Financial Inclusion In Asia

Transcription

1. Financial Inclusion in Asia : Meghana Ayyagari (GWU) GDN Workshop on Financial Inclusion 17th November, 2014 1
2. Agenda p   What the raw data says p  Benchmarking across countries p  Challenges p  Policy Implications 2
3. 0 20 40 60 80 100 Aggregate Financial Development High Income MENA Developing Asia Europe LAC Sub-Saharan Africa Private credit by deposit money banks and other FI to GDP (%) Bank Deposits to GDP(%) Liquid Liabilities to GDP(%) Source: Beck, Demirguc-Kunt, Levine, Cihak, and Feyen (2014) Median country in Developing Asia fares better than median developing country in Europe, LAC and Sub-Saharan Africa 3
4. Aggregate Financial Development 0 20 40 60 80 100 Private credit by deposit money banks and other FI to GDP (%) Developing Asia RoW High Inc Developing Asia RoW Developing Asia RoW Upper-middle Inc Lower-middle Inc Developing Asia RoW Low Inc The GNI/capita thresholds for income classification are: Low: <$1025, Lower-middle: $1,026-$4,035; Upper-middle: $4,036-$12,475; High Inc: >$12,475 Within each income group, the median country in Developing Asia performs better than the median country in the rest of the world (RoW). 4
5. Household Access to Finance % of adults with an account at a formal financial institution 100 90 80 70 60 50 Global Median 37% 93.3 40 30 52.8 20 27.7 10 26.7 24.4 Developing Asia MENA 17.5 0 High Income Europe LAC SSA Source: 2011 Global FINDEX Database Over 70% of adults in Developing Asia report not having an account at a formal financial institution- a bank, credit union, cooperative, post office, or microfinance institution 5
6. Household Access to Finance But this varies greatly across countries within Asia % of adults with an account at a formal financial institution 100 90 80 70 60 50 40 30 20 10 0 6 Source: 2011 Global FINDEX Database
7. Household Access to Finance The Supply Side Picture 7
8. Enterprise Access to Finance Percentage of Enterprises that Percentage of Enterprises that have a checking /savings have a line of credit/loan from account a financial institution Developing Countries in Middle East & North Africa 54.39% 13.88% Developing Asia 84.24% 32.96% Central Asia 88.23% 29.67% East Asia 91.80% 35.63% South Asia 79.72% 31.19% Southeast Asia 77.19% 35.54% The Pacific 94.56% 39.36% Africa 83.94% 19.03% Latin America & Caribbean 88.83% 53.65% Europe 92.13% 40.91% While a large percentage of firms use a checking/saving account, firms’ access to external finance is limited 8
9. Enterprise Access to Finance % of working capital financed by banks Small firms are particularly constrained in Developing Asia 9
10. Gap in Financial Inclusion for households For the whole of Developing Asia , median gap is -8.15 suggesting that the median country in Developing Asia lags behind benchmark countries in account penetration 10
11. Barriers reported by households TOP 3 BARRIERS Lack of money Geographic Access Cost 11
12. Barriers reported by enterprises Developi ng Asia Europe LAC MNA Africa No need 55 .36 64.77 65.38 48.32 37.16 Unfavorable interest rates Complex application procedures 14.75 19.84 12.30 11.74 19.25 10.81 7.13 5.81 9.64 17.41 Collateral requirements 8.21 4.94 4.62 7.55 11.56 3.36 1.13 1.06 3.77 2.26 3.22 0.40 2.42 3.04 6.05 4.29 1.80 8.41 15.93 6.32 Size of loan and maturity are insufficient Did not think it would be approved Other 12
13. Financial Inclusion in Asia Summary p   p  p  p  Mixed picture of achievements and challenges. In terms of aggregate financial development (banking sector depth and stock market turnover ratio), the median country in Developing Asia performs better than the median developing country in other regions of the world. However, in terms of financial access very few households access formal financial services and far few enterprises have access to external credit. There is also wide variation within Developing Asia with East Asia scoring high on most indicators and Central Asia performing the worst. 13
14. FINANCIAL INCLUSION IN ASIA : IMPLICATIONS FROM POLICIES AND INNOVATIONS ACROSS THE WORLD 14
15. Households and Microenterprises p   Mircocredit n  p  Microsavings n  p  Research shows limited impact of providing access to microcredit on poor households’ welfare and microenterprises’ growth Some evidence that access to formal savings might therefore result in a better protection of resources from other household members especially if the alternative is saving within the household rather than other informal means of saving outside the household (Beck, Pumak and Uras, 2014). Microinsurance n  Limited take-up. Lack of trust and liquidity constraints are significant nonprice frictions that constrain demand for microinsurance (Cole et al. 2013) 15
