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The basic analytics of access to financial services

  • Beck, Thorsten
  • de la Torre, Augusto

Access to financial services, or rather the lack thereof, is often indiscriminately decried as a problem in many developing countries. The authors argue that the"problem of access"should rather be analyzed by identifying different demand and supply constraints. They use the concept of an access possibilities frontier, drawn for a given set of state variables, to distinguish between cases where a financial system settles below the constrained optimum, cases where this constrained optimum is too low, and-in credit services-cases where the observed outcome is excessively high. They distinguish between payment and savings services and fixed intermediation costs, on the one hand, and lending services and different sources of credit risk, on the other hand. The authors include both supply and demand side frictions that can lead to lower access. The analysis helps identify bankable and banked population, the binding constraint to close the gap between the two, and policies to prudently expand the bankable population. This new conceptual framework can inform the debate on adequate policies to expand access to financial services and can serve as the basis for an informed measurement of access.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4026.

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Date of creation: 01 Oct 2006
Date of revision:
Handle: RePEc:wbk:wbrwps:4026
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  1. Claessens, Stijn, 2006. "Access to financial services: a review of the issues and public policy objectives," Journal of Financial Transformation, Capco Institute, vol. 17, pages 16-19.
  2. Beck, Thorsten, 2006. "Creating an efficient financial system : challenges in a global economy," Policy Research Working Paper Series 3856, The World Bank.
  3. Ricardo Hausmann & Bailey Klinger, 2008. "Growth Diagnostic: Peru," IDB Publications (Working Papers) 44998, Inter-American Development Bank.
  4. Thorsten Beck & Ross Levine, 2003. "Legal Institutions and Financial Development," NBER Working Papers 10126, National Bureau of Economic Research, Inc.
  5. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Innovative experiences in access to finance : market friendly roles for the visible hand ?," Policy Research Working Paper Series 4326, The World Bank.
  6. Augusto de la Torre & Juan Carlos Gozzi & Sergio L. Schmukler, 2008. "Capital Market Development: Whither Latin America?," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 121-154 National Bureau of Economic Research, Inc.
  7. Gine, Xavier & Klonner, Stefan, 2006. "Credit Constraints as a Barrier to Technology Adoption by the Poor: Lessons from South-Indian Small-Scale Fishery," Working Paper Series RP2006/104, World Institute for Development Economic Research (UNU-WIDER).
  8. Navajas, Sergio & Schreiner, Mark & Meyer, Richard L. & Gonzalez-vega, Claudio & Rodriguez-meza, Jorge, 2000. "Microcredit and the Poorest of the Poor: Theory and Evidence from Bolivia," World Development, Elsevier, vol. 28(2), pages 333-346, February.
  9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  10. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  11. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2004. "Finance, inequality, and poverty: cross-country evidence," Policy Research Working Paper Series 3338, The World Bank.
  12. Auffret, Philippe, 2003. "Catastrophe insurance market in the Caribbean Region : market failures and recommendations for public sector interventions," Policy Research Working Paper Series 2963, The World Bank.
  13. Honohan, Patrick, 2005. "Measuring microfinance access : building on existing cross-country data," Policy Research Working Paper Series 3606, The World Bank.
  14. Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank.
  15. Thorsten Beck, 2004. "The determinants of financing obstacles," Policy Research Working Paper Series 3204, The World Bank.
  16. Michael Gavin & Ricardo Hausmann, 1996. "The Roots of Banking Crises: The Macroeconomic Context," Research Department Publications 4026, Inter-American Development Bank, Research Department.
  17. Beck, T.H.L. & Demirgüc-Kunt, A. & Martinez Peria, M., 2008. "Banking services for everyone? Barriers to bank access and use around the world," Other publications TiSEM 667b51d6-c698-43ce-9777-e, Tilburg University, School of Economics and Management.
  18. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 635-672, May.
  19. Marianne Bertrand & Dean S. Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Papers 918, Economic Growth Center, Yale University.
  20. Frame, W Scott & Srinivasan, Aruna & Woosley, Lynn, 2001. "The Effect of Credit Scoring on Small-Business Lending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(3), pages 813-25, August.
  21. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2005. "Reaching out : access to and use of banking services across countries," Policy Research Working Paper Series 3754, The World Bank.
  22. Dean Karlan & Jonathan Zinman, 2005. "Observing unobservables: identifying information asymmetries with a consumer-credit field experiment," Proceedings 961, Federal Reserve Bank of Chicago.
  23. Honohan, Patrick, 2006. "Household financial assets in the process of development," Policy Research Working Paper Series 3965, The World Bank.
  24. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  25. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  26. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank.
  27. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
  28. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
  29. Stephen D. Williamson, 1984. "Costly Monitoring, Loan Contracts and Equilibrium Credit Rationing," Working Papers 572, Queen's University, Department of Economics.
  30. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Household Decision Making and Savings Impacts: Further Evidence from a Commitment Savings Product in the Philippines," Working Papers 939, Economic Growth Center, Yale University.
  31. Beck, T.H.L., 2006. "Creating an efficient financial system : Challenges in a global economy," Other publications TiSEM fa839175-173f-4972-a0e7-e, Tilburg University, School of Economics and Management.
  32. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, June.
  33. Stijn Claessens & Thomas Glaessner & Daniela Klingebiel, 2002. "Electronic Finance: Reshaping the Financial Landscape Around the World," Journal of Financial Services Research, Springer, vol. 22(1), pages 29-61, August.
  34. Inessa Love & Nataliya Mylenko, 2003. "Credit reporting and financing constraints," Policy Research Working Paper Series 3142, The World Bank.
  35. Caskey & John P. & Duran, Clemente Ruiz & Solo, Tova Maria, 2006. "The urban unbanked in Mexico and the United States," Policy Research Working Paper Series 3835, The World Bank.
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