FINANCIAL INCLUSION IN AFRICA: THE ROLE OF INFORMALITY Leora Klapper and Dorothe Singer
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FINANCIAL INCLUSION IN AFRICA:
THE ROLE OF INFORMALITY
Leora Klapper and Dorothe Singer
GLOBAL FINDEX OVERVIEW
Global Findex: Goal to collect comparable cross-country data on financial inclusion by surveying individuals around the world:
― Measure the use of formal and informal financial services, using consistent methodology across economies and time
― Added questions on the use of financial services - payments, savings, credit, and insurance – to the 2011 Gallup World Poll
― Surveys 1,000+ individuals in 148 countries; overall nationally representative data based on 150,000+ interviews of adults aged 15+
― Funded by a 10 year grant from the Bill & Melinda Gates Foundation (through 2020)
― 2014 and 2017 next years of full data collection
― Motivate and track policies to expand financial services to the poor
GLOBAL FINDEX ACCOUNTS
Over 2.5 billion adults do not have a formal account
41% of adults in developing economies are banked—compared to 89% of adults in high-income economies
37% of women in developing economies are banked—compared to 46% of men
23% of adults living below $2 per day have a formal account
GLOBAL FINDEX ACCOUNTS
23% of adults in Africa are banked compared to 41% of adults in developing countries
Wide variation of account ownership across sub-regions, from 12% in Central Africa to 51% in Southern Africa
In several countries fewer than 5% of adults have accounts, including Central African Republic and Democratic Republic of Congo
41%
23%
51%
28% 23%
12% 17%
0%
20%
40%
60%
DevelopingCountries
Africa SouthernAfrica
Eastern Africa Western Africa Central Africa North Africa
Account penetration
Adults with an account at a formal financial institution (%)
GLOBAL FINDEX ACCOUNT OWNERSHIP TYPE 2011
Women, rural residents, youth, adults with little education and the poor are the least likely to have a formal account
Adults in the richest income quintile in Africa economies are four times as likely to be banked as adults in the poorest quintile
Compared with other regions, the gender gap in Africa is relatively small.
Account penetration in Africa by individual characteristics Adults saving at a formal financial institution in the past year (%)
GLOBAL FINDEX BARRIERS
Positive but imperfect correlation between account penetration and financial depth raises questions regarding cross-country differences in financial use and access and suggests room for policy reforms.
GLOBAL FINDEX BARRIERS
82% of unbanked in Africa choose “Not enough money” and 36% of unbanked in Africa cite it as only reason. This compares to 66% and 30%, respectively, in developing countries overall.
Cost, lack of documents, and distance cited by more than 25% of unbanked in Africa, a significantly higher number than in developing countries in general.
0 5 10 15 20 25 30 35 40
Religious Reasons
Lack of trust
Lack of necessary documentation
Too far away
Family member already has account
Too expensive
Not enough money only*
Developing Countries Africa
Self-reported barrier to the use of formal accounts
Non-account-holders reporting barrier as reason for not having account (%)
Note: Respondents could choose more than one reason. The data for “Not enough money only refer to the percentage of adults who reported only this reason.
GLOBAL FINDEX BARRIERS VS ACCOUNT PENETRATION
Self-reported barriers to the use of accounts closely related to objective measures of costs, documentation requirements and bank branch penetration.
0
25
50
75
100
0 20 40 60 80 100 120 140 160
% o
f adu
lts w
ith a
ccou
nt a
t a fo
rmal
fin
anci
al in
stitu
tion
Minimum amount to open a checking account (% of GDP per capita)
Cost to open checking account vs account penetration
GLOBAL FINDEX BARRIERS VS ACCOUNT PENETRATION
Self-reported barriers to the use of accounts closely related to objective measures of costs, documentation requirements and bank branch penetration.
Documentation requirements vs account penetration
0
25
50
75
100
1 1.5 2 2.5 3 3.5 4 4.5 5
% o
f adu
lts w
ith a
ccou
nt a
t a fo
rmal
fin
anci
al in
stitu
tion
Number of documents needed to open a checking account (1to 5)
GLOBAL FINDEX BARRIERS VS ACCOUNT PENETRATION
Self-reported barriers to the use of accounts closely related to objective measures of costs, documentation requirements and bank branch penetration.
Bank branch penetration vs account penetration
0
25
50
75
100
0 20 40 60 80 100 120
% o
f adu
lts w
ith a
ccou
nt a
t a fo
rmal
fin
anci
al in
stitu
tion
Commercial bank branches (per 100,000 adults)
GLOBAL FINDEX ACCOUNTS AND PAYMENTS
14% of adults in Africa use a mobile phone to pay bills, send or receive money in the past year 68% of adults in Kenya use mobile money technology, driven by the early success of M-PESA 51% of adults in Africa who use mobile technology to transfer money are otherwise unbanked 5% of adults in all developing economies use mobile money technology
GLOBAL FINDEX SAVINGS
36% of adults in Africa saved in the past year, compared to 31% in developing countries
13% of adults in Africa (35% of savers) saved using a formal financial institution
19% of adults in Sub-Saharan Africa (48% of savers) saved using a community-based method. 34% of savers report having used a only community saving clubs.
