Financial Exclusion: Comparative Experiences and Developing Research

1
Financial Exclusion Comparative Experiences and
Developing Research

• Professors Ted Gardener and Phil Molyneux
  (Institute of European Finance,
• University of Wales, Bangor)
• and
• Professor Santiago Carbo (FUNCAS Spain)
• The World Savings Bank Institute and The World
  Bank Conference on Access to Finance, Brussels,
  28-29 October, 2004

2
The Project

• Broad Definition of Financial Exclusion (FE)
• Project Commissioned by Spanish Savings Banks,
  FUNCAS
• Comparative Study UK, US and Wider Europe
• UK and US Strongly Market-Orientated Systems
• Broad Objective of the Project
• Related Aims Exploratory Study

3
Nature and Causes

• Part of the Much Wider Concept of Social
  Exclusion and Polarisation
• Wider Definition
• Several Aspects or Dimensions of FE
• - Access Exclusion
• - Condition Exclusion
• - Price Exclusion
• - Market Exclusion
• - Self Exclusion
• Comprise a Complicated Collection of Barriers to
  Entry

4
The Financially Excluded in Europe

• UK Select Data
• - 7 per cent of Households
• - No Mainstream Financial Services
• - Particular Societal Groups
• European Experiences
• - See Table 1
• - Countries with 10 of Population Excluded
• - Considerable Country Variation
• - Same Experiences on Demand Side as US and UK

5
Table 1 Availability of a personal current
account, giro account or similar ()
Source Eurobarometer 52, Financial
Services, Europeans and Financial Services (May
2000) and Ruozi and Anderloni (Eds) (2002, Table
5.1)
6
Market Context and Policy Responses

• Wide Range of Policy Responses
• Strategic Mindset of Financial Services Firms
• Need to Relate FE to Historical and Institutional
  Systems
• Free Market Efficiency
• versus
• Social Welfare Aims?

7

• Several Models of Response
• - Government Affirmative Action (US)
• - The Market, but Increasing Government and
  Private Sector Interest (Spain, Greece, Ireland
  and Italy)
• - Voluntary Role of Banks (France, Germany and
  Belgium
• - Government as Mediator (UK and French
  Attempt)
• - Government as Legislator (France, Portugal
  and Sweden)

8
Economic Research

• Eclectic Variety of Research Interests
• Multi-Disciplinary Problem
• Rule of Thumb Consensus in Macro Models
• Overall Economic Theory of Financial Exclusion?
• Institutionalist and Behavioural

9

• Key Economic Q
• - What Are The Economic Consequences of
  Financial Exclusion?
• - What Are The Economic Benefits of Complete
  Financial Inclusion?
• Our Survey Located 4 Relevant Economic Research
  Domains
• But Note Data Availability - A Major Issue

10

• Bank Strategies That Flow From The Free Market
  Model
• Asymmetric Information (the Extent to Which FE is
  an Information Problem)
• Statistical Discrimination (and Related
  Techniques, like Credit Scoring)
• Role Of Financial Development in Regional
  Development (which is related to the problem of
  Financial Desertification)