Barriers and Policies To Increase Access
However, in many countries financial access is still limited to only 20–50 percent of the population, excluding many poor individuals and SMEs. Many recents could explain the limited financial access especially among the poor. First, the poor lack the education and knowledge needed to understand financial services that are available to them. Second, loan officers might find it unprofitable to serve the small credit needs and transaction volume of the lower-income population. Additionally, banks may not be geographically accessible for the poor since financial institutions are likely to be located in richer neighborhoods. The poor are also burdened by lack of collateral and inability to borrow against their future income because their income streams tend to be hard to track and predict.
In light of the lack of financial access for the poor, over the past few decades developments in microfinance institutions have managed to provide financial services to some of the world’s poorest, and achieved good repayments.
There are still work to be done to build inclusive financial systems. This includes taking advantage of the technological advances in developing financial infrastructure to lower transaction costs, encouraging transparency, openness and competition to incentivize current institutions to expand service coverage, and enforcing prudential regulations in order to provide the private sector with the right incentives.
Read more about this topic: Access To Finance
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—Alexis de Tocqueville (1805–1859)
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“Whilst the rights of all as persons are equal, in virtue of their access to reason, their rights in property are very unequal. One man owns his clothes, and another owns a country.”
—Ralph Waldo Emerson (1803–1882)