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Measuring microfinance access: Building on existing cross-country data Patrick Honohan World Bank...
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![Page 1: Measuring microfinance access: Building on existing cross-country data Patrick Honohan World Bank Prepared for UNDP/World Bank/IMF Workshop Washington.](https://reader034.fdocuments.net/reader034/viewer/2022051516/56649dea5503460f94ae573c/html5/thumbnails/1.jpg)
Measuring microfinance access: Building on existing cross-country data
Patrick HonohanWorld Bank
Prepared for UNDP/World Bank/IMF Workshop
Washington DC, October 26, 2004
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Outline
• Summary• Concepts• Sources
– Provider– Household users– Business users– Experts
• Moving Forward
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Summary
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Who has access to what financial services?
• We know surprisingly little – Even “how many households use formal finance?”
• Deposits / credit / insurance / modern payments technologies
• Main international databases don’t cover– HDR
– WDI
– GDDS (not a database but a standard)
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Who needs it?
• Financial service providers– Help design better ways of delivering better services
profitably on a larger scale
– Need to know market size, product and service needs, price sensitivity
• Policymakers (national, bilateral, multilateral)– Effectiveness of interventions in achieving wider policy
goals
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A convergence of information needs
• Whether the user in public or private sector, understanding current usage properly requires info on both demand and supply aspects
• Demand side– Willingness to pay
– Household wellbeing and productivity
• Supply side– Cost conditions
– Other barriers to access
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Four different sources of data
• Providers (often collected through national
regulators)
• Households
• Enterprises
• Experts
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Outputs
• Basic indicators
– For each country
– Limited in number
– Comparable across countries
– Updated every few years
• National microeconomic databases
– Allowing for detailed research including market
research
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Concepts
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Usage data is key
• But design of data collection needs to be informed by a conceptual framework
• Supply and demand determine usage
• Demand: what are the benefits of various financial services?– As it is these that will determine both private and public
policy demand
• Supply: what are the cost and other barriers?
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Elements of the demand side
• Payments – E.g. inland and international remittances –
crucial for families dependent on migrant income
• Savings mobilization – E.g. deposits
• Allocation of capital funds – Conditions for access to credit
• Monitoring users of funds – Mechanisms for building creditworthiness
• Transforming risk– Insurance, etc
(based on Levine’s functions of finance)
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Elements of the supply side - Barriers to access
• Price barriers– Cost of supply, mark-up, additional user costs
• Information barriers– How to build creditworthiness– Improving information – or reducing the need for it
• Product and service design barriers– Repayment terms, frequency– Convenience of points of service– Minimum balance requirement etc– Simple vs. multipurpose but risky products (e.g. checking a/cs)
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Sources -- provider surveys
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Example (1): why do we not know “what % of households have access to FS?”
• (Christen et al. (2004) go quite a distance but:)• Different types of FI
– banks, postal savings, agric banks, credit unions as well as specialized MFIs
– keep different types of record and many focus on accounts rather than customers
• Inactive accounts, accounts at multiple institutions, etc.
• Regulatory agencies’ first concerns (e.g. inflation control, stability) have meant priority for aggregates & big borrowers, not numbers (access)
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Example (2): alternative question “how widespread is MF?”
• Is no easier
• Dividing line: what is MF?– Types of provider– Types of user– Types of financial service
• And is less interesting than holistic approach– looking at financial services industry as a whole– and characteristics of small-scale & low-income users
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Provider surveys (1)
• Provider surveys are thus problematic for penetration data
• Need to complemented with user surveys
• But can be improved, and also useful for other dimensions.
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Provider surveys (2)
• Cost structures (The Mix - for MFIs)
• Pricing (e.g. international remittance work)
• New inquiries 60-70 countries (WB-DECRGFI)• (a) Regulators
– Branch numbers, ATMs– Average size of deposit/loan– No. & value payments transactions
• (b) Banks– Product and process technology
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Sources -- household surveys
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Household surveys (1)
• General surveys: LSMS– 25 countries (1985) have borrowing & saving module– plus a few others which have relevant questions– borrowing: how much, why, from whom, terms,
refused?– savings, formal and informal, how much– lots of control variables– limited geographical variation
• Other general surveys -- not many known in LDCs– Limited but key questions (e.g. “has savings a/c”)
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LSMS surveys with FS data (cf appendix table for details)
Albania Guatemala Nicaragua
Armenia Guyana Pakistan
Bosnia & Herzegovina India - UP & Bihar Panama
Brazil Kosovo (Yugoslavia) Peru
Bulgaria Jamaica Romania
China Kazakhstan RussiaCôte d'Ivoire Kyrgyz Republic South Africa
Ecuador Morocco Tajikistan
Ghana Nepal Viet Nam
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Household surveys (2)
• Stand-alone finance surveys -- several recent examples, e.g.
• Details: motivation for product choice/reasons for credit refusal (Brazil, India etc. World Bank 2004)
• Psychometric variables (Southern Africa, Finmark Trust, 2003-4)
• Financial diary approach
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Household surveys (3)
• Finance-only versus module in general survey?
• Cost per 1000 surveyed?
• Need for control variates (region, education, family status, occupation, etc.)?
• Frequency?
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Sources -- business surveys
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Business surveys (1)
• Public reporting for listed companies
• Synthetic use of public info (Amadeus)
• Official surveys (FRB Survey of Small Business Finances, every 5 years)
• WBES/PICS (World Bank)
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Business surveys (2)
• PICS coverage: 49 countries 2002-4• PICS asks 82 investment climate etc questions • PICS finance questions:
– sources of financing; – existence and utilization of a line of credit; – collateral, interest and duration of most recent loan; – currency denomination of total borrowing; – speed and cost of payments system; whether accounts
audited; – whether land owned or leased.
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PICS countries to dateAlbania Czech Latvia Slovakia Algeria Ecuador Lithuania Slovenia Armenia Estonia Moldova Tajikistan Azerbaijan Ethiopia Montenegro Tanzania Bangladesh Macedonia FYR Nicaragua Turkey Belarus Georgia Nigeria Uganda Bosnia & Herzegovina Guatemala Pakistan Ukraine Bolivia Honduras Peru Uzbekistan Brazil Hungary Philippines Yugoslavia Bulgaria India Poland Zambia Cambodia Kazakhstan Romania China Kenya Russia Croatia Kyrgyzstan Serbia
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Business surveys (3)
• Sample size (several hundred) is small given heterogeneity
• Coverage of micro enterprises…better done through household?
• Reliability of financial data?
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Sources -- expert surveys
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Expert surveys
• Low cost, but reliability?
• Useful for complementing other sources for facts that are locally well-known to experts
• Good for prices, time delays, institutions
• Not good for numbers of customers, total values
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Moving forward
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Outputs -- next steps
• Basic indicators– Choosing them and defining in greater detail – (Guided by the demand/supply discussion cf Table 2)– Deciding how best to coordinate collecting them– Assigning responsibilities– Budget
• National microeconomic databases– Collection of the basic indicators allows opportunities
for accelerating these– Stand-alone or part of general survey?