Banking the Poor Getting Finance 2008 Thailand Launch The World Bank November 2008

2 Access to Banking Services  How many persons have access to banking services?  What matters for access to banking services?  Reform oriented indicators - 54 countries  Africa (35 countries)  South and East Asia (6 and 8 countries), respectively,  Central America (4 countries) and Mexico.  Survey Instruments  2 questionnaires: Commercial Banks and Central Banks

3 Numbers of Accounts Vary Widely…  Barely 9 bank accounts per 000 adults in Chad.  Fewer than 35 accounts per 000 adults in Rwanda, Liberia and Madagascar  550 accounts per 000 adults in South Africa, the richest African county, with a per capita income more than tenfold that of Chad  But 2,010 accounts per 000 adults in Mauritius, the second richest country in Africa, which has the most financial access  1,352 accounts per 000 in Thailand (5th best), compared to 83 in Vietnam and 464 in Indonesia.

4 Main Measures Explored and Findings 1. Accounts per 000: income is a key factor 2. Complexity: documents to open an account, days to open an account, loan application processes - associated with reduced access 3. Costs: opening charges, maintenance costs - recurring charges and complex fee structures matter 4. Quality and Convenience Features: enhance banking services for the already banked but are not likely to bring new entrants 5. Special Schemes – basic banking, special savings vehicles: – hard to find a measurable impact upon access 6. Mobile technology, retail payments services: increase convenience / depth 7. Transparency, information, institutions, competition: associated with better access

5 1. Income Matters Most for Accounts/000 Income explains a large part of access to bank accounts

6 2. More complexity, less access for individuals Documents Needed to Open an Account :  5 in Cote d’Ivoire, Nicaragua  Only 1 in Singapore, Thailand

7 Opening an Account can be complex… Days to Open an Account More days, less access

8 More complexity, less access for firms… More complex business loan applications mean fewer small firms use working capital credit…

9 Country performance on index of business loan complexity

10 3. Some Costs Matter – Ongoing Costs  Monthly maintenance fee, as a % monthly wage is:  51.5% in Rwanda; 0.05% in Singapore  Over half of all sampled banks charge monthly fees  Fees in Africa tend to be higher ($4, vs. 0.50c in Asia)  20% of banks report other charges such as fees for a checkbook or an ATM  People dislike paying fragmented fees

11 Annual fees for cash and debit cards

12 Periodic monthly fee for current account maintenace in Thailand is 1.39 USD

13 Remittance Costs Also Matter… Higher Costs for Receiving a Banker’s Draft - Lower Financial Access

14 4. What Doesn’t Seem to Influence Access?...Convenience Features…

15 5. Special Measures don’t seem to promote access…  ‘Basic’ or simplified accounts?  However, experiments are small and new  Commercial banks schemes also don’t show association  Matched savings may work  Require governments to make matching contributions to private savings, in some agreed proportion  But such schemes require subsidies  Only offered in Singapore in our sample  Yet 22 countries offer tax incentives for savings  Many governments prefer to forgo revenue through tax waivers instead of spending on subsidies  Door Step Collection Schemes  India, Philippines, Indonesia, Ghana

16 6. Phone, Internet and Mobile Technologies overview  Banking services can be offered via ATMs, Internet, Cell Phones  No association with number of accounts  All banks in Thailand offer balance inquiries over Internet  About 50% of banks in Thailand offer balance inquieries via cell phones  M-banking holds promise

17 Mobile Technologies increase financial depth but not access

18 The network quality and interoperability index for Thailand is 0.88

19 7. What Else Matters? Increased competition, transparency, creditors rights… Banks in countries with more competitive banking sectors are less bureaucratic. Thailand:  Asset share of top three banks: less than 45%  Documents required to open an account: 1 on average Nicaragua:  Asset share of top 3 banks: 95%  Documents required to open an account: 5 on average

20 Increasing disclosure can increase access  Clear, transparent bank regulations  Transparent fees  Informed customers  Procedures for complaints  Clear credit application guidelines  Financial literacy programs

21 Increasing disclosure

22 Banking the Poor Snapshots

23 Banking the Poor Snapshots

24 Next Steps  New Regulators Survey in 140 countries  Measuring broader access to finance:  Commercial Banks  Microfinance Institutions  Development Banks  Credit Unions, Cooperatives  Part of the new CGAP initiative

25 Questions?