## The More the Merrier? What Happens When More People Use Financial Services

_IMF Blog, September 15, 2015_

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## Bibliographic details
- Authors: Ratna Sahay, Martin Cihak, Papa NDiaye, Adolfo Barajas, Srobona Mitra
- Published: September 15, 2015

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### Overview
- Publication: The More the Merrier? What Happens When More People Use Financial Services
- Authors: Ratna Sahay, Martin Cihak, Papa N’Diaye, Adolfo Barajas, Srobona Mitra
- Date: September 15, 2015
- Core message: Financial inclusion delivers tangible macroeconomic benefits up to a point, but broadening access to credit requires high quality banking supervision to avoid compromising financial stability.

### Tangible benefits from inclusion
- Greater access to financial services is associated with higher GDP growth.
- Financial inclusion provides an additional growth boost beyond that from increasing financial depth.
- The benefits of inclusion diminish as both financial access and financial depth become large.

### Mind the gap (coverage and usage)
- More than 60 countries have adopted national financial inclusion targets and strategies.
- The percentage of adults with bank accounts increased from 50 to about 60 percent worldwide between 2011 and 2014.
- Some two billion adults remain “unbanked”.
- Out of the banked population, almost 40 percent do not effectively use their accounts.
- Regional and sectoral disparities:
  - Organization for Economic Cooperation and Development countries: banked population over 90 percent.
  - Developing countries: banked population 54 percent.
  - Inclusion is particularly low in South Asia and the Middle East.
- Gender and firm-size gaps:
  - Worldwide, men are five percent more likely to own accounts than women.
  - In developing countries, men are nine percent more likely to own accounts than women.
  - Small firms are about ten percentage points more likely to feel credit-constrained than large firms.
- Leadership and supervision gender gaps:
  - Women hold less than 20 percent of bank board seats.
  - Women represent less than two percent of bank CEOs.
  - Share of women in banking supervisory boards is about 17 percent on average.

### Impacts on growth, stability, and inequality
- Growth:
  - Various types of access—accounts, credit, infrastructure, women users, low-income—improve economic growth, but up to a point.
  - The growth benefits from inclusion are additional to those from financial depth.
  - The benefits fall as both financial access and depth become large.
- Stability:
  - Effects of broadening access to credit on financial stability depend on the quality of financial supervision.
  - When supervision quality is high (assessed by Basel Core Principles via IMF-World Bank Financial Sector Assessment Programs), broadening credit access leads to an increase in financial stability as banks build up capital and profit buffers.
  - When supervision quality is low, these buffers decline as credit access broadens, compromising stability.
  - Supervisory quality tends to be deficient in countries where financial inclusion is most lacking, creating a dual challenge.
  - Other forms of financial inclusion (access to bank accounts, branches, and ATMs) do not significantly deteriorate financial stability and can be expanded without impeding stability.
- Inequality:
  - Gaps in financial inclusion are associated with economic inequality, but the association appears relatively weak.

### Policy implications and recommended priorities
- Expand access to bank accounts, branches, and ATMs to increase inclusion without materially harming financial stability.
- Prioritize strengthening banking supervision before or alongside broadening access to credit:
  - High quality supervision helps ensure that expanded credit access builds capital and profit buffers rather than eroding them.
- Address gender gaps across users, bank leadership, and supervisory roles to improve inclusion and governance.
- Recognize limits to what financial inclusion can achieve; benefits diminish as access and depth grow large, so tailor policy ambitions accordingly.

*The More the Merrier? What Happens When More People Use Financial Services — Ratna Sahay, Martin Cihak, Papa N’Diaye, Adolfo Barajas, Srobona Mitra; September 15, 2015; https://www.imf.org/en/blogs/articles/2015/09/15/the-more-the-merrier-what-happens-when-more-people-use-financial-services*

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## Content in this bundle

- **Staff Discussion Note**
  - [Staff Discussion Note (Markdown version)](/external/pubs/ft/sdn/2015/sdn1517.pdf.md){rel="alternate" type="text/markdown"}
  - [Staff Discussion Note (PDF)](/external/pubs/ft/sdn/2015/sdn1517.pdf){rel="external" type="application/pdf"}

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## References

- [عربي](http://blog-montada.imf.org/?p=3722)
- [financial inclusion](http://www.imf.org/external/POS_Meetings/SeminarDetails.aspx?SeminarId=68)
- [growth and stability](http://blogs.imf.org/2015/05/04/how-much-finance-is-too-much-stability-growth-emerging-markets/)
- [too much finance"](http://www.imf.org/external/pubs/cat/longres.aspx?sk=42868)
- [Financial Access Survey](http://fas.imf.org/Default.aspx)

_Source: https://www.imf.org/en/blogs/articles/2015/09/15/the-more-the-merrier-what-happens-when-more-people-use-financial-services_