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Identifying and Verifying Customers: When are KYC Requirements Likely to Become Constraints on Financial Inclusion?

Author

Listed:
  • Alan Gelb

    (Center for Global Development)

  • Diego Castrillon

    (Center for Global Development)

Abstract

Onerous KYC documentation requirements are widely recognized as a potential constraint to full financial inclusion. However, it is sometimes difficult to judge the extent to which this constraint is a serious or binding one, relative to the many other factors that can limit access to finance or demand for financial services. The paper considers this question, distinguishing between different types of documentation and different financial market segments according to their KYC requirements. Using data from several sources it then looks at cross-country patterns which provide some suggestive evidence on the conditions under which particular requirements are more or less likely to pose serious constraints. It concludes with policy suggestions, including on the use of technology to help ease the burden of documentary requirements while still maintaining financial integrity.

Suggested Citation

  • Alan Gelb & Diego Castrillon, 2019. "Identifying and Verifying Customers: When are KYC Requirements Likely to Become Constraints on Financial Inclusion?," Working Papers 522, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:522
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    File URL: https://www.cgdev.org/publication/identifying-and-verifying-customers-when-are-kyc-requirements-likely-become-constraints
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    More about this item

    Keywords

    documentation; identification; financial inclusion; KYC;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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