The foundations of financial inclusion : understanding ownership and use of formal accounts

By Franklin Allen, Asli Demirgüç-Kunt, L. Klapper, María Soledad Martínez Pería. 2012

1,337 citations recorded by the source corpus.

Financial inclusion -- defined here as the use of formal accounts -- can bring many welfare benefits to individuals. Yet the authors know very little about the factors underpinning financial inclusion across individuals and countries. Using data for 123 countries and over 124,000 individuals, this paper tries to understand the individual and country characteristics associated with the use of formal accounts and what policies are effective among those most likely to be excluded: the poor and rural residents. The authors find that greater ownership and use of accounts is associated with a better enabling environment for accessing financial services, such as lower account costs and greater proximity to financial intermediaries. Policies targeted to promote inclusion -- such as requiring banks to offer basic or low-fee accounts, exempting some depositors from onerous documentation requirements, allowing correspondent banking, and using bank accounts to make government payments -- may be especially effective among those most likely to be excluded. Finally, the study the factors associated with perceived barriers to account ownership among those who are financially excluded and find that these individuals report lower barriers in countries with lower costs of accounts and greater penetration of financial service providers. Overall, the results suggest that policies to reduce barriers to financial inclusion may expand the pool of eligible account users and encourage existing account holders to use their accounts with greater frequency and for the purpose of saving.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b2b2d5e42f452645f2e4aea9fda1fb633c3e31d8

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Citations in the corpus

Measuring Financial Inclusion: A Multidimensional Index (2014, background): “16Similarly, Allen et al. (2012) find a high correlation when regressing the percentage of adults with a formal account and GDP per capita.”
Financial Inclusion and Legal Discrimination Against Women: Evidence from Developing Countries (2013, background): “Though these studies do not find evidence of explicit legal discrimination against female borrowers, there is evidence that banks 3 See Klapper and Parker (2011) for a survey of the literature.”
Understanding Financial Inclusion in China (2015, background): “Allen et al. (2012) point out that some of these answers can be considered volun- tary exclusion (“lack of money”, “religious reasons”, “family member has one”) while the others are associated with involuntary exclusion (“too far away”, “too expensive”, “lack of documentation”, “lack of trust”).”
The Nexus of financial inclusion and financial stability : a study of trade-offs and synergies (2016, methodology): “…for shaping the interaction between financial inclusion and stability, we condition the aggregate correlation12 between the overall stability index and inclusion index on individual country characteristics, including the conditions of different financial sector architectures (Allen et al., 2012).”
Price Fluctuations and the Use of Bitcoin: An Empirical Inquiry (2015, neutral): “Cash on delivery is often used by individuals, who may not even have a bank account or a payment card, and by those distrustful or ignorant of new technologies [2].”
Factors that Matter for Financial Inclusion: Evidence from Peru (2015, positive): “A micro-data based paper by Allen et al. (2012) estimates several Probit models for a total of 123 countries to analyse the relationship between financial inclusion and individual- and country-level variables, such as regulatory aspects, the implementation”
Fintech, financial inclusion and income inequality: a quantile regression approach (2020, methodology): “FollowingAllen et al. (2016), we use variousmeasures of financial inclusion to capture access to and use of different types of formal financial services, namely: the share of the adult population (aged 15+) owning an account at a formal financial institution; the proportion of adults saving at a for”
Trust in banks (2017, result): “Allen et al., 2012). In countries with this gender effect, enhanced financial inclusion of women could contribute to higher level of trust in banks and thereby increase financial stability. Age. Trust in banks decreases with age. This result is in accordance with what Knell and Stix (2015) observe f”
Financial Inclusion, Financial Literacy and Economically Vulnerable Populations in the Middle East and North Africa (2019, positive): “These questions capture different degrees of financial inclusion on the savings and asset side and are commonly used measures within the literature (Allen et al. 2016; Demirgüç-Kunt and Klapper 2013; Demirgüç-Kunt et al. 2014; G20 Global Partnership for Financial Inclusion 2016b; Larrimore et al.…”
Financial Inclusion in Sub-Saharan Africa: Recent Trends and Determinants (2018, methodology): “Most of the existing studies find that females are less likely to be financially included (Allen et al., 2016; Aterido, Beck, & Iacovone, 2013; Demirgüç-Kunt et al., 2013; Ghosh & Vinod, 2017; Mohammed et al., 2017).”