
- The way to go from cross-country analysis to policy prescription, given the endogenity issues;
- Whether micro studies provide information about why countries are different;
- The conclusion of experimental studies that selection bias is particularly poignant for microcredit.
The presentation concludes by recommending a three-pronged process to make policy prescriptions that involves:
- Collecting cross-country data on price and quality of credit and savings options;
- Conducting micro-level experimental studies to answer:
- Are firms/individuals credit/savings constrained?
- Why are they so?
- What to do?
- Combing the results of the two prongs to make out-of-sample policy decisions.