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Banking services for everyone ? Barriers to bank access and use around the world

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Using information from 193 banks in 58 countries, the authors develop and analyze indicators of physical access, affordability, and eligibility barriers to deposit, loan, and payment services. They find substantial cross-country variation in barriers to banking and show that in many countries these barriers can potentially exclude a significant share of the population from using banking services. Correlations with bank- and country-level variables show that bank size and the availability of physical infrastructure are the most robust predictors of barriers. Further, the authors find evidence that in more competitive, open, and transparent economies, and in countries with better contractual and informational frameworks, banks impose lower barriers. Finally, though foreign banks seem to charge higher fees than other banks, in foreign dominated banking systems fees are lower and it is easier to open bank accounts and to apply for loans. On the other hand, in systems that are predominantly government-owned, customers pay lower fees but also face greater restrictions in terms of where to apply for loans and how long it takes to have applications processed. These findings have important implications for policy reforms to broaden access.
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Banking Services for Everyone?
Barriers to Bank Access and Use Around the World
Thorsten Beck, Asli Demirguc-Kunt and Maria Soledad Martinez Peria*
First draft: October 2006
This draft: February 2007
Abstract:
Using information from 209 banks in 62 countries, we develop new indicators of barriers to
banking services around the world, show their correlation with existing measures of outreach,
and explore their association with other bank and country characteristics suggested by theory as
potential determinants. Barriers such as minimum account and loan balances, account fees and
documentation requirements are negatively correlated with outreach and these barriers exclude a
large percentage of the population from using banking services in many countries. Factors
associated with financial depth such as the effectiveness of credit information sharing, creditor
rights and contract enforcement are highly correlated with barriers, but so are non-financial
factors such as the development of the infrastructure and the extent of media freedom. More
competitive banking systems and market-based supervisory policies are associated with lower
barriers. Contrary to conventional wisdom, government banks are not associated with lower
access barriers. Instead, bank customers face higher barriers to credit services in banking
systems which are predominantly government-owned, while a larger share of foreign bank
ownership is associated with lower barriers in deposit services.
JEL Classification: G2, G21, O16
Keywords: financial development, banking sector outreach, financing obstacles
* The authors are with the World Bank’s research department. We thank Jerry Caprio, Stijn Claessens, Simeon
Djankov, Matthew Gamser, Xavier Giné, Patrick Honohan, Leora Klapper, Inessa Love, Emanuel Rocher, Susana
Sánchez and L. Alan Winters for comments and suggestions. Edward Al-Hussainy, Andrew Claster, Subika Farazi,
Ning Jiang, and Hamid Rashid provided excellent research assistance. This paper’s findings, interpretations, and
conclusions are entirely those of the authors and do not necessarily represent the views of the World Bank, its
Executive Directors, or the countries they represent.
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1. Introduction
Over 700 dollars are required to open an account in Cameroon, an amount higher than the
GDP per capita of that country. On the other hand, no minimum amounts are required in South
Africa or Swaziland. Fees to maintain a checking account exceed 25 percent of GDP per capita
in Sierra Leone, while there are no such fees in the Philippines. The fees for transferring 250
dollars internationally are 50 dollars in the Dominican Republic, but only 30 cents in Belgium.
While most people in the developed world take access to banking services for granted, price and
non-price barriers prevent large parts of the population in developing countries from accessing
and using formal banking services. These fees observed in many countries may effectively
prevent the poor from using checking or savings accounts. Similarly, the requirement of a
physical address or of a formal sector job as eligibility criteria to open an account excludes the
majority of people in many developing countries, where a large percentage of the population
lives in rural areas and works in the informal sector.
This paper presents new indicators of barriers to bank access and use of banking services
around the world, shows their significance for outreach and relates them to bank and country
characteristics suggested by theory as potential determinants. First, through surveying the
largest banks in 62 countries, we document the extent of barriers to three banking services -
deposit, loan and payments - across three dimensions - physical access, affordability, and
eligibility. Second, we show that our barrier indicators are negatively correlated with measures
of outreach and document that barriers can potentially exclude large percentages of the
population from using banking services. Third, we explore which bank and country
characteristics are associated with these barriers. Our findings have important implications for
policies to broaden access.
2
Market frictions such as transaction costs and information asymmetries give rise to
financial institutions and markets (see Diamond 1984, 1991, Ramakrishnan and Thakor 1984,
Boyd and Prescott 1986). These market frictions, however, can also limit the extent to which
financial institutions can reach out to clients and provide access to different services. Transaction
costs that to a large extent are independent of the size of the financial transaction – deposit, loan
or payment – make outreach to clients with demand for small transactions costly. High
information asymmetries and the resulting agency problems make outreach to opaque clients
again more difficult and costly. Barriers such as high minimum account balances and fees,
multiple documentation requirements and high payment fees might reflect high transaction costs
and the contractual and business environment in which banks operate. However, they might also
reflect the competitive pressures, regulatory framework, and the availability of physical
infrastructure in the market where banks offer their services.
Theory suggests that financial market frictions that prevent broad access can be the
critical mechanism for generating persistent income inequality or poverty traps (Banerjee and
Newman, 1993; Galor and Zeira, 1993). While a large empirical literature has established the
importance of banking sector depth for GDP per capita growth, productivity growth, poverty,
firm growth and entry rates (Beck, Levine and Loayza, 2000; Demirguc-Kunt and Maksimovic,
1998; Rajan and Zingales, 1998; Beck, Demirguc-Kunt and Levine, 2007; Klapper, Laeven and
Rajan, 2007), much less is known about the determinants and implications of access to financial
services by individuals and firms. This is because data on who has access to which financial
services remain thin and inadequate. This paper contributes to closing this gap in the literature.
Our data show substantial cross-bank and cross-country variation in barriers to banking.
While banks in 18 countries do not impose any minimum balances for checking accounts, such
balances are higher than 10 percent of GDP per capita in 15 countries. While one document is
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needed to open an account in Albania, Czech Republic, Mozambique, Spain and Sweden, at least
four documents, including ID, payment slip, proof of domicile and reference letter, are required
in Bangladesh, Cameron, Chile, Nepal, Sierra Leone, Trinidad and Tobago, Uganda and Zambia,
effectively preventing large parts of the population from accessing these services. While it is
possible to apply for a loan over the phone or the Internet in Australia, Chile, Denmark, Greece,
South Africa and Spain, customers can only submit loan applications at bank headquarters or at
branches in Armenia, Ethiopia, Sierra Leone and Uganda.
We conduct consistency checks on our data and show that, in general, barriers to banking
are lower in economically and financially developed economies. Barriers are also negatively
correlated with financial outreach – measured by branches, loans and deposits per capita and an
estimate of the share of the adult population with access to financial services – and positively
correlated with financing obstacles as reported by firms. However, we also show that some
barriers seem to be more constraining than others. Specifically, we find that the fees on
consumer and SME loans relative to GDP per capita are not consistently correlated with
outreach. Similarly, the fees associated with international wire transfers and the use of ATM
cards seem orthogonal to most other outreach indicators. On the other hand, minimum balances
for checking and savings accounts, annual fees and documentation requirements associated with
these accounts, the number of delivery channels for lending products, minimum loan amounts for
SME and consumer loans relative to GDP per capita, and the days to process consumer and SME
loans are highly correlated with other outreach measures and thus seem to constitute true hurdles
to accessing formal banking services.
While double-digit ratios of minimum balances, fees and minimum loan amounts to GDP
per capita already give a first impression of the limited affordability of many of these services for
large parts of the population in a number of countries, we offer back-of-the-envelope calculations
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using data on income distribution. We find that fees to maintain checking accounts effectively
prevent more than 30 percent of the population from using such services in ten of the 62
countries in our sample.
Barriers to banking services could in principle arise as a result of banks’ rational business
decisions based on their business model, their market position, the macroeconomic, contractual
and regulatory environment in which they operate and the level of competition they face. We
explore the association between our barrier indicators and several bank and country
characteristics that proxy for the business model and macroeconomic, contractual and regulatory
frameworks to understand which policies might be more effective at reducing these barriers. We
find that bank size and thus economies of scale are an important factor explaining barriers.
Factors traditionally associated with the development of the financial sector such as upgrading
credit registries and improving the contractual framework are associated with lower barriers
mostly in terms of deposit services but, surprisingly, less for lending services. In addition, non-
financial factors such as having an efficient infrastructure and free media are also strongly
associated with lower barriers. We also find more competitive banking systems and market-
based supervisory policies are associated with lower barriers. Finally, contrary to conventional
wisdom, government banks are not associated with lower access barriers. Instead, bank
customers face higher barriers to credit services in banking systems which are predominantly
government-owned, while a larger share of foreign bank ownership is associated with lower
barriers in deposit services.
This paper is related to an emerging literature on access to financial services. Most of the
existing research and the efforts underway focus on country case studies that aim at measuring
and analyzing access to financial services at the household or firm level (see Claessens, 2006;
Claessens and Demirguc-Kunt, 2006). Few papers study this issue by focusing directly on
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banking services providers. Recently, Beck, Demirguc-Kunt and Martinez Peria (2007) present
aggregate cross-country data on banking sector outreach (such as branch and ATM penetration,
deposits per capita, and loans per capita) and show that these indicators closely track more
difficult and costly to collect micro-level statistics of household and firm use of banking
services. More directly related to our paper, Genesis (2005a) examines the costs of using bank
accounts in seven countries - Brazil, India, Kenya, Malaysia, Mexico, Nigeria, and South Africa.
However, in contrast to our study, this report focuses exclusively on deposit service affordability
in a small number of countries.
While our paper is the first systematic effort to document and analyze banking barriers
across countries, it has a number of limitations. First, our attempt to compare standard products
across a broad sample of countries is limited by differences in financial practices. For example,
while in some countries checking accounts are the prevalent form of transaction account, in other
countries savings accounts might be preferred. Furthermore, even the same type of financial
product, e.g., an SME loan, might have different definitions and features across banks and
countries. We therefore assess barriers on somewhat different deposit and loan products.
However, to the extent that standardized products are not offered across countries, it is difficult
to overcome this problem.1 Second, fees and charges might differ because of differences in the
scope and quality of the services provided rather than because of differences in pricing strategies.
Third, we focus on the largest banks, not on the whole banking system. While this seems a
restriction, by focusing on the largest banks with the most wide-spread branching structure we
capture the barriers encountered by a majority of customers in a country. Finally, our survey
focuses exclusively on banks and hence our data cannot reflect the extent of barriers to the use of
non-bank financial institutions, such as postal savings banks, finance companies and
1 We also considered asking questions on standardized loans and deposits, yet decided to collect information on
actual barriers as opposed to “hypothetical” ones based on products that might not exist in all countries.
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microfinance institutions. While these limitations suggest potential areas of further improvement,
we see this paper as an important first step in the effort to create consistent cross-country
indicators of barriers that households and firms face in accessing financial services.
The remainder of the paper is organized as follows. Section 2 discusses the survey used
to collect bank-level information. Section 3 presents the indicators and discusses their cross-
country variation. Section 4 shows that these barriers are correlated with cross-country indicators
of outreach and firms’ financing obstacles and section 5 offers back-of-the-envelope calculations
that show the impact of some of these barriers on access. Section 6 relates our indicators to bank
and country characteristics associated with the institutional, contractual and, competitive
environment, and section 7 concludes.
2. The survey
The dataset is constructed from a web-based survey with 75 questions that was sent to the
five most important banks in 115 countries in 2004 and 2005, identified based on their total asset
size or branches.2 We chose to focus on the largest banks with wide-spread branching networks
since we are interested in the barriers encountered by the average customer in each country.
Survey responses were carefully confirmed through extensive follow-up with the banks
whenever we had questions about the data provided. While we received a total of 257 responses
from banks in 88 countries, to insure representativeness, we limited the analysis in this paper to
countries for which the responding banks constitute at least 30 percent of the market in terms of
2 Data collected from bank regulators and analyzed by Barth, Caprio, and Levine (2004) indicates that on average
the five largest banks in over 100 countries account for 73 percent of bank assets and deposits.
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total loans or total deposits, or economies where we received a response from the largest bank.3
This gives us a total sample of 209 banks across 62 countries.
Table 1 presents all the countries in our sample and shows their level of economic and
financial development, as measured by GDP per capita in U.S. dollars and private credit to GDP,
respectively. Also, the table contains information on the number of banks (out of the top 5 banks)
that responded to our survey, along with the market share they represent. Our sample comprises
countries across all levels of financial and economic development. Countries range from
Ethiopia with a GDP per capita close to 100 dollars to Switzerland, where GDP per capita
exceeds 34,000 dollars. With banking sector credit at 2 percent of GDP, Mozambique is the
country with the lowest level of financial development in our sample, while Denmark and
Switzerland rank at the top with private sector credit exceeding 150 percent of GDP. In terms of
regions, our sample coverage is also quite balanced. Our dataset includes 15 countries from
Eastern Europe and Central Asia, 14 countries from sub-Saharan Africa, 9 countries in Western
Europe, 9 Latin American and Caribbean countries, 5 countries from the Middle East and North
Africa, 5 countries in South Asia, 4 countries in East Asia and one non-European developed
country (Australia).
In terms of market share, for 60 out of the 62 countries in our sample the share of
deposits captured by respondents exceeds 30 percent. Banks from France and Zimbabwe are not
included in the calculations for deposit and payment barrier indicators because the market share
of bank respondents in these countries is below the 30 percent threshold. When it comes to loans,
the share represented by bank respondents exceeds 30 percent in 57 countries. In this case, the
countries excluded from the sample are Germany, Nigeria, Romania, Swaziland, and Sweden. In
3 We determined the market share using data from Bankscope. We have data for the largest bank constituting less
than 30% of the market in only one country, Swaziland, but this ratio is 29%. In Algeria too, we only have data for
the largest bank, but this bank accounts for more than 30% of the market.
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32 (28) countries the share of deposits (loans) exceeds 50 percent. On average across countries,
the banks that responded to our sample account for 55 percent of the deposits and 52 percent of
the loans in the countries in our sample, based on data from Bankscope.
3. The indicators
This section presents our indicators of barriers to banking across countries. Tables 2, 3
and 4 present country-level averages including descriptive statistics and Figures 1 through 16
show the cross-country variation graphically.4 Table 5 reports correlations across the different
barrier indicators. We separate our indicators based on the type of service: deposit, loan and
payments. We report averages for each country calculated by weighing each banks’ responses by
their share of deposits in total deposits of all sampled banks in the case of indicators for deposit
and payment barriers, and by the share of loans for indicators of loan barriers. Also, wherever
possible, we try to distinguish between three different service dimensions: physical access,
affordability, and eligibility. Physical access refers to the points of service delivery. Greater
physical access means services are delivered in multiple and more convenient ways.
