Measuring Financial Exclusion: How Many People Are Unbanked?

Thanks to the launch of the Global Findex data set, based on nationally representative surveys of more than 150,000 adults in 148 economies, we have a fresh and robust answer to that question—approximately 2.5 billion adults lack a formal bank account. Most of these people are concentrated in developing economies.

But there are important differences across economies. In high income economies account penetration is 89 percent, while in developing economies account penetration is only 41 percent (see Figure 1 for regional data). Among those living below $2 per day, only 23 percent have a formal account. In developing economies, if you are wealthy (within the highest quintile in your country), you are more than twice as likely to have an account than if you are poor (within the lowest quintile in your country), on average.

However, there are even significant disparities in the prevalence of bank accounts among countries with similar financial depth (see Figure 2). Vietnam, for instance, has domestic credit to the private sector amounting to 125 percent of GDP, but only 21 percent of adults in the country report having a formal account. Conversely, the Czech Republic, with relatively modest financial depth (with domestic credit to the private sector at 56 percent of GDP), has relatively high account penetration (81 percent). This suggests that financial depth and financial inclusion are distinct dimen­sions of financial development—and that financial systems can become deep without delivering access for all.

Those without an account are deprived of a secure way to save and transfer money, both basic abilities that support multiple dimensions of human well being. Research like that reported in Portfolios of the Poor has shown us that the poor are often quite ingenious at overcoming this lack of access. While the stereotype may be of cash hidden under a mattress, the poor often manage a complex sets of financial relationships with their family, friends, and the wider community to manage risk, save for large purchases, and invest in their children or in small businesses.

There is a positive message from the Global Findex data. Public policy can tackle many of the barriers to access and thus pave the way improving financial access. For example, regulation and promotional policies can help reduce the cost of opening an account, improve access in rural areas (e.g. through mobile money), and reduce unnecessary documentation requirements. Documentation requirements for opening an account may exclude workers in the rural or informal sector. In Sub-Saharan Africa, documentation requirements potentially reduce the share of adults with an account by up to 23 percentage points. Public policies can reverse that. Our analysis shows that there is a significant relationship between subjective and objective measures of documentation requirements as a barrier to account use, even after accounting for GDP per capita (See Figure 3)

But how can we be sure which policies are most effective at achieving these goals? Well, the Global Findex data give us plenty of food for thought in this area. For instance, it seems likely that the widespread adoption of mobile money in Kenya has led to an increase in financial access that would not otherwise have been possible, with over 40 percent of Kenyan adults who used mobile money reporting that they do not have a formal bank account.

However, more robust answers to these types of questions will have to wait until three years from now, when the Global Findex will release a second tranche of data that will allow for analysis of longitudinal data around access to finance. In the meantime, you’ll find plenty of data to keep you busy forming hypotheses in the full report and the Global Findex database.


24 August 2012 Submitted by Tomas Husar (not verified)

Hallo, the numbers from Figure 1 looks to me very surprising, because as far as I know, at least in Czech Republic and in Slovakia there is aproximately one payment card per one inhabitan (10 milions card in CZ and 5,5 milion in Slovakia)

24 August 2012 Submitted by Dr V.Rengarajan (not verified)

Dear Asli
Measuring financial exclusion is an important one in the context of development through financial inclusion with formal entities.At the same time, evidences suggest lack of sustainability of inclusion after some time in the inclusion process. That is to say many included accounts (be it loan or savings) remain dormant or defunct or inoperative having a similar feature of exclusion. For instance in India and Bangladesh where MF- SHG system plays vital role in financial inclusion of poor , the phenomenon like drop out rates of members and group mortality is not uncommon pointing exclusion of included . It is therefore suggested in the longitudinal survey, at least some sample of same cohort covered in the first survey in developing countries may consider the extent of second exclusion ( if I am permitted to use the term) as also one of global findex data set. It would also facilitate for advocacy for focusing sustainability of nascent inclusion particularly for poor segment and policy consideration for necessary action at national level.
Dr Rengarajan

24 August 2012 Submitted by Janet (not verified)

I was delighted to read that you defined the unbanked as those excluded from formal banking. Just because there is not enough documentation covering the achievements of Microfinance in developing countries, especially in SSA, one must deduce that the majority are unbanked. Perhaps it is high time we looked into what we define as ‘unbanked’. If Microfinance is an industry to reckon with and many poor people ‘bank’ with MFIs your data should be wobbly and common CGAP give Microfinance a little more credit!

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