Download Mexico - World Bank

Access to Financial Services
What Do we Know Across Countries?
Preliminary Comparisons
Finance Forum 2004
Anjali Kumar, Manuela Francisco, Tova Maria Solo,
Priya Basu, Niraj Verma,
Latin America and the Caribbean Region, Asia Region
World Bank
With contributions from John Caskey, Swarthmore College,
Clemente Durán, Universidad Nacional Autónoma de México,
Rosane Mendonça, IPEA, Brazil, Cristine Campos, IPEA and Berkeley,
Soumya Chattopadhyay, University of Maryland, Adam Parsons, consultant
Pradeep Srivastav, NCAER, Delhi
How Do Banking Services Available Vary?
GDP per
capita
Population
per branch
GDP per
branch
(US$2001)
Area per
branch
(sq. Km)
Brazil
3,152
9,331
29.4
470
Colombia
2,085
10,931
22.8
273
Mexico
4,969
11,924
59.3
236
India
448
14,888
6.7
44
USA
33,087
3,568
118.0
117
Source: Brazil, Access to Financial Services, World Bank, p.18
In terms of conventional services such as bank branches, Bank client
countries have only a third or a quarter of the USA’s service level.
But in terms of area per branch countries such as Mexico and
Colombia are better served, with half of US levels. India has a denser
branch network than the USA
How is area per branch so high in India with its low GDP per branch?
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How Many People Have a Bank Account?
Brazil (11 urban areas)
43.0%
Colombia (Bogotá city)
41.2%
Mexico (México city)
25.0%
Including compulsory savings (AFORES) 48.2%
India (UP and AP-rural)
USA (households)
England and Wales (households)
47.5%
87%
92%
Scotland
85%
(households)
Less than half the population of these countries have bank
accounts
Can obligatory schemes such as the AFORES hugely
impact on the number of banked?
How does India rank so high given that its per capita
income is the lowest of these countries?
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Why Don’t the Unbanked Use Banks?
USA*
Demand limitations: no need/no savings
No awareness
Supply limitations: Bank barriers/
(eg. high costs minimum balances;
documentations)
Perceptions of Service/Safety/Mistrust:
Lack of documentation
Privacy
Inconvenience –Location and hours
Other Reasons
Mexico
Colombia
Brazil
India
53%
7%
16%
n.a.
75%
18%
45%
70%
78%
42%
n.a.
18%
10%
22%
10%
16%
3%
2%
2%
3%
25%
3%
33%
On the demand side, lack of perceived need may be important for the
poorest
On the supply side, bank barriers are also a factor – documentation,
cost, and unfriendly service
However questions are not standardized and comparisons are
therefore difficult through these surveys
*percentage of total sample and not percentage of total reasons
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What Savings and Deposit Facilities are
Used?
Distribution of Deposits
Brazil
India
Colombia Mexico
Banks
95%
90%
85%
(54% private;
41% public)
(30% Rural Regional
Banks)
Cooperatives
0%
7%
Post Office
n.a.
2%
Family/Friends
4%
n.a.
Others
1%
1%
96%
14%
1%
Where do the unbanked save?
USA
Mexico
Informal savings – cash, money orders,
signed checks, clubs, loans, jewelry etc.
20.5%
28%
No financial savings
68.6%
56%
4%
 There is a surprisingly high role for the formal financial system in all countries
– does this suggest greater confidence?
 A high proportion of the unbanked have no financial savings – Mexico and the
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USA
How do People Receive Income?
Cash
Income in kind
Check
Deposit in a current account
Deposit in a saving account
Others
Brazil
Colombia
Mexico
68%
63%
9%
4%
22%
2%
4%
7%
2%
28%
0%
71%
5%
15%
0%
India
60%
33%
n.a.
n.a.
n.a.
n.a.
Most income is received in Cash – except in Mexico?
In the poorest countries (India) income is also received in kind
However the Latin American countries also receive direct bank deposits
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How Would People Like to Receive Income?
Brazil
Cash
Check
Deposit in a current account
Deposit in a saving account
Others
72%
2%
3%
21%
2%
Colombia
Mexico
62%
3%
30%
3%
2%
74%
6%
16%
3%
1%
There is a strong cash preference – is this because of the costs
associated with formal financial instruments?
Note that in all countries, cash preference exceeds actual receipts
in cash
Why do people prefer cash?
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What is the Demand for Credit?
Is this Demand Met?
What proportion of
respondents applied for
a loan?
Yes
No
Did the banks award
them loans?
Approved
Rejected
Under evaluation
Brazil
15%
85%
Brazil
Colombia
Mexico
9%
91%
14%
86%
Colombia
Mexico
India
3%
97%
India
(formal and
informal)
68%
32%
0%
72%
26%
2%
75%
20%
5%
20%
80%
0%
The percentage “not applying” is very high, especially in India
Only a fifth of loan applications in India were accepted; a marked
contrast to two thirds or three quarters in the Latin countries.
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Why Don’t Persons Apply for Bank Loans?
Brazil
- No Need
- Preference for own resources
- Assumed that the application would be
rejected
Too many requirements
Lack of guarantees
Don’t have a job
Low income
- High Interest rates
- Others
Colombia
Mexico
India
70%
27%
14%
37%
34%
56%
13%
35%
8%
2%
9%
16%
5%
19%
19%
7%
1%
4%
7%
4%
6%
n.a.
n.a.
17%
n.a
n.a
Lack of necessity is apparently the main reason for not applying for bank
loans, in India and Brazil – Why is this not true for Colombia and Mexico?
Non-applicants have a high expectation of rejection (Colombia and
Mexico) – what does this imply for ‘unmet’ demand?
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Why are Loan Requests Refused?
(applicants perceptions)
Brazil
Lack of enough earnings/steady income/job
Lack of guarantees
Unfeasible project
Others
56%
22%
11%
11%
Colombia
Mexico
28%
44%
1%
27%
24%
41%
7%
28%
Lack of income appears to the main perceived reason in Brazil
However the lack of guarantees seems to be important in Colombia
and Mexico – can we explore these differences further?
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What Have We Learned and Where do We
Go Next?
The proportion of persons with access to formal financial institutions in poor
countries is less than half that of well-to-do countries; they have thrice as many
persons per bank branch – but this is despite levels of income of only a fifth or even a
tenth of that of advanced comparators
Reasons for this are complex and include limited need, likelihood of refusal, high
costs, mistrust and service – better designed demand estimations are needed.
Only a small proportion of persons want credit – between 3% and 15% of the
countries surveyed – and in most Latin countries, two thirds to three quarters of
applications are successful. Non-application may be at least as interesting to examine
as rejection – many perceive that their applications will be refused due to lack of
earnings or lack of guarantees (little uniformity in results).
Preference for formal financial institutions is high across all sample countries –
this may be the norm, even if there are exceptions. Why is this so?
Cash preference is high; even when non-cash payments methods are available – is
this due to cost?
A final word of caution on comparability of the numbers - more standardized
analyses are needed.
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