Affordability refers to the costs in terms of minimum balances and fees that bank clients need to
pay to obtain financial services, such as checking or savings accounts, consumer or SME loans,
international payment transfers and use of ATM cards. Finally, eligibility refers to the criteria (in
terms of documentation or other requirements) that determine who can access financial services
and who cannot. In the case of lending, we use the days needed to process a loan application as
an eligibility criterion since some potential bank customers might not apply for loans if they need
financing urgently and they know it takes a long time to get a decision.
4 We do not report and graph the indicators for Swaziland or Algeria, as they represent only one bank. Nevertheless,
these banks do enter the subsequent analysis.
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3.1. Deposit services
The main deposit products we consider in terms of deposit services are the checking and
savings accounts. Across countries, there are differences in the extent to which savings or
checking accounts are the dominant transaction account type. We therefore assess barriers to
deposit services based on survey questions related to both account types. Potential customers
can encounter barriers to the use of deposit services in terms of the need to visit headquarters to
open an account instead of doing it at the local bank branch or a non-branch office (physical
access), payment of high minimum balances and fees (affordability), and the requirement to
present multiple documents to open an account (eligibility). We will discuss each of these
barriers in turn. Weighted country-level averages are presented in Table 2.
Physical access
Physical access to banking services can often be hampered by long distances from the
next bank outlet (Beck, Demirguc-Kunt and Martinez Peria, 2007). However, even if there is a
sufficiently wide network of bank offices, not all of these offices might offer the same services.
We measure physical access in deposit services by considering the locations to open a deposit
account. This indicator takes values from 1 to 3 depending on whether an account can be opened
at headquarters only (1), at headquarters or a branch (2) or at headquarters, branches or a non-
branch office (3).5 While the majority of sampled banks in Greece and Sierra Leone require
customers to visit the head office to open a checking account, customers in Moldova can open
such an account at headquarters, branches and even branch-like offices. Overall, we find
5 We consider only the most local office, i.e. banks that allow customers to open an account at a branch or a non-
branch office receive the same rating (3) as banks that allow customers to open an account at headquarters, a branch
or a non-branch office.
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substantial variation in the locations to open a deposit account (Figure 1). In the median country,
customers can open accounts at headquarters or branches but not at non-branch offices.
Affordability
We characterize the affordability of deposit services across countries by looking at the
minimum balances required to open checking and savings accounts, along with the fees needed
to maintain such accounts. There is substantial variation in the ratio of the minimum balance
needed to open a checking account to GDP per capita (Figure 2). While in Cameroon and
Nigeria, the minimum balance exceeds 100 percent and in Ethiopia, Nepal, Sierra Leone and
Uganda, more than 50 percent of per capita income is required to open a checking account, the
amount is zero in 18 countries, less than half of which are developed.6 The median value for this
indicator is 0.98 percent and the average is 12.27 percent. While some of the variation in this
indicator might be explained by the denominator – GDP per capita – the correlation between the
amount necessary to open an account and GDP per capita is far from perfect (-0.29) and even in
dollar terms, there is a significant variation in minimum balances.
The ratio of the minimum balance needed to open a savings account to GDP per
capita (Figure 3) ranges from zero in nine countries (i.e., Australia, Belgium, Chile, Denmark,
Egypt, Israel, Spain, Switzerland and Turkey) to over 40 percent in Cameroon, Kenya, Nepal,
Sierra Leone and Uganda. The median value for this indicator is 1.2 percent. The required
minimum balance to open a savings account is on average only slightly below the minimum
balance in checking accounts, 9 percent for the former compared to 12.3 percent of GDP per
capita for the latter.
6 Countries for which the minimum balance to open a checking account averages zero include: Australia, Belarus,
Belgium, Brazil, Croatia, Denmark, Georgia, Germany, Israel, Lithuania, Malawi, Moldova, South Africa, Spain,
Swaziland, Sweden, Switzerland, Turkey, and Zambia.
11
As reported in Table 2, there is similar variation across countries in the balances that have
to be maintained in checking and savings accounts. Thus, the affordability barriers expand
beyond the initial stage of opening a checking or savings account. There is a high correlation
between the amounts needed to open and to maintain checking and savings accounts, although
on average, the amounts are significantly lower to maintain than to open an account, 5 percent
and 7.3 percent of GDP per capita for checking and savings accounts, respectively.7
Fees associated with maintaining a checking or savings account also vary
significantly across countries (Figures 4 and 5). While in Malawi, Sierra Leone, and Uganda
checking account fees amount to over 20 percent of GDP per capita, these accounts are free in
Bangladesh, Belarus, Ethiopia, India, Jordan, Malta, Pakistan, Philippines, and Sweden. The
median value for the fees associated with checking accounts is 0.3 percent and the average is 2.5
percent. Savings accounts fees are significantly lower than those associated with checking
accounts, ranging from zero in 28 countries to almost 4 percent of GDP per capita in Malawi and
Uganda. The average value across countries for the fees on savings account is 0.5 percent while
the median is 0.01 percent.
Eligibility
Around the world, banks demand proof of identification to open an account for a new
client. However, banks in many countries demand a variety of other documents on top of ID
cards, including recommendation letters, wage slips, and proof of domicile. To quantify these
eligibility requirements, we create indicators of the number of documents required to open
checking and savings accounts, respectively. While banks in Albania, Czech Republic,
Mozambique, Spain and Sweden demand on average only one document to open a checking
7 Given the high correlation between minimum balances to open and to maintain accounts, we will focus on the
minimum balances to open an account in the subsequent analysis.
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account, banks in Bangladesh, Cameroon, Chile, Nepal, Sierra Leone, Trinidad and Tobago,
Uganda, and Zambia require at least four documents (Figure 6). On average, a slightly smaller
number of documents are required to open a savings account (2.2) relative to a checking account
(2.6). In 9 out of 52 countries for which information is available on the number of documents
needed to open a savings account, only one type of document is required.8 On the other hand,
more than three documents are needed in Bangladesh, Cameroon, Ghana, Malta, Nepal, Sierra
Leone, South Africa, Trinidad and Tobago, and Zambia (Figure 7).
3.2. Credit services
We collected indicators of physical access, affordability and eligibility for four different
loan types – business, SME, consumer, and mortgage loans. However, due to space constraints
and because of our interest in products available to individuals and to typically constrained
smaller firms, we focus on consumer and SME loans (see Table 3). Nevertheless we report
indicators on the other loan types in Appendix Table A.1. Indicators of physical access,
affordability and eligibility barriers are highly correlated with each other across the different loan
types.
Physical access
To measure physical access for loans, we examine the locations to submit a loan
application. While customers in Armenia, Ethiopia, Nepal, Sierra Leone, Thailand, and Uganda
can only apply for loans at a bank’s headquarters and branches, customers in Australia, Chile,
Denmark, Greece, South Africa and Spain not only can use branch and non-branch outlets, but
also submit loan applications over the phone and the Internet (Figure 8). In the median and
8 These countries include: Albania, Belarus, Czech Republic, Hungary, Lithuania, Mozambique, Spain, Sri Lanka,
and Sweden.
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average country, bank customers can submit loan application at headquarters, branch and branch-
like offices.
Affordability
We measure loan affordability by looking at the minimum balances required for
consumer and SME loans and at the fees for these loans. The minimum amount for consumer
loans relative to GDP per capita ranges from less than 1 percent in Denmark and Switzerland
to 1,152 percent of GDP per capita in Nepal (see Figure 9). The median minimum amount for
consumer loans is 19.3 percent, while the average is 76.9 percent. While banks in Belarus,
Denmark, and Egypt do not specify minimum amounts for SME loans, banks in Nepal,
Georgia, and Uganda report a minimum of over 2,000 percent of GDP per capita (Figure 10).
The average minimum amount for SME loans is 408.4 percent and the median is 58 percent of
GDP per capita. Existence of high minimum loan requirements suggests that in those countries
banks do not meet the external financing needs of poorer households and smaller enterprises.
Fees on consumer loans expressed as a percentage of GDP per capita range from zero
in Belgium, Ethiopia, and Switzerland to over 6 percent in Albania and Cameroon (Figure 11).
The median fee on consumer loans is 1.3 percent and the average is 1.6 percent. Fees on SME
loans also exhibit a significant cross-country variation. Fees vary from zero in Armenia and
Switzerland to close to over 80 percent in Cameron (Figure 12). The average fee on SME loans
across countries is 3.5 percent and the median is 1.3 percent.9
9 We also computed loan fees relative to the minimum loan amount. Comparing loan fees relative to GDP per capita
and relative to the minimum loan amount yields a very high rank correlation.
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Eligibility
A crucial function of financial intermediaries is to screen borrowers. The number of
days it takes to process a loan application can be perceived as a de facto eligibility barrier,
since some borrowers might be discouraged from applying for bank loans and seek financing
elsewhere to avoid long waiting periods. For consumer loans, this indicator ranges from almost
one day in Australia, Brazil, Czech Republic, Denmark, Greece, Israel and Spain to over 20
days in Pakistan (see Figure 13). The average number of days to process a consumer loan
application is 4 and the median is closer to 3.
SME loan application are processed in less than 2 days in Denmark, Israel, and Spain but
take more than one month to process in Bangladesh, Pakistan, Philippines and Uruguay (Figure
14). Across countries, it takes an average of almost 11 days to process an SME loan application.
The median number of days is 8.
3.3. Payment services
Our indicators on payment services measure primarily affordability. We examine the
costs of transferring a small amount of funds internationally and the fees associated with using
ATM cards (see Table 4).10
The cost of transferring funds internationally varies from 0.12 percent in Belgium to
20 percent in the Dominican Republic (Figure 15).11 To compute these ratios and to make them
comparable across countries, we focus on a typical transfer of 250 dollars. On average, the cost
of transferring funds internationally is 6.3 percent or $ 15.82.
10 Though ATM cards can be used for transactions such as transferring funds across accounts, we think of ATMs as
primarily facilitating payments by allowing the withdrawal of funds.
11 While we also considered the speed of transfers in terms of days, we found little variation across banks and
countries.
15
We express the fees associated with ATM transactions as a percentage of 100 dollars.
We find that ATM fees are above 40 cents for Pakistan and Nigeria, and average 10 cents across
countries while the use of ATM is free for 50 percent of the sample (Figure 16).
3.4. Correlations
Table 5 shows the pairwise correlations between the different barrier indicators, averaged
at the country level. Most of the variables are significantly correlated with each other, although
the correlations are stronger among indicators of the same type of service (deposit, loan or
payment) than between indicators across the different services.
Among deposit service indicators, we find that banks in countries with high minimum
balances for checking accounts also require high minimum balances for savings account, as
expected. Similarly, fees and documentation requirements for checking accounts are highly
correlated with those for savings account. Also, higher fees are positively correlated with higher
minimum checking and savings deposit balances required to open deposit accounts. Finally, in
countries with high deposit fees and high minimum balances, prospective depositors are also
required to present a larger number of documents to open accounts.
Loan indicators are also correlated with each other but to a lesser extent than is the case
among deposit indicators. SME and consumer loan fees are significantly correlated with each
other and so are the loan minimum balances and the days to process SME and consumer loan
applications. The indicator on the number of locations/ways in which a potential borrower can
submit a loan application is negatively correlated with the loan minimum balances and the
number of days to process loan applications. Among the payment service indicators, the cost to
transfer funds internationally is positively correlated with the fees associated with using ATM
cards.
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Across the three different types of services, we find that countries with higher minimum
loan amounts also tend to have higher minimum deposit amounts and, in the case of consumer
loans, also higher checking fees. Further, we observe that higher loan fees are correlated with
higher costs of transferring funds internationally.
4. Barriers to banking and outreach
In this section we explore the association between our barrier indicators and existing
measures of economic development, financial depth, and banking sector outreach (Table 6). In
many ways, examining these correlations represents a consistency check on our indicators and
allows us to assess which barriers are actually constraining, in the sense that they are correlated
with less banking sector outreach.
As expected, we find that barriers to banking are negatively correlated with economic
development. Specifically, minimum balances to open accounts and fees to maintain them, the
number of documents to open accounts, minimum amounts of consumer and SME loans, and the
days to process consumer and SME loans are negatively and significantly correlated with GDP
per capita. In the same way, we find that the number of places to submit loan applications, an
indicator of lower barriers to physical loan access, is positively and significantly correlated with
GDP per capita.
Further, we find that higher barriers are consistently negatively associated with financial
development. Table 6 shows that private credit to GDP – a standard measure of financial
intermediary development – is negatively and significantly correlated with the minimum
balances to open accounts, the annual fee and the documents to open checking accounts, the
minimum amount for consumer and SME loans, and the days to process SME and consumer
loans. On the other hand, private credit to GDP is positively and significantly correlated with the
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number of locations to submit loan applications. Interestingly, the fees on consumer and SME
loans, the cost to transfer internationally, the fee for using the ATM card and the locations to
open deposit accounts are not significantly correlated with economic or financial development.
One explanation for this lack of significance could be that countries at low levels of economic
and financial development are leapfrogging using the same alternative delivery channels and
cheaper technology to provide deposit and ATM services as more developed countries.
To gauge the relationship between barriers and aggregate measures of financial sector
outreach, we utilize recently compiled data on branch penetration, the number of loan and
deposit accounts per capita (Beck, Demirguc-Kunt and Martinez Peria, 2007) and a synthetic
indicator of the proportion of adult population with access to a financial account estimated using
existing household surveys and information on accounts from banks, cooperatives and MFIs
(Honohan, 2007). These are country-level indicators, compiled from regulatory surveys and
publicly available information. We would expect countries with banks that impose higher
barriers on their customers to have fewer numbers of branches, deposit and loan accounts per
capita and an overall lower share of adult population with access to financial accounts.
The correlations in Table 6 suggest that lower barriers are indeed associated with greater
outreach. Specifically, banks in countries with a higher demographic branch penetration demand
lower minimum balances and fewer documents to open accounts, are more likely to accept loan
applications in branch-like offices or over the phone or Internet, set lower minimum SME loan
amounts, are quicker at processing loan applications, and charge lower fees for using ATM
cards. Similarly, banks in countries with higher loans per capita are more likely to accept these
applications outside headquarters, in particular, through non-traditional channels such as phone
or Internet, and take fewer days to process SME applications. Banks in countries with more
deposits per capita demand lower minimum balances and lower fees, require fewer documents to
18
open such an account, set lower minimum amounts for consumer and SME loans, charge lower
fees for consumer loans, are faster in processing loans, are more likely to accept loan
applications through non-traditional channels, and charge lower fees for using ATMs. Finally,
barriers to access and use of banking services are correlated with estimates of the share of adults
with access to an account (deposit or loan) at a financial institution. We find that the share of
adults with access to a financial account is higher in countries where banks demand lower
minimum balances and fees on savings and checking accounts, where they demand fewer
documents to open such accounts, where the consumer and SME minimum loan amount is lower,
where loans are processed more quickly, where loan applicants are more likely to be able to use
non-traditional channels, and where ATM fees are lower. Surprisingly, the possibility of using
non-branch office to open accounts is negatively correlated with this financial breadth measure,
which could indicate that technological advances such as e-finance or m-finance may be
substituting for and expanding access despite limitations in physical locations.
