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From: Brookings Papers on Economic Activity
Spring 2013
pp. 322-340 | 10.1353/eca.2013.0011

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Comment by Pascaline Dupas

The new Global Findex data set that Asli Demirgüç-Kunt and Leora Klapper are introducing in this paper is arguably among the most important multicountry, repeated-cross-sectional data sets being collected in this decade. It provides much-needed statistics on the use of financial services around the world at a time when interest in such services is peaking. Indeed, almost 40 years after Muhammad Yunus made the first microloan—the first of many exciting developments in financial services for the poor—only now are we beginning to see concerted research efforts to map the reach and effect of these tools on households around the world.

Country-specific micro-level studies have suggested that financial inclusion today may be much lower than what an informed observer would suppose from the ubiquitous media accounts. For example, recent randomized trials suggest that at best a quarter of households take up available loans from microfinance institutions in India, Mexico, and Morocco (Banerjee and others 2013, Crépon and others 2011, Angelucci, Karlan, and Zinman 2012). Dupas and coauthors (forthcoming) document that only 20 percent of households in rural western Kenya have a bank account, and ongoing censuses in Uganda and Malawi reveal comparable rates (see Dupas, Karlan, and Robinson 2013). But such micro studies tend to be clustered in a few countries or areas, and absent more wide-reaching data, it is difficult to understand how representative and applicable these results are. Efforts to date to provide more-exhaustive survey evidence have remained limited: the FinScope survey sponsored by the U.K. Department for International Development covers only 15 countries (14 of them in Africa), and the European Bank for Reconstruction and Development's Life in Transition Survey covers only 35 countries in Europe and Central Asia.

Given the lack of survey evidence, until the Global Findex data set was introduced, the most extensive efforts to estimate rates of financial inclusion worldwide had to rely on triangulation exercises between aggregate banking data from bank regulators and microfinance institutions (to get absolute numbers of accounts, loans, and the like) and population counts. Thorsten Beck, Demirgüç-Kunt, and Ross Levine (2007) focus on the formal banking sector and estimate that across the 54 countries in their sample, the median number of deposit accounts per 1,000 people is 529, and across a subset of 44 of those countries, the median number of loans per 1,000 people is 80. Patrick Honohan (2008) builds on this effort and proposes a "composite indicator" of access to both formal and semiformal financial services. This indicator is constructed from estimates of the number of bank accounts and the size of deposits relative to the total population. These estimates are generated as functions of the number of microfinance accounts and GDP per capita, respectively; these functions in turn are based on correlations observed in the few countries with enough available data.

The first thing that can be done with the Global Findex database is to check the accuracy of such extrapolation exercises. Because the Honohan (2008) estimates are from 5 to 8 years before the Global Findex measures, one should not expect a perfect correlation between the two, but after downloading both sets of measures, I found the correlation to be surprisingly high: 0.85 between Honohan's estimate of "access to financial services" (Honohan 2008, table 2) and the share of the population that "has an account at a formal financial institution" in the Global Findex database (see figure 3 in the paper). What is more, further calculations by Alberto Chaia and coauthors (2009) based on Honohan's figures find that (as their title states) "half the world is unbanked," which is also a key finding from the Global Findex. I found this high rate of consistency across the two types of sources to be very good news: it means that estimation exercises like those of Beck and others (2007), Honohan (2008), and Chaia and others (2009) are relatively accurate in providing comparable cross-country measures.

But gauging and analyzing covariates of cross-country variation can take one only so far toward a better understanding of financial inclusion worldwide. A key advantage of the Global...

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