FinScope supporting strategies for market-led financial inclusion

1. FinScope � supporting strategies for market-led financial inclusion Mark Napier FinMark Trust 23 September 2008 Livingstone

2. Structure Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

3. Addressing market failure Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

4. What is FinScopeTM? FinScopeTM, a FinMark Trust initiative, is a nationally representative study of consumers' perceptions on financial services and issues, which creates insight to how consumers source their income and manage their financial lives. The sample covers the entire adult population, rich and poor, urban and rural, in order to create a segmentation, or continuum, of the entire market and to lend perspective to the various market segments. Focuses attention on the issues that prevent consumers form being able to access financial services � physical access, affordability issues, documentary constraints etc. Focuses attention on the issues that prevent consumers form being able to access financial services � physical access, affordability issues, documentary constraints etc.

5. Financial sector development in Africa � FinScope playing its part

6. Access strand compared

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11. Zambia - supply side project complements the demand side Demand side offered insights into constraints to access Supply side perspective needed to complete the picture it maps the supply of finance by institutional type it identifies the scope and scale of accessible supply it looks for gaps in the platform for accessible supply it looks also for obstacles to expanded accessible supply and it recommends practical options for improvement

12. . . . at Kw 60,000 a month to run the average bank account is far too expensive for mass rural use . . . Striking point is that six out of the ten middle decile rural households have the same income level and it is barely enough to guarantee food security for a typical family of five (food security level was roughly an average Kwacha 100,000 per family member (which is broadly $1 per day). Note also that about a quarter of rural household income is non-cash so typical bank charges would take up to 15% of cash income. This is not the same as saying that individuals pay this much but if they used an account to hold income, draw it steadily to spend it and pay a couple of bills then you get the 10/15% figures quoted above. Even the two, maybe, three banks that offer cheaper accounts would still be taking 7%+ of most rural households� cash income. Striking point is that six out of the ten middle decile rural households have the same income level and it is barely enough to guarantee food security for a typical family of five (food security level was roughly an average Kwacha 100,000 per family member (which is broadly $1 per day). Note also that about a quarter of rural household income is non-cash so typical bank charges would take up to 15% of cash income. This is not the same as saying that individuals pay this much but if they used an account to hold income, draw it steadily to spend it and pay a couple of bills then you get the 10/15% figures quoted above. Even the two, maybe, three banks that offer cheaper accounts would still be taking 7%+ of most rural households� cash income.

13. Lower priced accounts might open up banking to the top 40% of urban households

14. A few commercial banks have the potential to position themselves to do more mass-market business

15. About half of the poorer, less densely populated districts have no financial institution outlet at all Crosses denote districts with no financial services outletCrosses denote districts with no financial services outlet

17. The deposit to GDP ratio has probably just about reached 20% and new funds mobilised equal about 5% of GDP . . .

18. . . . and more of banks� interest-bearing liabilities are at last turning into earning assets and lending is growing fast . . . Rise in interest-bearing liabilities in four years is Kw 5.4 trillion but income earning assets up only Kw 4.2 trillion � where has the extra Kw 1.2 trillion gone?Rise in interest-bearing liabilities in four years is Kw 5.4 trillion but income earning assets up only Kw 4.2 trillion � where has the extra Kw 1.2 trillion gone?

19. . . . and the spread taken on deposits is slowly balancing up with that on loans as government security yields fall . . . Changed from 10�% and 6�% in 2006Changed from 10�% and 6�% in 2006

20. . . . and all this is driving up net income from lending but net income from DEPOSITS still dominates markedly

21. Access frontier Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

22. The progression of state action in the market

23. Examples of �market friendly coercion�

24. Parallel processes in support of access in SA � coordination?

25. �Mzansi� basic bank account � powerful contributor to incidence of bank usage

26. Why an access policy matters Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

27. Policy intervention in pursuit of enhanced market characteristics

28. Possible structure of inclusion policy So what does an access policy look like? Firstly, there need to be a vision � ideally one that sets credible and achievable targets. Secondly, there needs to be a statement of guiding principles that define government�s relationship with the financial system. In many ways this is the most complex area � it will be an amalgamation of (i) political principles (ii) what is practically achievable (iii) what has worked elsewhere (iv) capacity constraints (v) the gravity of the need Thirdly, goals � enhanced market characteristics Fourthly, specific policy objectives So what does an access policy look like? Firstly, there need to be a vision � ideally one that sets credible and achievable targets. Secondly, there needs to be a statement of guiding principles that define government�s relationship with the financial system. In many ways this is the most complex area � it will be an amalgamation of (i) political principles (ii) what is practically achievable (iii) what has worked elsewhere (iv) capacity constraints (v) the gravity of the need Thirdly, goals � enhanced market characteristics Fourthly, specific policy objectives

29. Conclusions Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

30. More information on our approach and publications can be found on our website: www.finmarktrust.org.za.More information on our approach and publications can be found on our website: www.finmarktrust.org.za.

31. Effective policy choices - Asia Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �

32. Effective policy choices - Americas Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of � Basic facts and figures on FMT � GBP1m per year, core team of 5 in the office in Jo�burg, plus full time use of 2.5 consultants as �theme champions�. We successfully leveraged in other people�s money last year on a multiplier of �