Higher barriers are also associated with higher financing obstacles as reported by firms.
We use responses to firm-level survey questions on “Is access to financing (e.g. collateral) a
problem to the operation and growth of your enterprise?” and “Is cost of financing (e.g. interest
rates) a problem to the operation and growth of your enterprise?” from the Investment Climate
Assessment (ICA) surveys conducted by the World Bank across 38 (access) and 39 (cost)
countries. Responses to these questions are coded between zero (no obstacle) to four (very severe
obstacle), with higher values thus indicating more severe financing constraints.12 We take the
average across all firms in a country. We find that firms report higher financing obstacles in
countries where banks impose higher minimum amounts to open checking and savings accounts
and charge higher fees to maintain these accounts, and where banks do not accept loan
12 There is a growing literature that shows the importance of financing obstacles for firm growth and financing
patterns (Beck, Demirguc-Kunt and Maksimovic, 2005; Ayyagari, Demirguc-Kunt and Maksimovic, 2006).
19
applications through non-traditional channels. Finally, firms report higher financing obstacles in
countries where banks demand a larger number of documents to open bank accounts. It is
interesting to note that firms’ financing obstacles are more significantly correlated with barriers
related to deposit services than with barriers related to payment or loan services. This suggests
that firms rely to a large extent not only on credit services, but on a whole array of financial
services from financial institutions.
These correlations are simply that – correlations. They do not imply causality. They
suggest that barriers to banking go hand in hand with less physical access to banking offices and
lower use of deposit and credit services by households and firms. However, they also show that
some of our indicators capture barriers more effectively than others. Minimum account balances
and account fees, minimum loan amounts, documentation requirements, reduced number of
delivery channels for loan products and lengthy loan processing times seem to be significant
barriers to access banking services as documented in lower financial sector penetration rates.
Loan fees as well as fees for international wire transfers and the use of ATM cards and
geographic access barriers to opening deposit accounts are either not significant barriers because
they can be circumvented through technological advances and other means or they are not
properly measured with our methodology, as they are not correlated with lower financial sector
penetration rates.
5. Financial exclusion – the effects of banking barriers
This section provides back-of-the-envelope calculations of the effects of barriers in terms
of the percentage of the population in a country that cannot afford banking services.
Specifically, we combine income and income distribution data with our information on annual
fees to maintain checking and savings accounts to compute the share of the population that does
20
not earn enough to afford using checking and saving accounts (see methodological explanation
in the appendix). Using the latest income distribution data from UNU-WIDER (2005), we utilize
information on the Gini coefficient to compute percentiles of income distribution and combine
this with income data to compute income per capita data at different percentiles of the income
distribution.13 If we follow Genesis (2005b) and assume that poor people cannot afford to spend
more than 2 percent of their annual household income on financial services, these calculations
provide us with a cut-off percentile of a country’s income distribution below which the use of
checking and saving accounts is not affordable. 14 We adjust income with the average household
size for every country.15
Table 7 shows that while in terms of fees, checking and savings accounts are affordable
for almost the entire population in many countries, there are significant outliers. In ten countries
at least 30 percent of the population cannot afford checking accounts and in Nepal as well as
several African countries, more than 50 percent of the population is priced-out of using these
services. Specifically, 54 percent of the population in Cameroon, 81 percent in Kenya, 40
percent in Madagascar, 94 percent in Malawi, 56 percent in Nepal, 89 percent in Sierra Leone
and 93 percent in Uganda cannot afford the fees for checking accounts. The fees on savings
accounts are in general less restrictive. Approximately, 34 percent of the population in Nepal, 33
percent of the population in Malawi and Uganda, and 17 percent of the Bolivian population
cannot afford the fees and charges associated with a savings account.
13 Calculations are based on Dollar and Kraay (2002) and Lopez and Serven (2006).
14 According to Genesis (2005b), the 2% limit is based on unpublished research by the South African Universal
Services Agency in the context of mandated rolling-out of telecom service to lower-income families. As both
financial transaction accounts and telecom service can be considered network products, similar assumptions on
affordability for both services seem reasonable.
15 Household size is expected to vary with income level within countries. As we do not have data available on
household size distribution, we are not able to adjust for this effect. Again, our numbers are indicative and a more
detailed analysis would require richer country-level information on the variation of household size distribution with
income distribution.
21
While these computations are rough estimates and the 2 percent cut-off may not
necessarily apply, they are still most likely conservative estimates of the share of the population
that cannot afford these services, as we do not take into account the costs imposed by minimum
balances, restricted locations to access services, and documentation requirements. As detailed by
Genesis (2005b), it is especially documentation requirements that prevent the large majority of
the population in many Sub-Saharan African countries who do not hold formal sector jobs, live
in rural areas without registered addresses and do not have IDs or passports from accessing
financial services.
6. What explains banking barriers across banks and countries?
Theory suggests that barriers to banking are the results of banks’ rational business
decisions based on their business model, their market position, the macroeconomic, contractual
and regulatory environment in which they operate and the competitive pressures they face
(Berger and Udell, 2006; Beck and de la Torre, 2007). The standard deviation of the barrier
indicators is about as large across banks within countries as it is across countries, which suggests
that both bank as well as country characteristics drive the variation in barriers. This section
therefore explores the empirical association between our barrier indicators and an array of bank
and country variables. In particular, we consider whether the size, business orientation and
ownership of the banks are associated with barriers and explore the role of physical
infrastructure, the contractual and informational frameworks, banking sector market structure,
regulatory policies and transparency in the economy in explaining cross-country variation in
these barriers. While bank-level data are from Bankscope, country-level variables are drawn
from different databases.16 Appendix Table A.2 shows definitions and sources for the
16 Bank ownership data are from Micco, Panizza and Yañez (2007), based on Bankscope data.
22
explanatory variables included in the analysis and Tables A.3 and A.4 present descriptive
statistics and correlations for all explanatory variables.
To assess the relationship between barriers and bank- and country-level characteristics,
we utilize the following regression model
Fi,k =α0 + α1 Bi + α2 Ck + εi,k , (1)
where F is one of the barriers indicators for bank i in country k, B is a matrix of bank-level
variables (the log of total assets in U.S. dollars, dummy variables for government and foreign
ownership and the loan to asset ratio), and C is a country-level variable. While we include all
bank variables in our regressions, we include only one country-level variable at a time given the
limited number of countries in our sample and the high correlation between our variables
(Appendix Table A.4). Critically, we do not control for GDP per capita because many of our
explanatory country-level variables are highly correlated with economic development. Also, we
are interested primarily in knowing which components of economic development can explain
cross-country variations in barriers, as captured by individual country characteristics. While our
analysis is conducted at the bank-level, we confirm our findings using simple correlations
between the weighted country-level averages of the barriers and the country characteristics.
We utilize different estimation techniques depending on the nature of the dependent
variable. Specifically, for all affordability indicators – constructed as minimum amounts and
fees relative to GDP per capita-, we conduct OLS regressions of the log of one plus the variable
– to account for the skewed distribution of these variables. Similarly, for the days to process
loans and documentation requirements to open an account, we use OLS regressions. For the
location variables (both for loans and deposits) capturing physical access, we utilize ordered
probit estimations to take account of the polychotomous nature of these variables with natural
order. In all cases, we drop the top one percent of the distribution of the dependent variables to
23
control for outliers. The first four rows of Table 8 report the results of a regression on just the
bank-level variables, while all subsequent rows report the results of adding the country-level
variables one at a time.
Bank characteristics
Theory provides opposing views on the impact of bank size and ownership types, on
barriers. On the one hand, large banks might be better at exploiting scale economies, thus
overcoming more easily the problem of smallness faced by financial systems in large parts of the
developing world which have clients with demand for small and few transactions and have few
customers over which fixed transaction costs can be spread (Beck and de la Torre, 2007). On the
other hand, by virtue of their size, small banks might be closer and better able to serve “smaller”
and riskier clients (Berger, Hasan and Klapper, 2004).
While the public-interest theory (Gerschenkron, 1962) justifies the creation of
government-owned banks with the necessity to target small and riskier clients ignored by private
financial institutions, a large theoretical and empirical literature suggests a mission drift of these
banks (La Porta, Lopez-de-Silanes and Shleifer, 2002), with both views having opposing
implications for the barriers imposed by government-owned banks. Similarly, while foreign-
owned banks are assumed to be more interested in large corporations and private clients with
demand for large transactions due to their limited access to soft local information (Mian, 2006),
they might have more efficient technologies, which allows them to lower cost and thus barriers
(Berger and Udell, 2006). And even if they may not serve the smaller clients themselves, the
competitive pressures they create may provide incentives for the domestic banks to do so, hence
leading to lower barriers (Rajan, 2006).
24
We measure the size of banks with the log of total assets in millions of US dollars, and
control for their ownership type with separate dummy variables for majority government- and
foreign-owned banks.17 Finally, we explore the impact of banks’ the business orientation using
the loan-asset ratio as a proxy for the degree to which banks serve retail clients (Laeven and
Levine, 2007). We conjecture that banks with a retail orientation will impose lower barriers to
attract a larger number of smaller clients, while wholesale or corporate banks might place higher
barriers to signal their lack of interest in such type of clients.
Our results suggest that larger banks demand lower minimum balances to open a
checking or savings account, charge lower checking and savings fees, require fewer documents
to open accounts, impose lower minimum loan amounts for SME and consumer loans, charge
lower fees on SME loans, need fewer days to process loans, and are more likely to accept loan
applications through non-traditional channels such as phone or Internet.
Focusing on ownership, we find that foreign banks appear to charge higher deposit fees,
but foreign ownership is not associated with significantly higher other barriers compared to
private domestic banks. It is also interesting that government-owned banks, whose existence
(despite efficiency problems) is often justified as providing access to the underserved groups, do
not seem to have significantly lower access barriers compared to private banks in our sample. If
anything, government banks take longer to screen SME loan applications.
Finally, the correlation between business orientation and barriers is mixed. While, retail,
loan-intensive banks – those with a higher ratio of loans to assets - require lower minimum
balances to open savings accounts and are more likely to accept loan applications through non-
traditional channels, they take longer to process consumer loan applications and require more
17 We also used the market share of each bank instead of log of total assets, but this variable entered only few
regressions significantly, suggesting that it is the absolute size of banks rather than their market share that drives
their business decisions on fees and requirements.
25
documents to open a checking account. Overall, these results suggest that size is the dominating
(i.e., most consistently significant) bank characteristic in explaining variation in barriers and that
scale economies play an important role in determining the extent of barriers.18
Physical Infrastructure
While the literature has paid surprisingly little attention to the relationship between
infrastructure, input costs and financial depth and breadth, our results suggest that the quality of
physical infrastructure, such as electricity networks, which is associated with the costs of doing
business for banks, can explain cross-country variation in many barriers to banking. We use
electric power transmission and distribution losses as percentage of output (Estache and
Goicoechea, 2005) to gauge the association of physical infrastructure with banking barriers.
Banks in countries with more power outages require higher minimum balances for savings
accounts, require more documents to open accounts, impose higher minimum loan amounts,
charge higher fees on consumer loans, take longer to process SME loan applications, and charge
higher fees for international wire transfers. We also used the number of telephone subscribers
per 1,000 people as an indicator of the communication infrastructure and obtained similar results.
However, unlike the energy loss measure, the communication indicator is likely to capture both
demand and supply-side constraints.
Contractual and informational framework
Theory suggests that bank barriers will be lower in countries with more effective
contractual and informational frameworks. Banks arise to overcome information asymmetries
18 These results are consistent with the observation that it is the banks in the small financial systems of Sub-Saharan
Africa that consistently impose the highest barriers on customers, arguably to recover their relatively high fixed
costs.
26
between lenders and borrowers (Diamond 1984, 1991, Ramakrishnan and Thakor 1984, Boyd
and Prescott 1986), which can lead to adverse selection and moral hazard problems. However,
the extent to which they are able to overcome these asymmetries depends on the contractual and
informational framework within which they operate. Specifically, more efficient systems of
credit information sharing allows banks to better assess loan applicants, thus potentially reducing
reliance on non-interest screening mechanisms such as minimum loan amounts and fees, while
increasing the possibility to use less personal application channels such as phone or Internet and
allowing for faster processing of loans. More effective creditor rights protection and more
efficient systems of contract enforcement might help banks overcome problems of moral hazard
and again allow them to rely less on non-interest barriers and to process loans faster. However, a
more efficient contractual and information environment might also allow banks more easily to
accept new deposit clients. An extensive empirical literature has shown the importance of
effective contractual and informational frameworks for financial sector depth (see for example
Beck and Levine, 2005). There is empirical evidence that this relationship also holds for
financial sector penetration and access to finance (Beck, Demirguc-Kunt and Martinez Peria,
2007; Beck, Demirguc-Kunt and Levine, 2005; Haselmann, Pistor and Vig, 2005; Visaria, 2006).
Here we explore whether the contractual and informational frameworks have a similar
importance for bank barriers. We utilize three indicators from the Doing Business database
(World Bank, 2006a) that measure the efficiency of credit information systems, the rights of
creditors in the reorganization and bankruptcy of a corporation, and the cost of contract
enforcement relative to GDP per capita.
Our results suggest that higher barriers reflect the higher costs imposed on banks and
their customers by an ineffective informational and contractual framework. Banks in countries
with more efficient systems of credit information sharing are more likely to accept deposits at
27
multiple locations, require lower minimum balances and fewer documents to open accounts and
allow for loan applications to be submitted through non-traditional channels. On the other hand,
banks in countries with better informational environments seem to charge higher fees on
international wire transfers. Banks in countries that more effectively protect creditors are more
likely to allow opening of bank accounts in non-branch locations, and require lower minimum
balances and documents to open a checking account. Banks in countries with poor systems of
contract enforcement require higher minimum balances on savings accounts, charge higher fees
on deposit accounts, require more documents to open accounts and impose higher minimum loan
balances. The significant association between the efficiency of contractual and informational
frameworks and lower barriers to banking thus matches the positive relationship between these
institutions and aggregate financial development or depth, established by the literature (Beck and
Levine, 2005). We note, however, that surprisingly it is mostly the barrier to deposit services that
are significantly correlated with the contractual and informational framework rather than barriers
to lending services, as one would have expected from the theoretical literature.
