Drivers of Financial Access: the Role of Macroprudential Policies

IMF Working Papers, May 29, 2020

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Canonical URL: Drivers of Financial Access: the Role of Macroprudential Policies

Study objective: Analyze drivers of the use of formal vs. informal financial services in emerging and developing countries using the 2017 Global FINDEX data.
Focus: Whether individuals’ choice of financial services correlates with macro-financial and macro-structural policies and conditions, in addition to individual and country characteristics.
Regional emphasis: Starts with middle and low-income countries and then focuses on sub-Saharan Africa (SSA), noted as the region that most relies on informal financial services and has the largest uptake of mobile banking.

Robust evidence of an association between macroprudential policies and individuals’ choice of financial access after controlling for personal and country-level characteristics.
Macroprudential policies aimed at controlling credit supply are associated with greater resort to informal financial services compared with formal, bank-based access.
Sub-Saharan Africa: highlighted for high reliance on informal financial services and largest uptake of mobile banking (as framed in the analysis).

Central bankers and financial sector regulators should consider potential spillovers of monetary policy and financial stability measures on financial inclusion.
Attention needed to interactions between macroprudential measures (especially those that constrain credit supply) and access to formal financial services.

Primary dataset: 2017 Global FINDEX data.
Country coverage: Middle and low-income countries, with a focused subsample on sub-Saharan Africa.
Controls: Personal and country-level characteristics included in analysis to test association between macroprudential policies and financial access choices.