Professor Elaine Kempson

1
Professor Elaine Kempson

• Policy level response to financial exclusion in
  developed countries
• Lessons for developing economies

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Research commissioned to

• Provide an overview of policy-level responses to
  financial exclusion
• Draw lessons for countries with less developed
  banking systems
• Detailed case studies of Australia, Belgium,
  Canada, France, Great Britain and the United
  States

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Extent of banking exclusion in industrialised
countries

• 1-17 lack a bank account of any kind
• Proportion varies with
• Levels of income inequality
• Make-up of banking sector
• Extent of electronic payment of incomes
• Policy initiatives taken
• Around half have had an account in past

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Who is excluded?

• Includes disproportionate numbers of people
• with low incomes
• from indigenous and ethnic minority populations
• who are very young or very old
• who live in rural areas

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Causes of banking exclusion

• Supply factors
• Refusal by banks
• Identity requirements
• Terms and conditions of accounts
• Bank charges
• Physical access problems

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Causes of banking exclusion ctd

• Demand factors
• Income considered too low
• Fear of loss of control
• Psychological barriers
• Cultural barriers
• Religious barriers
• These often outweigh an awareness of the
  advantage of being banked

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Policy responses

• Early legislation mainly conferring right to a
  deposit account
• Voluntary charters and codes of practice
• More recent legislation to ensure access to
  appropriate banking facilities

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Voluntary charters and codes

• Developed by banks through trade bodies
• Make provision for simple life-line accounts
• Charters in France, Belgium, Germany
• Codes in Australia and Britain
• South African Charter
• Limited success need way of ensuring compliance

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Legislation

• France to strengthen existing right to an
  account
• Belgium to enforce principles in charter
• United States at state level to ensure access
  to lifeline banking
• Canada legislation stimulated and under-pins a
  voluntary agreement

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Lessons for developing economies

• Build an inclusive banking sector
• Need for low-cost simple life-line accounts
• Technology offers new possibilities
• Demand issues need to be addressed
• Local outlets are important
• As is working with intermediaries
• Promote universal access through Codes or
  legislation
• With careful monitoring of compliance

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Professor Elaine Kempson

• Policy level response to financial exclusion in
  developed countries
• Lessons for developing economies