Market structure
Theory does not suggest an unambiguous relationship between market structure and
barriers to banking. Banks in more concentrated banking systems might either exploit their
market power imposing higher barriers or, alternatively, might face higher incentives to lend to
smaller, more opaque borrowers such as SMEs as they can recover investment in the relationship
in future periods (Petersen and Rajan, 1995). Further, the variation of barriers across countries
might be affected by the dominance of government-owned or foreign-owned banks in a banking
system; banks might impose higher or lower barriers in banking systems dominated by
government-owned or foreign-owned banks, independent of what individual banks’ own
28
ownership structure is. Specifically, competitive pressures or the lack thereof from a
predominantly government-owned or foreign-owned banking system can push individual banks
towards higher or lower banking barriers. We use data from Barth, Caprio and Levine (2004) to
assess the association between bank ownership and market structure and barriers to banking.
We find some evidence of lower barriers to deposit services in banking system with
greater foreign bank presence. Although we find that foreign banks themselves seem to charge
higher fees than other banks, in foreign dominated banking systems fees on checking accounts
are lower. Further, it is easier to open bank accounts, both in terms of the required documents
and the geographic access. On the other hand, in systems that are predominantly government-
owned, bank customers face greater restrictions in terms of where to apply for loans and the time
it takes to have applications processed is longer.
We also find that in less contestable systems, as proxied by a higher share of new bank
license application rejected, banks require higher minimum account balances, charge higher
deposit fees, require more documents to open accounts, require higher minimum consumer loan
balances and take longer to process these applications.19 However, banks in countries with more
concentrated banking systems are less likely to allow customers to open deposit accounts outside
headquarters but charge lower ATM fees, impose lower minimum amounts for SME loans, and
are faster at processing loan applications. Hence, overall we find that contestability is associated
with lower barriers, while there is no consistent relationship between market structure and
barriers.
19 We also used the H Statistics as indicator of competitiveness, following the approach by Claessens and Laeven
(2004). However, we do not find any significant relationship of this indicator with barriers. We also tried regulatory
indicators of formal bank entry requirements, but did not find consistent correlations with bank barriers.
29
Regulatory and supervisory framework
Bank regulation and supervision might have both a direct and indirect effect on the
barriers that banks impose. Some barriers such as documentation requirements might directly
result from regulatory requirements. In other cases, regulatory costs might be passed on by
banks to customers. We use three indicators to gauge the association of bank barriers with
regulatory and supervisory policies. First, we use the index on Banking Restrictions from the
Heritage Foundation, a composite index of whether foreign banks are able to operate freely, how
difficult it is to open domestic banks, what degree of regulations there are on financial market
activities, the presence of state-owned banks, whether the government influences the allocation
of credit, and whether banks are free to provide customers with insurance products and invest in
securities. Second, we use two indicators of the supervisory approach, the Official Supervision
and Private Monitoring indexes developed by Barth, Caprio and Levine (2007). Official
Supervision measures the extent to which bank supervisors can intervene into banks’ decisions in
normal and distressed times, whereas Private Monitoring measures the degree to which private
market participants such as large creditors and depositors have the means and the incentives to
monitor and discipline banks.
Banks in countries with less restrictive regulatory framework, less supervisory power and
more reliance on private monitoring have fewer barriers. We find that banks in economies with
more restrictions to banking freedom are less likely to allow that accounts are opened outside the
headquarters, demand higher minimum balances to open a checking or savings account, impose
higher fees on checking accounts, require more documentation to open deposit accounts, are less
likely to accept loan applications through non-traditional channels, impose higher minimum
balances on consumer loans, and are slower at processing loan applications. Banks in countries
with more powerful supervisors impose higher checking account fees, require more documents
30
to open accounts, and impose higher minimum SME loan amounts. Banks in countries where the
private sector has a greater role in monitoring and disciplining banks demand lower minimum
balances and fees on checking accounts, require lower minimum amounts on consumer and SME
loans, and process these loans faster. However, they also demand higher fees for using ATMs.
Our findings on the association between barriers, less restrictive regulatory policies and a focus
on private monitoring rather than powerful supervisors matches other papers that find it is
reliance on private monitoring rather than regulatory restrictions and official supervision that
foster financial development and efficiency (Barth, Caprio, and Levine, 2004; La Porta, Lopez-
de-Silanes and Shleifer, 2006; Beck, Demirguc-Kunt and Levine, 2006).
Media freedom
More transparent societies might allow for lower barriers to banking, as banks in
economies where clients have more access to information might have less leeway to impose high
barriers to banking. More transparency might also imply a higher degree of competition, as
customers can more easily compare products across banks. To gauge the relationship between
transparency and bank barriers, we use an indicator of media freedom, which measures the share
of press outlets that are owned by the government. This indicator comes from Djankov et al.
(2003) who show a negative association between this and other measures of media freedom with
economic and political freedom.
Banks in countries with lower degrees of media freedom (i.e., where a greater share is
controlled by the government) restrict the locations where accounts might be opened, impose
higher minimum balances to open accounts, require more documents to open checking or savings
accounts, need more days to process loan applications, and are less likely to accept loan
applications through non-traditional channels.
31
Overall, although we cannot infer causality from cross-country data, the results presented
in this section still have important policy implications for potential reforms to broaden access.
They show that traditional financial sector policies such as upgrading of credit information
systems and improvements in the contractual environment are likely to be associated with lower
barriers, but more on the deposit than on the lending side. However, they also underline the
importance of non-financial sector policy reforms such as improving the general infrastructure
and securing a free and vibrant media for lowering barriers. While our results stress the
importance of a competitive environment, there are no clear correlations of barriers with market
structure. Our results also suggest that in contrast to conventional wisdom, government-owned
banks do not impose lower access barriers, and to the contrary, in predominantly government-
owned systems bank customers face higher barriers, particularly in access to credit services. On
the other hand, while foreign-owned banks themselves charge higher fees on deposits, a larger
share of foreign ownership is generally associated with lower barriers, particularly in access to
deposit services. Regulatory and supervisory policies that are less restrictive and focus on private
sector monitoring rather than powerful supervisors are associated with lower barriers. Finally,
our results also emphasize the importance of scale economies in enabling lower access barriers.
Many, though not all, of these results are consistent with the literature exploring the
determinants of financial depth. As panel data or more in-depth data for individual countries
become available, future work should be able to address issues of causality and to offer more
informed evidence on the determinants of barriers.
7. Conclusions
This paper is the first effort to systematically document the existence of barriers to
banking services. Using surveys of 209 banks in 62 countries, our data show significant variation
32
in barriers to banking across countries. Though not without limitations, this effort represents an
important first step in identifying and understanding the channels through which financial
exclusion works. Barriers like high minimum deposit balances, minimum loan amounts and fees
can lead to exclusion by making these products unaffordable for large shares of the population.
For example, in our sample high fees on checking and savings accounts may effectively exclude
more than 30 percent of the population from having a checking account in ten of our 62
countries. Also, strict documentation requirements and long processing times can exclude
households and firms who cannot provide these documents or who depend on faster loan
decisions. Similarly, geographic centralization of deposit and loan decisions at headquarters
reduces physical access and increases the opportunity costs for households and firms in
accessing financial services.
Critically, several of our barrier variables are significantly correlated with indicators of
outreach and estimates of the adult population with access to financial services. Specifically,
minimum account balances and loan amounts, annual account fees, documentation requirements,
reduced number of delivery channels for loan products and lengthy loan processing times are all
negatively associated with lower banking sector outreach and a lower proportion of the adult
population with access to financial sector accounts, suggesting that these are effective barriers to
expanding access to and use of banking services in many developing countries.
Since these barriers are likely to result from rational business decisions of financial
institutions taking into account their business model and the environment they work in, it is
important to understand which bank and country characteristics explain variation in barriers
across countries and across banks. We provide suggestive evidence that factors traditionally
associated with greater financial depth such as upgrading credit registries and the contractual
framework, but also non-financial sector variables such as infrastructure and free media are
33
important correlates with lower barriers. While more competitive banking systems are
associated with lower barriers, there is no clear correlation of barriers with the actual market
structure. Contrary to conventional wisdom, government banks are not associated with lower
access barriers. In contrast, bank customers face higher barriers to credit services in banking
systems which are predominantly government-owned. On the other hand, foreign banks do
charge higher deposit fees themselves, although a larger foreign bank share is associated with
lower barriers in deposit services overall. Finally, regulatory and supervisory policies that are
less restrictive and rely more on private markets rather than on powerful supervisors are also
associated with lower barriers.
As a first attempt at capturing quantitative measures of cross-country differences in
barriers to banking along the dimensions of physical access, affordability and eligibility, this
paper is complementary to other efforts to collect data on access to financial services at the
aggregate, firm- and household levels. Research on financial access is very much in its beginning
stages and richer data sources and in-depth analysis are needed to improve our measurement and
understanding of access and its impact on economic outcomes.
34
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World Bank (2006a). Doing Business.
World Bank (2006b). Global Assessment of Bank Disclosure Practices.
37
Table 1. Sample Countries
Private
Credit to
GDP
GDP per
capita in
2000
USD
Deposit
market
share
(respondents
share out of
total
system)
Loan market
share
(respondents
share out of
total system
Number
of banks
that have
responded
Country
2004 2004 2004 2004
Albania 8.80% 1463.21 91.42% 64.24%
5
Algeria 10.20% 1991.82 34.43% 37.08%
1
Armenia 6.10% 985.93 59.63% 47.28%
4
Australia 97.60% 22082.67 32.59% 33.59%
2
Bangladesh 27.60% 401.35 56.98% 56.51%
5
Belarus n.a. 1701.42 74.58% 71.63%
3
Belgium 71.80% 23213.42 72.56% 68.57%
3
Bolivia 42.50% 1039.27 58.04% 58.87%
4
Bosnia Herzegovina n.a. 1410.06 64.04% 58.96%
4
Brazil 33.80% 3563.52 64.35% 48.61%
4
Bulgaria 30.50% 1958.16 34.87% 31.65%
3
Cameroon 8.90% 736.71 83.83% 81.36%
5
Chile 70.40% 5461.71 35.50% 36.05%
2
Colombia 21.80% 2099.44 50.48% 45.65%
5
Croatia 52.60% 4933.67 63.42% 63.69%
4
Czech Republic 30.30% 6137.49 43.00% 43.00%
2
Denmark 152.00%
30734.76 72.71% 48.81%
2
Dominican Republic 26.40% 2440.57 39.27% 42.61%
2
Egypt, Arab Rep. 54.80% 1614.65 32.05% 32.08%
2
Ethiopia 19.10% 131.69 93.73% 85.37%
4
France 87.60% 23431.63 26.23% 30.08%
2
Georgia 8.30% 879.96 85.71% 80.26%
5
Germany 112.80%
23705.48 31.91% 23.72%
3
Ghana 11.60% 278.46 69.49% 68.72%
4
Greece 71.10% 11960.44 56.92% 58.36%
3
Hungary 43.50% 5453.73 53.09% 42.43%
3
India 32.70% 547.8 36.87% 37.75%
4
Indonesia 21.20% 904.14 44.73% 40.38%
4
Israel 86.40% 17787.76 36.17% 34.75%
2
Jordan 68.10% 2000.12 83.61% 80.36%
3
Kenya 24.50% 426.56 43.82% 47.61%
3
n.a. means not available.
38
Table 1. Sample Countries (contd.)
Private
Credit to
GDP
GDP per
capita in
2000
USD
Deposit
market
share
(respondents
share out of
total
system)
Loan market
share
(respondents
share out of
total system
Number
of banks
that have
responded
Country
2004 2004 2004 2004
Korea, Rep. 125.40%
12762.22 68.95% 73.54%
6
Lebanon n.a. 5628.37 38.00% 38.00%
3
Lithuania 22.00% 4481.41 88.87% 86.77%
5
Madagascar 8.50% 229.06 72.44% 74.59%
5
Malawi 7.80% 153.58 82.36% 59.73%
3
Malta 105.70%
9435.9 44.56% 58.34%
4
Mexico 15.80% 6055.92 48.95% 45.74%
3
Moldova 19.20% 399.62 40.16% 48.32%
3
Mozambique 1.90% 275.95 48.78% 40.34%
2
Nepal n.a. 231.59 37.86% 42.40%
5
Nigeria 15.90% 401.62 32.22% 29.31%
3
Pakistan 24.90% 566.03 47.50% 44.02%
3
Peru 18.60% 2206.33 81.88% 76.40%
4
Philippines 32.50% 1087.92 41.84% 43.17%
4
Romania 8.50% 2164.64 35.01% 24.66%
4
Sierra Leone 3.90% 209.75 100.00% 100.00% 4
Slovak Republic 29.70% 4494.83 58.12% 51.93%
3
Slovenia 42.10% 10964.99 67.48% 70.68%
5
South Africa 132.80%
3346.05 70.09% 69.39%
3
Spain 115.10%
15343.24 63.75% 66.73%
4
Sri Lanka 28.00% 961.61 52.19% 51.10%
3
Swaziland n.a. 1358.05 43.40% 29.19%
1
Sweden 102.10%
28857.84 39.47% 22.43%
2
Switzerland 157.30%
34340.34 79.57% 59.19%
2
Thailand 96.30% 2355.99 38.36% 36.16%
3
Trinidad and Tobago 38.30% 8501.16 40.15% 50.27%
3
Turkey 16.90% 3196.86 50.14% 38.33%
3
Uganda 6.10% 262.4 59.27% 46.87%
3
Uruguay 34.00% 5925.78 48.52% 59.16%
4
Zambia 6.50% 338.66 46.28% 34.41%
3
Zimbabwe n.a. 456.69 28.24% 43.45%
4
n.a. means not available.
