The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute (ADBI), the Asian
Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no
responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

POLICIES TO PROMOTE
FINANCIAL INCLUSION
THORSTEN BECK
 FINANCIAL INCLUSION – A DEFINITION

• G20 definition: “a state in which all people who can use them have access to a suite of quality services,
provided at affordable prices, in a convenient manner and with dignity to the clients”
• Exclusion due to
• the lack of stable and sufficiently high income flows
• the lack of appropriate documentation
• socio-cultural barriers

• Basic supply-side constraints: cost and risk

• Need for financial innovation to overcome supply and demand-side constraints
• Tailored products, delivery channels and literacy programs

• Formal vs. informal financial service

• Informal finance: often lacking in privacy and dignity; lack of protective rules; loses out on benefits of risk
diversification
 https://globalfindex.worldbank.org
FINANCIAL INCLUSION IS ON THE RISE GLOBALLY

The Global
Findex Database
Measuring Financial Inclusion
and the Fintech Revolution

Asli
INCLUDING IN ASIA
QUESTIONS TO BE ASKED?

• How far can and should countries go in facilitating financial deepening?

• How fast can we expect LICs to catch up to MICs and MICs to HICs?
• Should 100% of population have access to savings/credit services?
• Might there be levels/speeds of financial deepening and broadening too
high for good of economy and society?
ACCESS POSSIBILITY FRONTIER – A FRAMEWORK
Market frictions
• Transaction costs
• Idiosyncratic and systemic risk
State variables:
• Invariant in the short-run and impose an upper limit on financial deepening
• Structural variables:
• Socio-economic factors (income, market size, population density, age dependency ratio, conflict)
• Available technology and infrastructure
• Policy variables:
• Macroeconomic management and credibility (inflation, exchange rate, capital account)
• Contractual and information frameworks (credit registries, court system, regulatory framework)
Constrained equilibrium outcome
ACTUAL VS. PREDICTED FINANCIAL INCLUSION
INNOVATION IS KEY
• Financial innovation: new products, new delivery channels, new institutions
• Mobile money accounts, agency banking, rainfall insurance, micro-deposit taking institutions

• Use of technology, big data, but also old concepts (e.g., group liability)
• Competition is key for innovation, but government can play catalytic role
• Level playing field – open infrastructure to all safe and sound players
• Including payment system and credit registries

• New regulatory approach to innovation

• Revert sequence of legislation-regulation-innovation

• New approach to inclusion

• Move away from credit- or savings-led inclusion to payment-led inclusion approach
 • Kenya: Third-party agents (69% to 79%)
EMPIRICAL • Pakistan: Branchless banking (8% to 18%)
EXAMPLES OF
POLICY CHANGES • Philippines: Cash agents/digital banking solutions in
RELATED TO low-income areas (20% to 25%)
DIGITAL • Liberia: Regulations linking commercial banks and
PAYMENTS USAGE community agents (28% usage rate in 2017)
• Bangladesh: Agent banking as complimentary channel
to reach unbanked/underserved (7% to 34%)

• Source: research undertaken with AFI

 WHERE WILL BE IN 2025?

• Further increases in financial inclusions might be harder to achieve!

• More on depth rather than breadth of inclusion

• Can we close the gender gap?

• Demographic changes – from Gen X to Gen Y (Millennials) and Gen Z
• Social media; further push towards digitalization
• Less brand loyalty?

• Can we learn more about usage?

AND PLEASE, LET’S KEEP IN MIND…

• Finance is NOT an objective in itself!

• Finance supports households and enterprises in their socio-economic choices and
activities
• Finance should not replace real activities; credit cannot replace income
• Finance is an enabler!
THANK YOU

THORSTEN BECK

WWW.THORSTENBECK.COM
@TL_BECK_LONDON