Banking services for everyone

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INTRODUCTION

Using information from 193 banks in 58 countries, we develop and analyze indicators of physical access, affordability and eligibility barriers to deposit, loan and payment services. We 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. Correlation with bank- and country- level variables shows that bank size and the availability of physical infrastructure are the most robust predictors of barriers. Further, we 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 themselves 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.