39
Table 2: Barriers to deposit services
DEPOSITS
Physical
access Affordability Eligibility
Country
Locations to
open deposit
account
(out of 3)
Minimum
amount to
open
checking
account
(% of
GDPPC)
Minimum
amount
to open
savings
account
(% of
GDPPC)
Minimum
amount to
be
maintained
in checking
account
(% of
GDPPC)
Minimum
amount to
be
maintained
in savings
account
(% of
GDPPC)
Annual
fees
checking
account
(% of
GDPPC)
Annual
fees
savings
account
(% of
GDPPC)
No. of docs.
to open
checking
account
(out of 5)
No. of docs
to open
savings
account
(out of 5)
Albania 2.73 0.85 6.08 0.85 6.08 0.19 0.39 1.00 1.00
Armenia 1.81 10.97 15.25 10.56 15.25 0.35 0.00 2.85 2.19
Australia 2.59 0.00 0.00 0.00 0.00 0.16 0.10 3.00 3.00
Bangladesh 2.00 2.28 0.89 2.28 0.79 0.00 0.00 4.57 4.57
Belarus 2.71 0.00 0.04 0.00 0.00 0.00 0.00 1.44 1.00
Belgium 2.00 0.00 0.00 0.00 0.00 0.09 0.00 1.80 1.80
Bolivia 2.00 17.40 0.81 25.44 3.93 0.83 1.78 2.53 2.33
Bosnia and
Herzegovina 2.60 0.04 0.04 0.19 0.15 0.34 0.35 1.74 1.34
Brazil 2.44 0.00 0.10 0.00 0.00 0.81 0.03 2.67 2.16
Bulgaria 2.02 0.59 0.88 0.59 0.91 0.14 0.00 1.72 1.72
Cameroon 1.88 116.39 68.26 55.88 64.75 7.87 1.22 4.00 3.11
Chile 2.42 4.33 0.00 0.00 0.00 3.38 0.42 4.42 1.58
Colombia 1.93 8.78 1.22 0.00 0.18 0.78 0.56 3.08 2.25
Croatia 2.63 0.00 1.19 0.00 0.00 0.07 0.00 2.16 2.00
Czech Rep. 2.00 0.23 1.41 0.00 1.24 0.26 0.00 1.00 1.00
Denmark 2.32 0.00 0.00 0.00 0.00 0.09 0.00 1.32 1.32
Dominican Rep. 2.67 2.94 0.70 0.58 0.41 0.66 0.00 2.66 1.99
Egypt 2.00 0.35 0.00 0.18 0.18 0.40 0.07
Ethiopia 1.92 55.41 5.50 5.11 0.00 0.00 3.77 2.14
France
Georgia 2.56 0.00 33.18 0.00 8.09 0.33 0.33 1.66 1.78
Germany 2.65 0.00 0.01 0.00 0.00 0.26 0.00
Ghana 2.15 22.69 21.89 0.09 11.99 5.90 0.58 3.62 3.24
Greece 1.21 0.64 1.27 0.64 1.27 0.02 0.02 2.53 2.26
Hungary 2.53 0.14 2.04 0.00 0.82 0.17 0.00 1.55 1.00
India 2.00 8.85 5.02 5.83 5.02 0.00 0.17 2.69 2.55
Indonesia 2.53 9.54 3.03 6.14 0.65 2.80 0.66 3.18 2.66
Israel 2.00 0.00 0.00 0.00 0.00 0.04 0.00 1.22
Jordan 1.93 16.55 5.34 1.73 0.87 0.00 0.00 2.04 2.04
Kenya 2.78 11.71 44.30 0.00 41.82 12.82 2.07 3.78 2.86
Korea 2.11 3.32 0.01 0.00 0.01 0.06 0.00 1.94 1.20
Lebanon 1.58 4.22 23.98 4.22 23.98 1.96 1.90 2.54 2.36
Lithuania 2.71 0.00 1.45 0.00 1.55 0.01 0.00 1.59 1.00
Madagascar 1.95 38.86 19.35 0.00 17.59 5.15 0.00 2.94 2.71
Malawi 2.00 0.00 17.89 0.00 17.89 21.98 3.63 3.65 2.84
Malta 2.00 0.22 0.71 0.00 0.68 0.00 0.00 3.17 3.07
Mexico 2.18 1.11 0.62 0.90 0.67 0.43 0.18 2.80 2.18
Moldova 3.00 0.00 13.13 0.00 8.26 0.53 0.00 2.31 2.06
Mozambique 2.00 29.61 15.71 14.19 7.20 0.30 1.00 1.00
40
Table 2: Barriers to deposit services (cont.)
Country DEPOSITS
Physical
access Affordability Eligibility
Locations to
open deposit
account
(out of 3)
Minimum
amount to
open
checking
account
(% of
GDPPC)
Minimum
amount
to open
savings
account
(% of
GDPPC)
Minimum
amount to
be
maintained
in checking
account
(% of
GDPPC)
Minimum
amount to
be
maintained
in savings
account
(% of
GDPPC)
Annual
fees
checking
account
(% of
GDPPC)
Annual
fees
savings
account
(% of
GDPPC)
No. of docs.
to open
checking
account
(out of 5)
No. of docs
to open
savings
account
(out of 5)
Nepal 2.34 90.66 65.39 123.77 73.83 8.28 4.97 4.11 3.92
Nigeria 2.44 106.42 22.07 0.00 1.96 0.05 0.00 3.66 1.99
Pakistan 2.00 1.59 1.59 0.33 0.71 0.00 0.00 2.64 2.43
Peru 2.00 1.66 0.53 0.00 0.00 1.44 0.50 2.42 1.87
Philippines 2.00 14.54 11.88 14.54 11.88 0.00 0.00 3.17 2.20
Romania 2.30 0.03 0.71 0.02 0.18 0.40 0.23 1.28
Sierra Leone 1.42 51.63 44.89 8.81 43.56 26.63 0.00 4.02 3.88
Slovak Rep. 2.08 0.12 0.79 0.10 0.79 0.18 0.01 1.47 1.51
Slovenia 1.50 0.01 0.03 0.01 0.02 0.17 0.00 1.88 1.88
South Africa 2.27 0.00 1.06 0.00 0.28 2.13 0.91 3.45 3.07
Spain 1.53 0.00 0.00 0.00 0.00 0.19 0.04 1.00 1.00
Sri Lanka 1.80 15.76 3.54 4.77 0.84 0.73 0.00 2.62 1.00
Sweden 1.66 0.00 0.01 0.00 0.00 0.00 0.00 1.00 1.00
Switzerland 2.00 0.00 0.00 0.00 0.00 0.08 0.00 1.14 1.14
Thailand 2.48 6.74 0.41 0.31 0.31 1.23 1.23
Trinidad and
Tobago 2.00 1.37 0.42 1.28 0.49 0.35 0.00 4.29 3.07
Turkey 2.20 0.00 0.00 0.00 0.00 0.30 0.14 3.20 2.40
Uganda 2.00 51.12 48.62 1.73 29.52 24.88 3.37 4.00 3.00
Uruguay 1.75 1.77 1.48 0.00 2.28 2.05 1.13 3.28 2.91
Zambia 1.80 0.00 7.87 0.00 7.87 4.28 4.00
Zimbabwe
Minimum 1.21 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00
5th percentile 1.53 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00
Median 2.00 0.98 1.21 0.00 0.79 0.30 0.01 2.63 2.15
Average 2.14 12.27 9.01 5.02 7.27 2.49 0.47 2.57 2.16
95th percentile 2.71 60.70 45.45 16.72 42.08 15.57 2.40 4.28 3.89
Maximum 3.00 116.39 68.26 123.77 73.83 26.63 4.97 4.57 4.57
n.a. means not available because the banks that responded to the survey account for less than 30 percent of the market
41
Table 3: Barriers to loan services
LOANS
Physical
access Affordability Eligibility
Country
Locations to
submit loan
applications
(out of 5)
Minimum
amount
consumer
loans
(% of
GDPPC)
Fees
consumer
loans
(% of
GDPPC)
Minimum
amount
SME
loans
(% of
GDPPC)
Fees
SME
loans
(% of
GDPPC)
Days to
process
consumer
loan
applications
Days to
process SME
loan
applications
Albania 2.03 214.29 7.17 1358.23 7.33 9.64 14.50
Armenia 2.00 14.74 1.98 860.58 0.00 4.83 7.62
Australia 5.00 7.31 0.52 10.06 1.29 1.00 7.19
Bangladesh 2.12 25.70 0.23 174.40 2.62 9.44 43.26
Belarus 3.28 0.89 0.00 1.15 8.06 6.20
Belgium 2.45 5.34 0.00 28.29 2.30 2.70 3.60
Bolivia 2.74 109.00 3.45 795.48 3.61 5.36 9.70
Bosnia and
Herzegovina 2.73 18.54 1.47 711.11 1.10 5.36 8.86
Brazil 4.85 1.96 3.44 8.08 2.10 1.00 3.63
Bulgaria 3.42 14.24 1.45 95.79 2.27 4.88 13.38
Cameroon 2.14 78.53 6.21 947.92 81.39 4.87 9.31
Chile 5.00 8.29 0.88 121.70 1.09 3.84 13.87
Colombia 3.47 16.40 0.97 242.96 0.09 2.51 8.22
Croatia 3.43 3.90 1.76 22.58 1.30 2.42 4.65
Czech Rep. 3.13 10.22 0.70 4.96 0.70 1.00 10.84
Denmark 5.00 0.00 2.00 0.00 2.00 0.73 1.00
Dominican Rep. 4.67 13.02 0.82 43.52 1.32 1.84 13.04
Egypt 2.81 5.84 0.01 0.00 5.38 14.43
Ethiopia 2.00 178.16 0.00 878.77 0.64 5.41 14.55
France 4.00 4.87 10.00
Georgia 2.46 34.53 1.40 2480.08 1.10 3.31 5.62
Germany
Ghana 2.63 111.94 2.04 1448.07 1.54 9.50 29.20
Greece 5.00 11.99 2.30 33.96 2.43 1.00 2.23
Hungary 3.29 4.77 3.71 58.00 1.51 5.66 7.66
India 2.44 28.79 1.19 145.17 0.84 4.17 10.75
Indonesia 3.10 31.68 4.94 9.68
Israel 4.58 1.00 1.79
Jordan 2.05 147.67 1.00 445.26 1.03 2.68 7.91
Kenya 3.27 186.42 1.84 166.44 2.10 2.52 5.66
Korea 3.78 4.19 0.37 16.99 0.29 1.88 2.73
Lebanon 4.60 32.95 1.05 1154.76 4.95 1.58 15.61
Lithuania 4.25 6.31 0.71 17.54 0.67 2.41 8.62
Madagascar 2.16 24.06 2.62 17.27 3.56 8.55 15.46
Malawi 2.12 222.36 1.00 1.72
Malta 4.20 19.26 0.45 355.91 0.28 1.34 5.69
Mexico 4.20 7.54 1.81 87.80 1.61 5.01 9.86
Moldova 2.54 31.11 2.05 71.78 1.43 1.36 4.31
Mozambique 2.15 30.71 28.61 8.66 25.84
42
Table 3: Barriers to loan services (cont.)
Country LOANS
Physical
access Affordability Eligibility
Locations to
submit loan
applications
(out of 5)
Minimum
amount
consumer
loans
(% of
GDPPC)
Fees
consumer
loans
(% of
GDPPC)
Minimum
amount
SME
loans
(% of
GDPPC)
Fees
SME
loans
(% of
GDPPC)
Days to
process
consumer
loan
applications
Days to
process SME
loan
applications
Nepal 2.00 1153.17 0.94 2970.18 16.86 3.71 10.94
Nigeria
Pakistan 3.09 146.71 0.14 234.25 0.19 20.71 33.63
Peru 3.21 21.08 1.83 54.35 0.16 1.94 3.71
Philippines 2.36 330.55 1.46 916.66 1.41 10.13 33.29
Romania
Sierra Leone 1.77 143.55 2.07 243.89 2.07 1.73 9.52
Slovak Rep. 3.64 10.26 57.89 1.13 1.75 3.54
Slovenia 2.13 1.13 1.22 5.21 0.95 1.13 3.89
South Africa 5.00 7.27 0.48 15.98 0.65 1.46 4.13
Spain 5.00 9.95 1.85 19.35 1.10 1.00 1.83
Sri Lanka 2.90 36.10 0.34 20.56 2.09 7.34 10.04
Sweden
Switzerland 3.12 0.11 0.00 11.28 0.00 1.44 3.24
Thailand 2.00 265.43 1.43 3.21 0.94 15.49 23.74
Trinidad and
Tobago 4.62 7.71 1.33 8.30 1.14 1.33 7.32
Turkey 4.15 11.83 0.95 18.57 1.41 2.94 4.61
Uganda 2.00 205.75 2.68 3141.17 2.25 1.38 4.47
Uruguay 2.26 32.62 32.62 8.51 31.45
Zambia 2.00 2.43 8.33
Zimbabwe 2.85 24.08 3.05 240.12 2.54 1.46 3.91
Minimum 1.77 0.00 0.00 0.00 0.00 0.73 1.00
5th percentile 2.00 1.63 0.00 1.61 0.12 1.00 2.11
Median 3.09 19.26 1.33 58.00 1.32 2.70 8.33
Average 3.20 76.84 1.58 408.35 3.53 4.29 10.69
95th percentile 5.00 239.59 3.61 1964.08 6.38 9.79 32.00
Maximum 5.00 1153.17 7.17 3141.17 81.39 20.71 43.26
n.a. means not available because the banks that responded to the survey account for less than 30 percent of the market
43
Table 4: Barriers to payment services
PAYMENT SERVICES
Affordability
Country Cost to transfer
funds
internationally
(% of 250
dollars)
Amount of fee
for using
ATM Cards
(% of 100
dollars)
Country Cost to transfer
funds
internationally
(% of 250
dollars)
Amount of fee
for using
ATM Cards
(% of 100
dollars)
Albania 7.70 0.00 Madagascar 4.30 0.00
Armenia 6.14 0.07 Malawi 6.42 0.08
Australia 8.05 0.00 Malta 5.59 0.03
Bangladesh 1.93 Mexico 0.40
Belarus 1.27 0.00 Moldova 11.19 0.00
Belgium 0.12 0.00 Mozambique
Bolivia 13.47 0.26 Nepal 7.10 0.00
Bosnia and
Herzegovina 3.79 0.01 Nigeria 0.50
Brazil 14.85 0.11 Pakistan 0.60
Bulgaria 5.24 0.13 Peru 6.68 0.24
Cameroon 9.15 0.00 Philippines 0.00
Chile 0.00 Romania
Colombia 0.19 Sierra Leone 6.86 0.00
Croatia 3.57 0.00 Slovak Rep. 4.38 0.19
Czech Rep. 3.99 0.19 Slovenia 2.88 0.00
Denmark 4.09 0.00 South Africa 9.53 0.34
Dominican Rep. 20.00 Spain 6.39 0.00
Egypt 0.76 0.00 Sri Lanka
Ethiopia 1.87 0.00 Sweden 8.16 0.00
France Switzerland 3.17 0.00
Georgia 7.03 0.13 Thailand
Germany Trinidad and
Tobago 3.74 0.05
Ghana 14.70 0.19 Turkey 6.34 0.00
Greece 7.42 0.00 Uganda 0.55 0.19
Hungary 3.60 Uruguay 7.18 0.14
India 6.49 0.00 Zambia 3.24 0.13
Indonesia 2.83 0.00 Zimbabwe
Israel 0.23
Jordan 5.37 0.00
Minimum 0.12 0.00
Kenya 8.43 0.15
5th percentile 0.89 0.00
Korea 7.05 0.22
Median 6.37 0.00
Lebanon 9.76 0.00
Average 6.33 0.10
Lithuania 8.72 95th percentile 14.39 0.38
Maximum 20.00 0.60
Maximum 0.12 0.00
n.a. means not available because the banks that responded to the survey account for less than 30 percent of the market
44
Table 5: Correlations between indicators of barriers
* significant at 10%; ** significant at 5%, *** significant at 1%.
