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Friday, April 20, 2012
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Financial access widens for poor

World Bank report says Bangladesh stands second in financial inclusion in South Asia

Bangladesh stands second after Sri Lanka in financial inclusion indicators among the South Asian countries, according to a World Bank report released yesterday.

The report -- Global Financial Inclusion Database or Global Findex -- shows 40 percent of Bangladesh's adults have accounts in formal financial institutions, which is 35 percent in India and only 10 percent in Pakistan.

Sri Lanka is well ahead of its South Asian peers with 69 percent of its adults having bank accounts. Findex provides the most comprehensive picture of how people around the world save, borrow, make payments and manage risks.

The report has been made on four sets of indicators drawing from survey data collected over the 2011 calendar year, covering more than 150,000 adults in 148 economies and representing about 97 percent of the world's population.

The first set of indicators focuses on formal accounts, the mechanics and the purpose of the use of these accounts and receipt of payments from work.

The second set of indicators focuses on savings behaviour. This relates to the use of accounts, as people often save at formal financial institutions. Other indicators explore the use of community-based savings methods and the prevalence of savings goals.

The third set focuses on sources of borrowing and purposes of borrowing (mortgage, emergency or health purposes, and the like). The fourth stresses use of insurance products for healthcare and agriculture.

The report shows 33 percent of Bangladesh's poorest-income people and 35 percent women have an account at formal financial institutions. It is 21 percent and 26 percent respectively in India. Only 5 percent poorest income quintile and 3 percent women have accounts in Pakistan.

Fifty-two percent of poorest people and 67 percent women in Sri Lanka have accounts in formal financial institutions.

Seventeen percent adults in Bangladesh saved in the past one year using a formal account, which is 12 percent in India, just 1 percent in Pakistan and 28 percent in Sri Lanka.

Financial inclusion started to get momentum when central bank Governor Dr Atiur Rahman took charge in May 2009. His efforts helped nearly one crore (10 million) farmers to open accounts in banks. Rahman has also brought the sharecroppers and the poorest segment into the banking services for loans and subsidy distributions.

The report shows three quarters of the world's poor do not have a bank account, not only because of poverty, but also because of the cost, travel distance, and amount of paper work involved in opening one.

It said those without access to formal banking often have to rely on moneylenders who often charge high fees. The “unbanked” are also less likely to start their own business or insure themselves against unexpected events.

"Providing financial services to the 2.5 billion people who are 'unbanked' could boost economic growth and opportunity for the world's poor,” said World Bank Group President Robert B Zoellick.

Nine out of 10 adults in high-income economies report having an account at a formal financial institution, according to the report. In East Asia and Pacific, 28 percent of adults reported having saved at a formal financial institution in the past 12 months, compared to 10 percent in the rest of the developing world.

The data was collected by Gallup, Inc using the Gallup World Poll Survey. The Bank's Development Research Group is building the database with a 10-year grant from the Bill & Melinda Gates Foundation.

The Global Findex fills a major gap in the financial inclusion data landscape and is the first public database of demand-side indicators that consistently measures individuals' usage of financial products across countries and over time.

sajjad@thedailystar.net

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