Paper

Data on Access of Poor and Low Income People to Financial Services

What are the challenges and solutions to collecting data on access to financial services?
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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.