16. Households and Microenterprises p   Islamic Finance n  Beck, Demirguc-Kunt and Merrouche (2013) show that there not as many significant differences between conventional and Islamic banks in countries with both types of institutions. p  Branching Policies n  Social banking experiments have shown some success in countries like India but not clear whether the gains are sustainable p  Financial Literacy n  Limited effect on financial behavior, including savings behavior p  Biometric Identification n  Important innovation showing promise. Few impact evaluation studies 16
17. Households and Microenterprises p   Other n  Non-bank models – mobile banking, e-finance, and phone finance p  n  Innovations Limited adoption of technology in Developing Asia Public-private partnerships, as in the case of digitalization of government payments in Pakistan. 17
18. Small and Medium Enterprises p   Institutional Framework n  n  Introduction of credit registries or bureaus à positive impact on lending to SMEs (Brown, Jappelli and Pagano (2009) with smaller and more opaque enterprises benefiting more (Love and Mylenko, 2003). Positive effect of introducing movable collateral registries on firms' access to finance, an effect stronger among smaller firms (Love, Martínez Pería, and Singh (2012)) 18
19. Small and Medium Enterprises p   Institutional Framework n  n  Haselmann, Pistor and Vig (2009) show that changes in collateral laws were more important than changes in bankruptcy laws for the expansion of credit in twelve transition economies in the 1990s Caveat: Countervailing evidence on the effect of strengthening creditor rights by negatively affecting the demand side (Acharya and Subramian (2009) , Acharya, Amihud and Litov (2011) ,Vig (2013)) 19
20. Small and Medium Enterprises p   Market Structure and Lending Techniques n  Large and foreign banks, relative to other institutions, can have a comparative advantage at financing SMEs through arms-length lending technologies, such as asset-based lending, factoring, leasing, fixedasset lending, credit scoring, and centralized organizational structures. n  See Berger and Udell (2006) and de la Torre, Martinez Peria, and Schmukler (2010). p  Partial Credit Guarantees n  Some positive evidence n  See Lelarge, Sraer, and Thesmar (2010) p  Equity Finance n  While private equity seems promising still a nascent technology in developing countries due to various barriers 20
21. Conclusion On average , countries stand where they are predicted to be by socio-economic factors p  But large variation within the region p  Financial innovation critical for further deepening and broadening p  External finance critical for SMEs n  Access to payment/savings services priority for households n  Need competition (beyond banking) and adequate regulatory framework n  21
22. EXTRA 22
23. Barriers reported by enterprises Armenia Bangladesh China Georgia India Indonesia Korea , Rep. Pakistan Philippines Sri Lanka Thailand Median Average Eligibility Days to Days to process process business loan SME loan applications applications 9.94 7.62 34.55 43.26 50 40 5.03 5.62 19.98 10.75 16.59 9.68 2.73 2.73 31.98 33.63 44.13 33.29 15.57 10.04 22.46 23.74 19.98 10.75 23.00 20.03 Source: Beck, Demirgüç-Kunt, and Martinez Peria (2007a) Evidence of complex application procedures – takes over 30 days in some countries to process a loan 23
24. Barriers reported by enterprises Stringent collateral requirements 24
25. Benchmarking Methodology p   p  p  p  We estimate the following regression FDi,t = bXi,t+ei,t where FD is the log of an indicator of financial development, X is an array of structural country-specific factors, and the subscripts i and t relate to countries and years, respectively. The predicted value of this regression provides a time-varying benchmark for different financial sector indicators This Benchmark serves as a “structural depth line” and we can now compare the actual and predicted values to estimate a financial inclusion gap. Source: Beck and De la Torre, 2007; De la Torre, Feyen, and Ize, 2013; Beck and Feyen, 2013. 25
26. Gap in Aggregate Financial Development For the whole of Developing Asia , the median gap is 1.62 suggesting that for the median country in Developing Asia, the predicted value of Private Credit to GDP (%) is 1.62 percentage points below actual value of Private Credit to GDP (%). 26
27. Gap in Financial Inclusion for enterprises Note : Data is presented by country since number of data points per region is fewer 27