Transcript Bank Ownership Type and Banking Relationships

Banking Services for Everyone?
Barriers to Bank Access and Use
Around the World
Thorsten Beck
Asli Demirgüç-Kunt
Maria Soledad Martinez Peria
The World Bank
1
Motivation
• Theory suggests that financial market frictions that prevent broad
access can lead to persistent income inequality or poverty traps.
• To date the empirical literature has established the importance of
banking sector depth for GDP growth, productivity growth,
poverty, firm growth and entry rates.
• But much less is known about the determinants and implications
of access to financial services by individuals and firms.
– Existing papers on access to financial services focus on country case studies
at the household or firm level. See Claessens (2006), Claessens and DemirgucKunt(2006).
• Few papers study this issue by focusing directly on banking
services providers.
– See Beck, Demirguc-Kunt and Martinez Peria (2007).
2
Paper’s Objectives
•
Develop new indicators of barriers to bank access and use of
banking services around the world.
•
Show their association with economic and financial
development and, most importantly, with existing measures of
outreach and financial exclusion.
•
Offer back-of-the-envelope calculations of financial exclusion.
•
Explore potential determinants of barriers.
– Banks’ characteristics (ownership, size, business
orientation)
– Countries’ contractual, regulatory, and competitive
frameworks as well as physical infrastructure and degree of
transparency.
3
Caveats
• Difficult to compare barriers across countries due to
differences in financial practices (e.g., certain type of accounts
might be more common in some countries than others).
• Fees and charges on financial services might reflect
differences in the scope and quality of services.
• We focus only on the largest banks and ignore non-bank
providers.
• Despite these limitations, we see this paper as a first effort to
create consistent indicators of barriers that can lead to financial
exclusion.
4
Data - The Survey
•
209 banks across 62 countries
•
Sample comprises countries across all levels of financial and
economic development.
•
Balanced regional coverage. All regions represented.
•
Banks are among the largest 5 in each country.
–
–
For 60 out of 62 countries the share of deposits exceeded 30% and
for 32 this share exceeds 50%
The share of loans exceeds 30% in 57 countries and 50% in 28
countries.
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Data – The Indicators
Physical Access
Deposits
Services
Affordability
Ratio of minimum balance needed to open an
account to GDP pc.
Fees associated with maintaining an account.
Eligibility
Number of documents required to open an
account.
Physical Access
Loans
Services
Locations to open a deposit account
Affordability
Eligibility
Payment
Affordability
Services
Locations to submit a loan application
Ratio of minimum balance required for
consumer or SME loans to GDP pc.
Fees associated with these loans.
Number of days to process a loan application.
Cost of transferring a small amount of funds
internationally.
Fees associated with using ATM cards. 6
Data – Minimum Balance to Open Checking Account
(% of GDPPC)
Average=12.27
Median=0.98
7
Data – Annual Fees for a Checking Account
(% of GDPPC)
Average=2.49
Median=0.3
8
Data – Number of Documents Needed to Open a
Checking Account
Median=2.63
Average=2.57
9
Data – Minimum Amount Required for SME Loans
(% of GDPPC)
Average=408.35
Median=58
10
Data – Fees on SME Loans (% of GDPPC)
Median=1.32
Average=3.53
11
Data – Days to Process a SME Loan Application
Average=10.69
Median=8.33
12
Data – Cost to Transfer Funds Internationally
(% of US$250)
Median=6.37
Average=6.33
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Barriers, Economic, and Financial Development
Private
GDP per Credit /
capita
GDP
Number of Places to Open Deposit Account (Out of 3)
Minimum Balance to Open Checking Account (% of
GDPPC)
Checking Account Annual Fee (% of GDPPC)
Number of Documents Needed to Open Checking
Account (Out of 5)
-0.105
-0.015
-0.288**
-0.26*
-0.318**
-0.302**
Number of Places to Submit Loan Application (out of 5)
Minimum Amount SME Loan (% of GDPPC)
Fee SME Loan (% of GDPPC)s
Days to Process SME Loan Applications
Cost to Transfer Funds Internationally (% of 250)
Fee for Using ATM Card
0.468***
-0.284**
-0.113
-0.356***
-0.164
-0.214
-0.422*** -0.349**
0.539***
-0.336**
-0.156
-0.331**
-0.088
-0.16 14
Barriers and Outreach
Number of
branches per
100,000
People
Number of Places to Open Deposit Account (Out
of 3)
Minimum Balance to Open Checking Account (%
of GDPPC)
Checking Account Annual Fee (% of GDPPC)
Number of Documents Needed to Open
Checking Account (Out of 5)
Number of Places to Submit Loan Application
(out of 5)
Minimum Amount SME Loan (% of GDPPC)
Fee SME Loan (% of GDPPC)s
Days to Process SME Loan Applications
Cost to Transfer Funds Internationally (% of 250)
Fee for Using ATM Card
Penetration (%
Number of Number of of adults with
Loans Per Deposits
access to a
1000
per 1000
financial
People
People
institution)
-0.181
-0.375*
-0.223
-0.266**
-0.286**
-0.231
-0.341
-0.202
-0.464***
-0.318*
-0.373***
-0.341**
-0.401***
-0.187
-0.42**
-0.462***
0.445***
-0.268*
-0.128
-0.313**
-0.107
-0.292*
0.633***
-0.329
-0.204
-0.383*
-0.091
