Access to financial services in Colombia : the"unbanked"in Bogota
AbstractThe authors look at the depth of the financial sector in Bogota in terms of the"financial exclusion"of those, particularly poorer citizens, who operate without accounts in formal financial institutions-the unbanked. They begin with a review of the overall decline in financial intermediation from 1998 to 2003, which explains, in part, the high percentage of unbanked-61 percent in a recent household survey in Bogota. The authors next look at the banking system today, concluding that the present challenge is to increase financial intermediation overall, especially with the poor. Their analysis shows that Colombia's banks provide costly services mainly catered toward high-income clients. Existing fees and costs of checking, savings, and loan services average 5-10 percent of a monthly minimum wage, making them hard to afford for low-income clients. The authors also explore the characteristics and impacts of financial exclusion associated with lower and more uncertain incomes, lower education, and closer links to the informal sector. They cite the household survey conducted in Bogota, showing that 70 percent of the unbanked earn less than one minimum wage per month, are three times more likely to be unemployed than the banked, and have lower education levels. The unbanked save and borrow largely in the informal sector, at greater risk and greater cost. At the same time, however, high home ownership rates show that the unbanked have the capacity to build assets, demonstrating that they have"bankable"characteristics. The authors conclude with recommendations for government and for the financial sector to broaden access for the benefit of public and private sectors, and for the unbanked.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3834.
Date of creation: 01 Feb 2006
Date of revision:
Banks&Banking Reform; Public Sector Economics&Finance; Economic Theory&Research; Financial Intermediation; Settlement of Investment Disputes;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-05 (All new papers)
- NEP-DEV-2006-02-05 (Development)
- NEP-FMK-2006-02-05 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas T. Holyoke, 2001. "Community organization and Community Reinvestment Act lending in Washington, D.C," Proceedings 795, Federal Reserve Bank of Chicago.
- Ricardo N. Bebczuk, 2008. "Financial Inclusion in Latin America and the Caribbean: Review and Lessons," CEDLAS, Working Papers 0068, CEDLAS, Universidad Nacional de La Plata.
- World Bank, 2009. "Banking the Poor : Measuring Banking Access in 54 Economies," World Bank Publications, The World Bank, number 13804, October.
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