Locations to Open
Deposit Account (Out of
3)
Minimum Balance to
Open Checking Account
(% of GDPPC)
Minimum Balance to
Open Savings Account
(% of GDPPC)
Annual Checking Fees
(% of GDPPC)
Annual Savings
Fees
(% of GDPPC)
Number of Documents to
Open Checking Account
(Out of 5)
Number of Documents to
Open Savings Account
(Out of 5)
Locations to Submit Loan
Applications (out of 5)
Minimum Amount
Consumer Loans
(% of GDPPC)
Minimum Amount
SME Loans
(% of GDPPC)
Fees Consumer Loan (%
of GDPPC)
Fees SME Loan (% of
GDPPC)
Days to Process
Consumer Loans
Applications
Days to Process SME
Loans Applications
Cost to Transfer Funds
Internationally (% of 250)
Minimum Balance to Open
Checking Account
(% of GDPPC) -0.093
Minimum Balance to Open
Savings Account
(% of GDPPC) -0.036 0.758***
Annual Checking Fees (%
of GDPPC) -0.151 0.381*** 0.658***
Annual Savings Fees (%
of GDPPC) 0.004 0.377*** 0.632*** 0.619***
Number of Documents to
Open Checking Account
(Out of 5) -0.114 0.426*** 0.432*** 0.474*** 0.403***
Number of Documents to
Open Savings Account
(Out of 5) -0.189 0.31** 0.434*** 0.482*** 0.435*** 0.823***
Locations to Submit Loan
Applications
(out of 5) 0.121 -0.42*** -0.419*** -0.338** -0.237* -0.135 -0.175
Minimum Amount
Consumer Loans (% of
GDPPC) 0.068 0.56*** 0.578*** 0.338** 0.717*** 0.281** 0.337** -0.365***
Minimum Amount SME
Loans (% of GDPPC) 0.045 0.526*** 0.683*** 0.438*** 0.719*** 0.261* 0.311** -0.371*** 0.626***
Fees Consumer Loan (% of
GDPPC) 0.121 0.339** 0.348** 0.177 0.127 -0.075 -0.003 -0.146 0.048 0.253*
Fees SME Loan (% of
GDPPC) -0.079 0.728*** 0.597*** 0.191 0.279* 0.23 0.22 -0.181 0.181 0.222 0.521***
Days to Process Consumer
Loan Applications 0.062 0.069 -0.038 -0.139 -0.101 0.007 -0.037 -0.435*** 0.18 0.03 0.03 0.027
Days to Process SME Loan
Applications -0.093 0.07 0.02 -0.044 -0.011 0.26* 0.207 -0.398*** 0.173 0.042 -0.153 -0.009 0.78***
Cost to Transfer Funds
Internationally (% of 250) 0.172 0.01 0.08 0.014 0.104 0.075 0.09 0.324** 0.047 0.028 0.266* 0.121 -0.085 0.074
Fees for Using ATM Card 0.047 0.075 -0.056 -0.039 0.014 0.092 0.033 0.098 -0.065 -0.016 -0.119 -0.153 0.374*** 0.257* 0.318**
45
Table 6. Barriers, financial and economic development, and financial outreach
* significant at 10%; ** significant at 5%, *** significant at 1%.
GDP per
capita
Private
Credit /
GDP
Number of
branches
per 100,000
people
Number of
Loans Per
1000 People
Number of
Deposits
per 1000
People
Penetration
(% of adults
with access
to a
financial
institution)
Business
constraint:
access to
finance
Business
constraint:
cost of
finance
Number of Places to Open Deposit
Account (Out of 3) -0.105 -0.015 -0.181 -0.375* -0.223 -0.266** -0.051 -0.048
Minimum Balance to Open
Checking Account (% of GDPPC) -0.288** -0.318** -0.286** -0.341 -0.464*** -0.373*** 0.332** 0.32**
Minimum Balance to Open Savings
Account (% of GDPPC) -0.329** -0.43*** -0.284** -0.318 -0.437** -0.433*** 0.399** 0.46***
Checking Account Annual Fee (%
of GDPPC) -0.26* -0.302** -0.231 -0.202 -0.318* -0.341** 0.368** 0.513***
Savings Account Annual Fee (% of
GDPPC) -0.254* -0.232* -0.24* -0.264 -0.405** -0.256* 0.285* 0.415**
Number of Documents Needed to
Open Checking Account (Out of 5) -0.422*** -0.349** -0.401*** -0.187 -0.42** -0.462*** 0.464*** 0.37**
Number of Documents Needed to
Open Savings Account (Out of 5) -0.308** -0.265* -0.299** -0.181 -0.357* -0.438*** 0.435*** 0.43***
Number of Places to Submit Loan
Application (out of 5) 0.468*** 0.539*** 0.445*** 0.633*** 0.427** 0.475*** -0.362** -0.369**
Minimum Amount Consumer Loan
(% of GDPPC) -0.239* -0.24* -0.211 -0.273 -0.367** -0.284** 0.117 0.161
Minimum Amount SME Loan (%
of GDPPC) -0.284** -0.336** -0.268* -0.329 -0.412** -0.369*** 0.153 0.112
Fee Consumer Loan (% of GDPPC)
-0.208 -0.29* -0.075 -0.126 -0.358** -0.196 0.076 0.16
Fee SME Loan (% of GDPPC)s -0.113 -0.156 -0.128 -0.204 -0.242 -0.13 0.108 0.225
Days to Process Consumer Loan
Applications -0.348*** -0.266* -0.299** -0.342 -0.331* -0.327** 0.129 0.098
Days to Process SME Loan
Applications -0.356*** -0.331** -0.313** -0.383* -0.37** -0.292** 0.246 0.226
Cost to Transfer Funds
Internationally (% of 250) -0.164 -0.088 -0.107 -0.091 -0.278 -0.164 -0.038 0.062
Fee for Using ATM Card -0.214 -0.16 -0.292* -0.225 -0.376* -0.257* 0.203 0.183
46
Table 7. Back-of-the envelope calculations of the share of the population that cannot afford deposit accounts
Lowest percentile for which
fee is more than 2% of HH
income
Average HH
Size Checking
Account
Annual Fee
(in 2003 USD)
Savings
Account
Annual Fee
(in 2003 USD)
GDP per capita
(in 2003 USD) Gini Coefficient
(latest available year)
Checking
Account Fee Savings
Account Fee
Albania 4.24 3.44 7.06 1811.11 0.28 1 1
Armenia 4.12 3.23 0.00 924.23 0.36 1 1
Australia 3.84 42.46 26.54 26539.40 0.31 1 1
Bangladesh 4.80 0.00 0.00 380.00 0.32 1 1
Belarus 0.00 0.00 1805.30 0.25
Belgium 2.56 26.39 0.00 29320.13 0.29 1 1
Bolivia 4.18 7.60 16.30 915.90 0.53 5 17
Bosnia and Herzegovina 6.16 6.34 1811.88 0.26
Brazil 3.79 22.58 0.84 2787.90 0.61 12 1
Bulgaria 2.71 3.57 0.00 2548.76 0.37 1 1
Cameroon 5.17 68.32 10.59 868.16 0.44 54 3
Chile 3.44 156.16 19.40 4620.02 0.57 48 4
Colombia 4.78 14.01 10.06 1795.65 0.57 6 4
Croatia 3.00 4.54 0.00 6484.10 0.31 1 1
Czech Republic 2.43 23.09 0.00 8880.78 0.23 1 1
Denmark 2.18 35.26 0.00 39181.91 0.35 1 1
Dominican Republic 3.90 12.47 0.00 1889.28 0.48 2 1
Egypt, Arab Rep. 4.67 4.65 0.81 1163.56 0.38 1 1
Ethiopia 4.83 0.00 0.00 115.75 0.30 1 1
France 2.53 29805.15 0.27
Georgia 3.52 2.89 2.89 874.42 0.45 1 1
Germany 2.29 76.97 0.00 29602.50 0.28 1 1
Ghana 5.11 21.21 2.08 359.43 0.41 37 1
Greece 2.99 3.14 3.14 15700.09 0.32 1 1
Hungary 2.67 13.95 0.00 8208.52 0.27 1 1
India 5.31 0.00 0.96 564.32 0.26 1 1
Indonesia 3.97 30.97 7.30 1105.94 0.34 10 1
Israel 3.50 6.60 0.00 16493.07 0.37 1 1
Jordan 6.16 0.00 0.00 1978.74 0.36 1 1
Kenya 4.55 58.89 9.51 459.35 0.45 81 10
Korea, Rep. 4.41 7.63 0.00 12709.67 0.37 1 1
Lebanon 111.77 108.35 5702.64 0.60
Lithuania 2.57 0.54 0.00 5369.39 0.36 1 1
47
Table 7. Back-of-the envelope calculations of the share of the population that cannot afford deposit accounts (cont.)
Lowest percentile for which fee
is more than 2% of HH income
Average HH
Size Checking
Account
Annual Fee
(in 2003 USD)
Savings
Account
Annual Fee
(in 2003 USD)
GDP per capita
(in 2003 USD) Gini Coefficient
(latest available year)
Checking
Account Fee Savings
Account Fee
Madagascar 4.89 15.99 0.00 310.57 0.47 40 1
Malawi 4.37 31.43 5.19 143.01 0.49 94 33
Malta
Mexico 4.38 27.20 11.39 6326.51 0.51 2 1
Moldova 2.48 0.00 468.16 0.44
Mozambique 4.43 0.75 251.18 0.39 1
Nepal 5.44 18.66 11.20 225.31 0.47 56 34
Nigeria 4.97 0.23 0.00 462.98 0.50 1 1
Pakistan 6.80 0.00 0.00 554.77 0.31 1 1
Peru 32.23 11.19 2238.11 0.49
Philippines 5.31 0.00 0.00 1004.02 0.50 1 1
Romania 3.13 10.95 6.30 2736.97 0.29 1 1
Sierra Leone 6.76 51.48 0.00 193.32 0.64 89 1
Slovak Republic 10.93 0.61 6071.99 0.27
Slovenia 3.07 23.91 0.00 14064.90 0.22 1 1
South Africa 4.00 77.23 33.00 3625.87 0.60 31 12
Spain 3.28 39.85 8.39 20974.39 0.31 1 1
Sri Lanka 3.84 6.92 0.00 947.72 0.47 2 1
Sweden 2.04 0.00 0.00 33670.48 0.26 1 1
Switzerland 2.42 35.08 0.00 43847.96 0.17 1 1
Thailand 3.84 2263.38 0.43
Trinidad and Tobago 3.68 29.04 0.00 8296.73 0.40 1 1
Turkey 5.05 10.20 4.76 3399.36 0.40 1 1
Uganda 4.86 57.92 7.84 232.79 0.55 93 33
Uruguay 3.26 67.12 37.00 3274.14 0.45 18 6
Zambia 5.26 383.18 0.57
Zimbabwe 4.81 615.20 0.73
48
Table 8. What Explains Barriers?
Table shows results of regressing each indicator against the four bank-level variables (two ownership dummies, loan to assets and log of assets) along with one country level variable at a
time. Regressions are estimated via OLS in all cases except for regressions on the number of places to open a deposit account and the number of places to submit a loan application where
ordered Probit models are estimated. Robust standard errors in brackets. * significant at 10%; ** significant at 5%, *** significant at 1%.
Locations to Open Deposit
Account (Out of 3)
Minimum Balance to Open
Checking Account (% of
GDPPC)
Minimum Balance to Open
Savings Account (% of
GDPPC)
Annual Checking Account
Fees (% of GDPPC)
Annual Savings Account Fees
(% of GDPPC)
Number of Documents Needed
to Open Checking Account
(Out of 5)
Number of Documents Needed
to Open Savings Account (Out
of 5)
Locations to Submit Loan
Application (out of 5)
Minimum Amount Consumer
Loan (% of GDPPC)
Minimum Amount SME Loan
(% of GDPPC)
Fees Consumer Loans (% of
Minimum Loan Amount)
Fees SME Loan (% of
Minimum Loan Amount)
Days to Process Consumer
Loan Applications
Days to Process SME Loan
Applications
Cost to Transfer Funds
Internationally (% of 250)
Fee for Using ATM Card (%
of 100)
-0.049 -0.004 -0.077 -0.102 -0.037 0.051 -0.046 -0.313 0.032 -0.731 -0.157 0.054 0.135 0.364** -0.037 0.028
Bank-Level Public
Ownership Dummy
[0.242] [0.207] [0.162] [0.102] [0.047] [0.062] [0.061] [0.235] [0.390] [0.502] [0.127] [0.164] [0.141] [0.169] [0.156] [0.047]
-0.237 -0.334 0.162 0.793*** 0.226** 0.081 0.097 -0.044 0.361 -0.151 0.056 0.058 -0.155 -0.126 0.183 0.025
Bank-Level Foreign
Ownership Dummy
[0.226] [0.274] [0.250] [0.208] [0.109] [0.067] [0.064] [0.225] [0.305] [0.532] [0.099] [0.132] [0.114] [0.140] [0.162] [0.033]
0.005 -0.385 -1.318*** -0.127 0.022 0.286* 0.089 1.232** 0.063 0.826 -0.564** 0.009 0.607** 0.177 -0.005 0.029
Bank-Level Loans /
Assets
[0.552] [0.583] [0.486] [0.357] [0.196] [0.165] [0.161] [0.552] [0.801] [1.202] [0.283] [0.356] [0.268] [0.348] [0.343] [0.094]
0.024 -0.223*** -0.249*** -0.109*** -0.025** -0.038*** -0.032*** 0.250*** -0.286*** -0.323*** -0.033 -0.049** -0.072*** -0.080*** 0.033 -0.003
Bank-Level
Log(Total Assets)
[0.042] [0.041] [0.033] [0.023] [0.010] [0.010] [0.010] [0.040] [0.058] [0.079] [0.021] [0.022] [0.022] [0.023] [0.026] [0.005]
0.022* 0.02 0.037*** 0.012 -0.002 0.009** 0.006* 0.005 0.051*** 0.065** 0.013** 0.008 0.012 0.016* 0.028*** 0.003
Electric Power
Transmission And
Distribution Losses
(% Of Output)
[0.011] [0.016] [0.013] [0.007] [0.004] [0.004] [0.003] [0.010] [0.019] [0.027] [0.005] [0.007] [0.008] [0.009] [0.007] [0.002]
0 0.008 0.012** 0.011*** 0.006*** 0.003*** 0.002*** -0.001 0.013* 0.018 -0.001 0.003 0.002 0.002 0 0
Cost of Enforcing
Contracts (% Of
Debt)
[0.004] [0.008] [0.005] [0.004] [0.002] [0.001] [0.001] [0.005] [0.008] [0.014] [0.002] [0.003] [0.002] [0.004] [0.002] [0.001]
0.075* -0.157*** 0.013 -0.012 -0.002 -0.034** -0.019 -0.06 -0.004 0.065 0.02 0.052 -0.024 -0.042 -0.041 0.006
Creditor Rights
Index
[0.042] [0.044] [0.043] [0.028] [0.016] [0.013] [0.014] [0.049] [0.064] [0.087] [0.024] [0.035] [0.024] [0.028] [0.032] [0.008]
0.100* -0.062 -0.162*** -0.024 -0.005 -0.033** -0.037** 0.129** -0.125 -0.138 -0.003 -0.036 -0.037 -0.051 0.098*** 0.004
Credit Information
Index
[0.057] [0.069] [0.056] [0.046] [0.023] [0.015] [0.015] [0.051] [0.078] [0.121] [0.025] [0.028] [0.028] [0.034] [0.036] [0.010]
-0.003 -0.003 -0.001 -0.002 0 -0.002 -0.002 -0.014** 0.011 -0.003 -0.001 -0.002 0.008*** 0.007** 0.006 -0.001
Government-Owned
Bank Share
[0.005] [0.006] [0.006] [0.002] [0.002] [0.002] [0.002] [0.006] [0.008] [0.014] [0.003] [0.003] [0.003] [0.003] [0.004] [0.001]
0.011** -0.008* -0.006 -0.006** -0.001 -0.004*** -0.005*** 0 -0.010* 0.013 0.002 0.001 0.003 0 -0.003 0.001
Foreign-Owned
Bank Share
[0.005] [0.004] [0.004] [0.003] [0.001] [0.001] [0.001] [0.005] [0.006] [0.008] [0.002] [0.002] [0.002] [0.003] [0.003] [0.001]
49
Table 8. What Explains Barriers? (cont.)