-0.225
0.427**
-0.412**
-0.242
-0.37**
-0.278
-0.376*
0.475***
-0.369***
-0.13
-0.292**
-0.164
-0.257*
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Barriers and Firm Financing Obstacles
Business constraints
access to
cost of
finance
finance
Number of Places to Open Deposit Account (Out of 3)
Minimum Balance to Open Checking Account (% of
GDPPC)
-0.051
-0.048
0.332**
0.32**
Checking Account Annual Fee (% of GDPPC)
Number of Documents Needed to Open Checking
Account (Out of 5)
0.368**
0.513***
0.464***
0.37**
Number of Places to Submit Loan Application (out of 5) -0.362**
-0.369**
Minimum Amount SME Loan (% of GDPPC)
Fee SME Loan (% of GDPPC)s
Days to Process SME Loan Applications
0.153
0.108
0.246
0.112
0.225
0.226
Cost to Transfer Funds Internationally (% of 250)
Fee for Using ATM Card
-0.038
0.203
0.062
0.183
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Barriers and Financial Exclusion
•
We conduct back-of-the-envelope calculations of the extent of
financial exclusion.
•
We combine income and income distribution data with our
data on deposit account fees to compute the share of the
population that cannot afford financial services.
•
In 10 out of 48 countries where we could do calculations
based on checking account fees, at least 30% of the
population cannot afford checking accounts.
•
In 7 countries, at least 50 % of the population was excluded.
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What Explains Banking Barriers?- Results
Bank Characteristics
• Theory offers mixed predictions as to the impact of bank size
and ownership type on the extent of barriers.
We find:
1. Bank size is correlated with lower barriers.
2. Some evidence that foreign banks charge higher deposit
fees, but they are not associated with higher barriers in
other respects.
3. Government banks are not associated with lower barriers.
Bank customers face higher barriers to credit services in
systems which are predominantly government owned.
4. Correlation between business orientation and barriers is
mixed.
18
What Explains Banking Barriers?- Results
Informational and Contractual Environment
• Theory suggests that by helping to overcome informational
asymmetries and problems of adverse selection and moral
hazard better informational and contractual environments can
lead to lower banking barriers.
• We find a significant association between the efficiency of
contractual and informational frameworks and lower barriers.
Surprisingly, this is more so for deposit barriers.
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What Explains Banking Barriers?- Results
Market structure
1. Evidence of lower barriers to deposit services in banking
system with greater foreign bank presence.
2. In systems that are predominantly government-owned, bank
customers face greater restrictions in terms of where to
apply for loans and the time it takes to process them.
3. Contestability is associated with lower barriers.
4. There is no consistent relationship between market structure
(concentration) and barriers.
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What Explains Banking Barriers?- Results
Regulatory and supervisory framework
1. Greater restrictions to banking freedom are linked to higher
barriers.
2. More supervisory powers are also associated with higher
barriers.
3. More reliance on private monitoring is correlated with lower
barriers.
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What Explains Banking Barriers?- Results
Transparency
• We explore the association between barriers and a measure of
transparency/freedom across countries.
• Banks in countries where a greater share of the media is
controlled by the government have higher barriers.
Physical infrastructure
• The quality of physical infrastructure, which is associated with
the costs of doing business for banks, can explain cross-country
variation in many barriers to banking.
• Barriers are higher in countries with higher electric power
transmission and distribution losses as a % of output.
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Conclusions
• First step in identifying and understanding barriers to banking.
• Barriers to banking are negatively associated with lower
banking sector outreach and a lower proportion of the adult
population with access to financial sector accounts.
• Barriers go hand in hand with greater firm financial constraints.
• Evidence that factors traditionally associated with greater
financial depth such as the availability of credit information
systems, the protection of creditor rights, and the cost of
contract enforcement are significantly associated with barriers.
• More competitive banking systems are associated with lower
barriers, but there is no clear correlations with the actual market
structure.
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Conclusions (cont.)
• Government banks are not associated with lower banking
barriers.
• A larger foreign bank share is associated with lower barriers in
deposit services.
• Regulatory and supervisory policies that are less restrictive
and rely more on private markets are also associated with
lower barriers.
• Non-financial factors such as better infrastructure and greater
transparency are also associated with lower barriers.
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