Access to Financial Services: A Review of the Issues and Public Policy Objectives

This paper argues that although access to finance is beneficial, data shows that universal usage is far from prevalent in many countries, especially developing countries. Also, universal access has generally not been a public policy objective and is not achievable in most countries. The paper:

• Reviews evidence on the importance of finance for economic well-being;
• Provides data on the degree of usage of basic financial services by households and firms across a sample of countries;
• Assesses the desirability of more universal access;
• Overviews the macro-economic, legal and regulatory obstacles to access using general evidence and case studies.

The paper is structured around the following topics:

• What does access to finance mean?
• What evidence is there on access, and who has or does not have it?
• What are the constraints to access?
• What can governments do to improve access?
• What are possible international actions?

The paper recommends the following actions that countries can undertake to facilitate access to financial services:

• Strengthening institutional infrastructures;
• Liberalizing markets and facilitating greater competition;
• Encouraging innovative use of know-how and technology.

The paper examines government attempts and interventions to directly broaden the access to finance, and finds that they are fraught with risks and costs, including the risk of missing the targeted groups.

The paper concludes with:

• Possible global actions aimed at improving data on access and usage;
• Areas of further analysis to help identify the constraints to broadening access.