Locations to Open Deposit
Account (Out of 3)
Minimum Balance to Open
Checking Account (% of
GDPPC)
Minimum Balance to Open
Savings Account (% of
GDPPC)
Annual Checking Account
Fees (% of GDPPC)
Annual Savings Account Fees
(% of GDPPC)
Number of Documents Needed
to Open Checking Account
(Out of 5)
Number of Documents Needed
to Open Savings Account (Out
of 5)
Locations to Submit Loan
Application (out of 5)
Minimum Amount Consumer
Loan (% of GDPPC)
Minimum Amount SME Loan
(% of GDPPC)
Fees Consumer Loans (% of
Minimum Loan Amount)
Fees SME Loan (% of
Minimum Loan Amount)
Days to Process Consumer
Loan Applications
Days to Process SME Loan
Applications
Cost to Transfer Funds
Internationally (% of 250)
Fee for Using ATM Card (%
of 100)
-1.382*** -0.961 -0.596 0.422 -0.198 -0.214 -0.214 0.004 -1.501 -3.352** -0.421 -0.225 -0.868*** -1.018*** -0.239 -0.142*
Bank Concentration
[0.526] [0.730] [0.575] [0.415] [0.207] [0.156] [0.153] [0.597] [0.976] [1.343] [0.281] [0.393] [0.312] [0.389] [0.396] [0.085]
-0.005 0.009** 0.009** 0.006** 0.003* 0.003*** 0.003*** -0.004 0.015*** 0.007 -0.003 -0.003 0.005* 0.003 0 0.001
Fraction Of Entry
Applications Denied
[0.004] [0.004] [0.004] [0.002] [0.002] [0.001] [0.001] [0.004] [0.006] [0.008] [0.002] [0.002] [0.002] [0.003] [0.002] [0.001]
-0.176* 0.393*** 0.431*** 0.205** 0.029 0.126*** 0.089*** -0.365*** 0.344** 0.045 0.04 0.110* 0.127** 0.128** -0.003 0.025
Index of Banking
Restrictions [0.105] [0.127] [0.102] [0.082] [0.035] [0.026] [0.028] [0.110] [0.151] [0.231] [0.047] [0.060] [0.052] [0.061] [0.069] [0.022]
0.18 -0.262* -0.212 -0.115* -0.003 0.004 -0.051 -0.056 -0.517** -0.731*** -0.022 0.006 -0.123* -0.191** 0.025 0.052**
Private Monitoring
Index
[0.119] [0.144] [0.130] [0.067] [0.036] [0.039] [0.038] [0.120] [0.199] [0.273] [0.073] [0.083] [0.067] [0.086] [0.078] [0.024]
0.027 -0.006 0.054 0.054** 0.007 0.035*** 0.019 0.018 0.069 0.258*** 0.018 -0.001 0.03 -0.011 -0.025 0.011
Official Supervisory
Power
[0.046] [0.048] [0.041] [0.025] [0.012] [0.013] [0.013] [0.044] [0.063] [0.082] [0.023] [0.033] [0.023] [0.028] [0.027] [0.007]
-0.910*** 1.494*** 0.579* 0.384 0.039 0.268*** 0.183** -0.997*** 0.499 0.317 -0.126 0.035 0.439*** 0.531*** -0.419* -0.06
Fraction of Media
Owned by Govt.
[0.294] [0.418] [0.337] [0.254] [0.131] [0.084] [0.085] [0.330] [0.564] [0.850] [0.138] [0.192] [0.151] [0.168] [0.234] [0.039]
50
APPENDIX
Technical appendix for section 5
The use of a lognormal function to model income distribution was first suggested by Gibrat
(1931) and widely used in the subsequent literature. Recently, Lopez and Serven (2006) show
that the size distribution of income per capita is indeed very well approximated by a lognormal
density function. Specifically, they cannot reject the null hypothesis that theoretical income
quintiles shares computed from the Gini coefficient are equal to empirically observed quintile
shares from income-based household surveys.
Log normality implies the following relationship between the Gini coefficient G, the standard
deviation σ of log income and the Lorenz curve L(p):
σ = 2 Φ-1 [(1+G)/2] (1)
L(p) = Φ (Φ-1(p) - σ) (2)
where Φ(.) denotes the cumulative normal distribution. The assumption of log-normality thus
implies a one-to-one mapping of the Gini coefficient and the Lorenz curve and therefore also a
one-to-one mapping between the Gini coefficient and income percentiles. We therefore can use
the observed Gini coefficient to calculate theoretical income percentiles Pj j = 1,…,99 as follows:
Pj = L(.01j) L(.01(j-1)) j=1,…,99. (3)
Substituting in (1) and (2) yields:
Pj = Φ{Φ-1(.01j) - 2 Φ-1 [(1+G)/2]} - Φ{Φ-1(.01(j-1)) - 2 Φ-1 [(1+G)/2]} (4)
We can then compute income per capita yj for each percentile j as function of Pj and income per
capita y.
yj = yPj/0.01. (5)
We then multiply yj with household size to get to the average household income hj for each
income distribution percentile. While household size is expected to vary with income level
within countries, we do not have data available on household size distribution, and are therefore
not able to adjust for this effect. Finally, we compare hj j=1,…,99 with the annual checking and
saving account fee to determine j such that 0.02*hj < account fee and .02*hj+1 > account fee.
Income distribution percentile j thus indicates the percentage of the population that cannot afford
checking (saving) account services.
Data on income per capita and household size are from World Development Indicators and Gini
data are from UNU-WIDER (2005).
51
Table A.1: Barriers to accessing and using business and mortgage loans
LOANS
Physical
access Affordability Eligibility
Country
No. of
places to
submit loan
applications
(out of 5)
Minimum
amount
business
loan (%
of
GDPPC)
Fee
business
loan (% of
GDPPC)
Minimum
amount
mortgage
loan (%
of
GDPPC)
Fee
mortgage
loan (% of
GDPPC)
Days to
process
business
loan
applications
Days to
process
mortgage
loan
applications
Albania 2.03 2263.77 7.33 535.19 7.36
16.05 11.69
Armenia 2.00 1042.28 0.19 234.16 9.19
9.94 10.95
Australia 5.00 10.06 3.03 41.12 0.80
7.19 2.59
Bangladesh 2.12 55.28 6.46 1412.52 0.18
34.55 33.48
Belarus 7.12 1.15 0.00 1.43
7.34 8.74
Belgium 2.45 28.29 2.30 86.18 0.95
3.60 5.24
Bolivia 2.74 759.35 3.48 1124.84 3.48
23.26 15.03
Bosnia and
Herzegovina 2.73 573.97 1.20 484.92 1.49
14.70 16.65
Brazil 4.85 19.19 2.10 10.32
Bulgaria 3.42 130.35 2.05 213.32 1.49
21.38 6.84
Cameroon 2.14 16393.68 81.39 1544.77 5.84
12.91 16.97
Chile 5.00 213.20 1.09
70.63
Colombia 3.47 2131.83 0.23 11.00 5.14
Croatia 3.43 146.24 0.94 183.04 1.17
11.89 4.53
Czech Republic 3.13 4.96 0.70 84.65 0.60
8.05 6.66
Denmark 5.00 0.00 1.73 0.00 1.59
1.00 4.56
Dominican Republic 4.67 89.32 1.25 176.10 6.27
6.67 17.55
Egypt, Arab Rep. 2.81 14.61 0.35 0.00 0.01
19.29 38.72
Ethiopia 2.00 981.67 0.64 712.65 0.68
14.55 15.00
France 4.00 18.22 24.67
Georgia 2.46 2345.59 1.01 290.71 0.73
5.03 4.56
Germany
Ghana 2.63 1044.39 1.31 1320.35 2.01
19.07
Greece 5.00 13.98 2.43 80.86 6.70
4.77 5.43
Hungary 3.29 58.00 3.31 29.00 1.59
10.04 19.94
India 2.44 57.77 0.93 145.17 0.74
19.98 9.45
Indonesia 3.10 16.59 6.07
Israel 4.58 1.79 12.08
Jordan 2.05 354.70 1.03 362.27 0.95
8.16 7.24
Kenya 3.27 193.78 1.57 5.66
Korea, Rep. 3.78 16.99 0.29 4.19 0.37
2.73 2.36
Lebanon 4.60 4470.83 5.40 409.00 1.95
15.61 9.26
Lithuania 4.25 17.54 0.88 65.83 0.67
9.83 8.48
52
Table A.1: Barriers to accessing and using business and mortgage loans (cont.)
LOANS
Physical
access
Affordability Eligibility
Country
No. of
places to
submit loan
applications
(out of 5)
Minimum
amount
business
loan (%
of
GDPPC)
Fee
business
loan (% of
GDPPC)
Minimum
amount
mortgage
loan (%
of
GDPPC)
Fee
mortgage
loan (% of
GDPPC)
Days to
process
business
loan
applications
Days to
process
mortgage
loan
applications
Madagascar 2.16 17.27 3.56 18.60
Malawi 2.12 306.05 1.32 1738.08 17.37
15.39 14.16
Malta 4.20 529.00 0.28 275.38 0.27
5.64 2.74
Mexico 4.20 101.93 1.27 298.56 1.40
15.70 28.25
Moldova 2.54 64216.77 1.34 428.58 1.09
7.31 3.90
Mozambique 2.15 28.61 71.53 25.84 34.21
Nepal 2.00 18.57 2147.93 1.00
9.53 9.50
Nigeria
Pakistan 3.09 0.12 954.59 0.08
31.98 28.44
Peru 3.21 429.43 0.16 410.39 6.50
10.63 3.81
Philippines 2.36 920.23 1.41 763.35 4.37
44.13 12.21
Sierra Leone 1.77 218.23 1.76 5157.40 1.00
11.53 4.66
Slovak Republic 3.64 50.91 1.13 71.15 3.06 4.67
Slovenia 2.13 5.21 0.38 94.90 1.30
4.19 7.60
South Africa 5.00 15.98 0.65 142.37 0.47
2.73 5.55
Spain 5.00 19.35 1.06 100.19 0.89
1.83 3.22
Sri Lanka 2.90 20.56 2.29 51.64 1.83
15.57 20.61
Sweden
Switzerland 3.12 11.28 0.00 22.57 0.00
3.24 1.56
Thailand 2.00 0.00 0.55 42.74 22.46 24.59
Trinidad and Tobago 4.62 8.30 1.24 93.03 1.02
10.41 7.50
Turkey 4.15 74.26 1.94 2.16
13.75
Uganda 2.00 7039.03 1.51 5.15
Uruguay 2.26 32.62 31.52
Zambia 2.00 2.23 10.67
Zimbabwe 2.85 263.49 2.54 7.91
n.a. means not available because the banks that responded to the survey account for less than 30 percent of the market
53
Table A.2: Definition and sources for explanatory variables in Table 8
Variable Source
Bank-level Government Ownership Dummy
Bank-level Foreign Ownership Dummy Micco, Panizza, andYanez (2007)
Bank-level Loans / Assets
Bank-level Total Assets
Bank Concentration BankScope Database (August 2006). Fitch Ratings/Bureau van Dijk
Electric Power Transmission and
Distribution Losses (% of output) Estache and Goicoechea. (2005)
Credit Information Index
Costs of Enforcing Contracts (% of debt)
Legal Rights Index World Bank (2006a)
Govt. Bank Share
Foreign Bank Share
Fraction Of Entry Applications Denied
Official Supervisory Power
Private Monitoring Index
Barth, Caprio, Levine. (2004).
Index of Banking Restrictions Index of Economic Freedom 2006. The Heritage Foundation/The Wall Street Journal
Share of Media Outlets Owned by the
Government Djankov et al. (2003)
54
Table A.3. Summary Statistics for Explanatory Variables in Table 8
Obs. Std. Dev. Mean Min Median Max
Bank-Level Public Ownership Dummy 191 0.40 0.19 0.00 0.00 1.00
Bank-Level Foreign Ownership Dummy 191 0.42 0.22 0.00 0.00 1.00
Bank-Level Loans / Assets 199 0.17 0.46 0.00 0.47 0.80
Bank-Level Log(Total Assets) 199 2.47 14.64 9.23 14.50 21.06
Electric Power Transmission And Distribution Losses
(% Of Output) 192 9.10 15.15 2.90 14.61 49.89
Enforcing Contracts - Cost (% Of Debt) 199 22.99 23.98 5.20 18.60 136.50
Getting Credit - Legal Rights Index 199 1.86 5.07 1.00 5.00 9.00
Getting Credit - Credit Information Index 199 2.01 3.08 0.00 3.00 6.00
Bank Concentration 207 0.16 0.64 0.34 0.63 1.00
Government-Owned Banks 153 21.99 19.75 0.00 12.16 95.78
Foreign-Owned Banks 150 27.44 38.71 0.00 36.30 90.00
Fraction Of Entry Applications Denied 133 28.31 24.02 0.00 15.38 100.00
Index of Banking Restrictions 207 0.97 2.74 1.00 3.00 5.00
Private Monitoring Index 120 1.10 7.75 6.00 8.00 10.00
Official Supervisory Power 165 2.22 11.33 6.00 12.00 14.00
Fraction of Media Owned by Govt. 158 0.35 0.21 0.00 0.00 1.00
55
Table A.4. Correlation between Explanatory Variables in Table 8
* significant at 10%; ** significant at 5%, *** significant at 1%.
Electric Power
Transmission And
Distribution Losses (%
Of Output)
Enforcing Contracts -
Cost (% Of Debt)
Getting Credit - Legal
Rights Index
Getting Credit - Credit
Information Index
Bank Concentration
Government-Owned
Banks
Foreign-Owned Banks
Fraction Of Entry
Applications Denied
Index of Banking
Restrictions
Private Monitoring Index
Official Supervisory
Power
Fraction of Media
Owned by Govt.