0% 10% 20% 30% 40% 50% 60%
Developing Countries
Africa
Central Africa
East Africa
Southern Africa
West Africa
North Africa
Saves at a formal financial institution Saves using other methods only
Formal and informal savings in Africa Adults saving any money in the past year (%)
GLOBAL FINDEX FORMAL SAVINGS
Formal savings most likely among men, adults living in urban areas, adults between ages 25-64, adults with higher education, and adults in the highest income quintiles.
Informal savings most likely among women, adults living in urban areas, adults with a primary education or less, and the poor
Formal savings in Africa by individual characteristics Adults saving at a formal financial institution in the past year (%)
0% 10% 20% 30% 40% 50%
Highest
Q4
Q3
Q2
Lowest
Tertiary
Secondary
Elementary
65+
25-64
15-24
Urban
Rural
Male
Female
Percent of Adults
GLOBAL FINDEX CREDIT
44% of adults in Africa have borrowed money in the past 12 months, compared to 34% of adults worldwide.
38% of adults in Africa have borrowed from family and friends, including 28% who report this as their only source of borrowing
5% of adults in Africa have borrowed from a formal financial institution
3% of adults in Africa report having a credit card
Sources of credit in Africa by individual characteristics Adults with outstanding loan from source specified (%)
GLOBAL FINDEX SAVINGS
Compared to developing countries in general, adults in Africa are more likely to report outstanding loans for funerals or weddings (4%), school fees (8%) and emergency or health purposes (15%).
Adults in Central Africa are most likely to report an outstanding loan in each of these categories.
0%
5%
10%
15%
20%
25%
DevelopingCountries
Africa Southern Africa East Africa West Africa Central Africa North Africa
School fees Emergency or health purposes Funeral or wedding
Reasons for loans reported by borrowers Adults with outstanding loan for purpose specified (%)
GLOBAL FINDEX REGRESSION RESULTS
Determinants of Account Ownership, Savings, and Credit
• Account ownership: women, poorer and less educated adults, and adults living in rural areas are least likely to have an account. Employment status is also an important determinant.
• Savings, formal vs informal vs none:. • Formal savings, compared to not savings at all, are more likely for men, the
rich, more educates, those living in urban areas, and those employed for an employer.
• The determinants for saving informally, compared to not saving at all, are similar to formal savings, however, urban and employed for employer are no longer significant.
• Credit, formal vs informal vs none:
• Formal credit, compared to no credit, is more likely the richer, more educated and those employed by an employer
• Access to credit from informal sources such as family and friends – the main source of credit in Africa --, compared to no credit at all, is not related to income
GLOBAL FINDEX CONCLUSION
To conclude • Despite financial sector in Africa over the past decades, almost 500 million adults in
Africa remain outside the formal financial system. • Data show deep disparities across sub-regions and individual characteristics in
how adults use financial services.
• Unbanked adults cite the lack of money, high costs, distance, and documentation requirements as barriers. Removing financial, physical, and bureaucratic barriers to expand financial inclusion is challenging and will require addressing underlying structural issues.
• Technological innovations such as mobile financial services and new business models such as agent banking offer new opportunities to expand financial inclusion in a cost-effective manner.
• For financial inclusion efforts to be successful, policy must be tailored to systemic failure in each setting
Global Findex Suite of Products
― Financial Inclusion Data Portal
― World Bank eAtlas of Financial Inclusion
― The Little Data Book on Financial Inclusion 2012
― Global Financial Inclusion Microdata Databank
― Findex Notes and research papers
Reference citation for the Global Findex:
Asli Demirguc-Kunt and Leora Klapper. 2013. “Measuring Financial Inclusion: The Global
Findex Database.” Brookings Papers on Economic Activity.
www.worldbank.org/globalfindex
GLOBAL FINDEX DATA RELEASE
GLOBAL FINDEX COUNTRY SAMPLE
GLOBAL FINDEX data is available for 38 African countries. A star indicates that country is excluded from the regression analysis due to data availability.
Angola Djibouti Mauritania Sudan
Benin Egypt, Arab Rep. Mauritius Swaziland
Botswana Gabon * Morocco * Tanzania
Burkina Faso Ghana Mozambique Togo
Burundi Guinea Niger Tunisia
Cameroon Kenya * Nigeria Uganda
Chad Lesotho Rwanda Zambia
Comoros Liberia Senegal Zimbabwe *
Congo, Dem. Rep. Malawi Sierra Leone
Congo, Rep. * Mali South Africa
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