Electric Power
Transmission And
Distribution Losses (%
Of Output)
1
Enforcing Contracts -
Cost (% Of Debt) 0.312** 1
Getting Credit - Legal
Rights Index -0.024 0.06 1
Getting Credit - Credit
Information Index -0.38*** -0.267** -0.127 1
Bank Concentration -0.376*** 0.053 0.17 -0.153 1
Government-Owned
Banks 0.163 0.341** -0.156 -0.232 -0.143 1
Foreign-Owned Banks 0.102 -0.196 0.092 -0.074 0.062 -0.401*** 1
Fraction Of Entry
Applications Denied 0.244 0.438*** -0.212 -0.129 -0.039 0.249 0.031 1
Index of Banking
Restrictions 0.427*** 0.444*** -0.116 -0.445*** -0.109 0.625*** -0.353** 0.395** 1
Private Monitoring
Index -0.426** -0.218 -0.161 0.55*** -0.075 -0.045 -0.073 0.026 -0.033 1
Official Supervisory
Power 0.288** 0.179 -0.028 -0.251* -0.065 0.1 0.182 0.196 0.215 -0.201 1
Fraction of Media
Owned by Govt. 0.146 -0.019 -0.169 -0.6*** 0.223 0.305* 0.013 0.399** 0.35** -0.376** 0.233 1
Figure 1. Locations to Open a Deposit Accounts
Moldova
Kenya
Albania
Belarus
Lithuania
Dominican Republic
Germany
Croatia
Bosnia and Herzegovina
Australia
Georgia
Indonesia
Hungary
Thailand
Nigeria
Brazil
Chile
Nepal
Denmark
Romania
South Africa
Turkey
Mexico
Ghana
Korea, Rep.
Slovak Republic
Bulgaria
Uganda
Trinidad and Tobago
Switzerland
Philippines
Peru
Pakistan
Mozambique
Malta
Malawi
Israel
India
Egypt, Arab Rep.
Czech Republic
Bolivia
Belgium
Bangladesh
Madagascar
Colombia
Jordan
Ethiopia
Cameroon
Armenia
Sri Lanka
Zambia
Uruguay
Sweden
Lebanon
Spain
Slovenia
Sierra Leone
Greece
0
1
2
3
Locations To Open A Deposit Account (Out Of 3)
Sample size: 58 countries
Figure 2. Minimum Balance to Open Checking Account (% of GDPPC)
Cameroon
Nigeria
Nepal
Ethiopia
Sierra Leone
Uganda
Madagascar
Mozambique
Ghana
Bolivia
Jordan
Sri Lanka
Philippines
Kenya
Armenia
Indonesia
India
Colombia
Thailand
Chile
Lebanon
Korea, Rep.
Dominican Republic
Bangladesh
Uruguay
Peru
Pakistan
Trinidad and Tobago
Mexico
Albania
Greece
Bulgaria
Egypt, Arab Rep.
Czech Republic
Malta
Hungary
Slovak Republic
Bosnia and Herzegovina
Romania
Slovenia
Zambia
Turkey
Switzerland
Sweden
Spain
South Africa
Moldova
Malawi
Lithuania
Israel
Germany
Georgia
Denmark
Croatia
Brazil
Belgium
Belarus
Australia
0
50
100
150
Minimum Balance To Open Checking Account (% Of Gdppc)
Sample size: 58 countries
Figure 3. Minimum Balance to Open a Savings Account (% of GDPPC)
Cameroon
Nepal
Uganda
Sierra Leone
Kenya
Georgia
Lebanon
Nigeria
Ghana
Madagascar
Malawi
Mozambique
Armenia
Moldova
Philippines
Zambia
Albania
Ethiopia
Jordan
India
Sri Lanka
Indonesia
Hungary
Pakistan
Uruguay
Lithuania
Czech Republic
Greece
Colombia
Croatia
South Africa
Bangladesh
Bulgaria
Bolivia
Slovak Republic
Romania
Malta
Dominican Republic
Mexico
Peru
Trinidad and Tobago
Thailand
Brazil
Bosnia and Herzegovina
Belarus
Slovenia
Sweden
Korea, Rep.
Germany
Turkey
Switzerland
Spain
Israel
Egypt, Arab Rep.
Denmark
Chile
Belgium
Australia
0
20
40
60
80
Minimum Balance To Open Savings Account (% Of Gdppc)
Sample size: 58 countries
Figure 4. Annual Fees for a Checking Account (% of GDPPC)
Sierra Leone
Uganda
Malawi
Kenya
Nepal
Cameroon
Ghana
Madagascar
Chile
Indonesia
South Africa
Uruguay
Lebanon
Peru
Bolivia
Brazil
Colombia
Sri Lanka
Dominican Republic
Moldova
Mexico
Egypt, Arab Rep.
Romania
Armenia
Trinidad and Tobago
Bosnia and Herzegovina
Georgia
Turkey
Czech Republic
Germany
Albania
Spain
Slovak Republic
Slovenia
Hungary
Australia
Bulgaria
Denmark
Belgium
Switzerland
Croatia
Korea, Rep.
Nigeria
Israel
Greece
Lithuania
Sweden
Philippines
Pakistan
Malta
Jordan
India
Ethiopia
Belarus
Bangladesh
0
5
10
15
20
25
Annual Fee For Checking Account (% Of Gdppc)
Sample size: 55 countries
Figure 5. Annual Fees for a Savings Account (% of GDPPC)
Nepal
Malawi
Uganda
Kenya
Lebanon
Bolivia
Cameroon
Uruguay
South Africa
Indonesia
Ghana
Colombia
Peru
Chile
Albania
Bosnia and Herzegovina
Georgia
Mozambique
Romania
Mexico
India
Turkey
Australia
Egypt, Arab Rep.
Spain
Brazil
Greece
Slovak Republic
Trinidad and Tobago
Switzerland
Sweden
Sri Lanka
Slovenia
Sierra Leone
Philippines
Pakistan
Nigeria
Moldova
Malta
Madagascar
Lithuania
Korea, Rep.
Jordan
Israel
Hungary
Germany
Ethiopia
Dominican Republic
Denmark
Czech Republic
Croatia
Bulgaria
Belgium
Belarus
Bangladesh
Armenia
0
1
2
3
4
5
Annual Fee For Savings Account (% Of Gdppc)
Sample size: 56 countries
Figure 6. Number of Documents Needed to Open a Checking Account
Bangladesh
Chile
Trinidad and Tobago
Zambia
Nepal
Sierra Leone
Uganda
Cameroon
Kenya
Ethiopia
Nigeria
Malawi
Ghana
South Africa
Uruguay
Turkey
Indonesia
Philippines
Malta
Colombia
Australia
Madagascar
Armenia
Mexico
India
Brazil
Dominican Republic
Pakistan
Sri Lanka
Lebanon
Bolivia
Greece
Peru
Moldova
Croatia
Jordan
Korea, Rep.
Slovenia
Belgium
Bosnia and Herzegovina
Bulgaria
Georgia
Lithuania
Hungary
Slovak Republic
Belarus
Denmark
Romania
Thailand
Israel
Switzerland
Sweden
Spain
Mozambique
Czech Republic
Albania
0
1
2
3
4
5
Number Of Documents Needed To Open Checking Account (Out Of 5)
Sample size: 56 countries
Figure 7. Number of Documents to Open a Savings Account
Bangladesh
Zambia
Nepal
Sierra Leone
Ghana
Cameroon
Trinidad and Tobago
Malta
South Africa
Uganda
Australia
Uruguay
Kenya
Malawi
Madagascar
Indonesia
India
Pakistan
Turkey
Lebanon
Bolivia
Greece
Colombia
Philippines
Armenia
Mexico
Brazil
Ethiopia
Moldova
Jordan
Croatia
Nigeria
Dominican Republic
Slovenia
Peru
Belgium
Georgia
Bulgaria
Chile
Slovak Republic
Bosnia and Herzegovina
Denmark
Thailand
Korea, Rep.
Switzerland
Sweden
Sri Lanka
Spain
Mozambique
Lithuania
Hungary
Czech Republic
Belarus
Albania
0
1
2
3
4
5
Number Of Documents Needed To Open Savings Account (Out Of 5)
Sample size: 54 countries
Figure 8. Locations to Submit a Loan Application
Spain
South Africa
Greece
Denmark
Chile
Australia
Brazil
D
ominican Repub
lic
Trinidad and Tobago
Lebanon
Israel
Lithuania
Malta
Mexico
Turkey
France
Korea, Rep.
Slovak Republic
Colombia
Croatia
Bulgaria
Hungary
Kenya
Peru
Czech Republic
Switzerland
Indonesia
Pakistan
Sri Lanka
Zimbabwe
Egypt, Arab Rep.
Bolivia
Bosnia and Herzegovina
Ghana
Moldova
Georgia
Belgium
India
Philippines
Uruguay
Madagascar
Mozambique
Cameroon
Slovenia
Malawi
Bangladesh
Jordan
Albania
Zambia
Uganda
Thailand
Nepal
Ethiopia
Armenia
Sierra Leone
0
1
2
3
4
5
Locations To Submit A Loan Application (Out Of 5)
Sample size: 55 countries
Figure 9. Minimum Amount Required for Consumer Loans (% of GDPPC)
Nepal
Philippines
Thailand
Malawi
Albania
Uganda
Kenya
Ethiopia
Jordan
Pakistan
Sierra Leone
Ghana
Bolivia
Cameroon
Sri Lanka
Georgia
Lebanon
Uruguay
Indonesia
Moldova
Mozambique
India
Bangladesh
Zimbabwe
Madagascar
Peru
Malta
Bosnia and Herzegovina
Colombia
Armenia
Bulgaria
Dominican Republic
Greece
Turkey
Slovak Republic
Czech Republic
Spain
Chile
Trinidad and Tobago
Mexico
Australia
South Africa
Lithuania
Egypt, Arab Rep.
Belgium
Hungary
Korea, Rep.
Croatia
Belarus
Brazil
Slovenia
Switzerland
Denmark
0
500
1,000
1,500
Minimum Consumer Loan Amount (% Of Gdppc)
Sample size: 53 countries
Figure 10. Minimum Amount Required for SME Loans (% of GDPPC)
Uganda
Nepal
Georgia
Ghana
Albania
Lebanon
Cameroon
Philippines
Ethiopia
Armenia
Bolivia
Bosnia and Herzegovina
Jordan
Malta
Sierra Leone
Colombia
Zimbabwe
Pakistan
Bangladesh
Kenya
India
Chile
Bulgaria
Mexico
Moldova
Hungary
Slovak Republic
Peru
Dominican Republic
Greece
Uruguay
Mozambique
Belgium
Croatia
Sri Lanka
Spain
Turkey
Lithuania
Madagascar
Korea, Rep.
South Africa
Switzerland
Australia
Trinidad and Tobago
Brazil
Slovenia
Czech Republic
Thailand
Denmark
Egypt, Arab Rep.
Belarus
0
1,000
2,000
3,000
Minimum Sme Loan Amount (% Of Gdppc)
Sample size: 51 countries
Figure 11. Fees on Consumer Loans (% of GDPPC)
Albania
Cameroon
Hungary
Bolivia
Brazil
Zimbabwe
Uganda
Madagascar
Greece
Sierra Leone
Moldova
Ghana
Denmark
Armenia
Spain
Kenya
Peru
Mexico
Croatia
Bosnia and Herzegovina
Philippines
Bulgaria
Thailand
Georgia
Trinidad and Tobago
Slovenia
India
Lebanon
Malawi
Jordan
Colombia
Turkey
Nepal
Belarus
Chile
Dominican Republic
Lithuania
Czech Republic
Australia
South Africa
Malta
Korea, Rep.
Sri Lanka
Bangladesh
Pakistan
Egypt, Arab Rep.
Switzerland
Ethiopia
Belgium
0
2
4
6
8
Fee For Consumer Loan (% Of Gdppc)
Sample size: 49 countries
Figure 12. Fees on SME Loans (% of GDPPC)
Cameroon
Nepal
Albania
Lebanon
Bolivia
Madagascar
Bangladesh
Zimbabwe
Greece
Zambia
Belgium
Bulgaria
Uganda
Kenya
Brazil
Sri Lanka
Sierra Leone
Denmark
Mexico
Ghana
Hungary
Moldova
Philippines
Turkey
Dominican Republic
Croatia
Australia
Belarus
Trinidad and Tobago
Slovak Republic
Bosnia and Herzegovina
Spain
Georgia
Chile
Jordan
Slovenia
Thailand
India
Czech Republic
Lithuania
South Africa
Ethiopia
Korea, Rep.
Malta
Pakistan
Peru
Colombia
Armenia
Switzerland
0
20
40
60
80
Fee For Sme Loan (% Of Gdppc)
Sample size: 49 countries
Figure 13. Days to Process a Consumer Loan Application
Pakistan
Thailand
Philippines
Albania
Ghana
Bangladesh
Mozambique
Madagascar
Uruguay
Belarus
Sri Lanka
Hungary
Ethiopia
Egypt, Arab Rep.
Bolivia
Bosnia and Herzegovina
Mexico
Indonesia
Bulgaria
Cameroon
France
Armenia
India
Chile
Nepal
Georgia
Turkey
Belgium
Jordan
Kenya
Colombia
Croatia
Lithuania
Peru
Korea, Rep.
Dominican Republic
Slovak Republic
Sierra Leone
Malawi
Lebanon
South Africa
Zimbabwe
Switzerland
Uganda
Moldova
Malta
Trinidad and Tobago
Slovenia
Spain
Israel
Greece
Czech Republic
Brazil
Australia
Denmark
0
5
10
15
20
Days To Process Consumer Loan Application
Sample size: 55 countries
Figure 14. Days to Process a SME Loan Application
Bangladesh
Pakistan
Philippines
Uruguay
Ghana
Mozambique
Thailand
Lebanon
Madagascar
Ethiopia
Albania
Egypt, Arab Rep.
Chile
Bulgaria
Dominican Republic
Nepal
Czech Republic
India
Sri Lanka
France
Mexico
Bolivia
Indonesia
Sierra Leone
Cameroon
Bosnia and Herzegovina
Lithuania
Zambia
Colombia
Jordan
Hungary
Armenia
Trinidad and Tobago
Australia
Belarus
Malta
Kenya
Georgia
Croatia
Turkey
Uganda
Moldova
South Africa
Zimbabwe
Slovenia
Peru
Brazil
Belgium
Slovak Republic
Switzerland
Korea, Rep.
Greece
Spain
Israel
Denmark
0
10
20
30
40
Days To Process Sme Loan Application
Sample size: 55 countries
63
Figure 15. Cost to Transfer Funds Internationally (% of US$250)
D
ominican