policy principles

8/17/2019 policy principles

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CHAPTER 1

INTRODUCTION

1 INTRODUCTION


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POLICY PRINCIPLES FOR EXPANDING FINANCIAL ACCESS

1.1 NEED FOT THE PROJECT:

Despite the rapid growth in finance worldwide over the past quarter century-

now interrupted by the global financial crisis-many low-income households and

small firms remain excluded from access to many financial services, especially

in developing countries. While traditionally seen by many financial service

providers (F!s" as less attractive customers, a growing number of mainstream

F!s have #oined microfinance firms in extending the range of their service

provision, and important advances have been made in expanding access. $t a

time of increased focus on financial-sector policy and of regulatory tightening,it is important not to lose sight of the goal of increasing the access to

appropriate financial services essential to the escape from poverty and the

achievement of firm growth. %t is in this spirit that we propose &' principles for

financial-sector policymaers-including national authorities, donors, private-

sector participants, international financial institutions, and others-on the

facilitation, regulation, and direct provision of financial services.

1.2 OBJECTIVES:

1.2.1 INSTITUTIONAL INFRASTRUCTURE FOR

PROMOTING ACCESS

Principl 1: Pr!"!#in$ n#r% !& 'n( c!"p#i#i!n '"!n$ &in'nci'l &ir")

!olicy should encourage competitive provision of financial services to

customers such as low- and middle-income households and small firms. !olicy

should favor entry of qualified suppliers that are liely to improve the quality

and price of services to such customers. )ompetition policy should empower

the active investigation of anticompetitive behavior.

Principl 2: B*il(in$ l$'l 'n( in&!r"'#i!n in)#i#*#i!n) 'n( +'r(

in&r')#r*c#*r

!olicymaers should wor with maret participants to eliminate barriers andidentify gaps in the institutional infrastructure relevant to small-scale supply.


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*his includes ensuring that payments and collateral systems and hard

infrastructure elements for retail transactions are available and have a low unit

cost. %n particular, collateral and information infrastructures need modern

supportive legislation and regulations. *he state has a central role in ensuring

the availability and maintenance of much of this infrastructure.

Principl ,: S#i"*l'#in$ in&!r"( ("'n(

$s a complement to other consumer protection activities, policymaers should

facilitate education and confidence-building measures among those currently

excluded by coordinating, setting standards and curricula, and possibly co-

funding private efforts. Financial-service providers play a crucial role in

fostering informed consumers, among others, by maing information available

in a manner suitable to small-scale clients.

1.2.2 REGULATION OF FINANCIAL-SERVICE PROVIDERS

FSP)/ AND FINANCIAL SERVICES

!rudential regulation and supervision of F!s is essential to ensure a safe and

stable overall financial system and healthy F!s, and, by extension, sustainable

access. *he principles proposed here are meant to complement+not be

competitive with+those set out under asel %% on capital adequacy

requirements, by the asel )ore !rinciples for ffective an upervision, the

)$! uiding !rinciples on /egulation and upervision of 0icrofinance (1uly

2''3", and others. Within these framewors, it is possible to design policies

with an eye toward expansion of access.

Principl 0: En)*rin$ #+ )'&#% 'n( )!*n(n)) !& &in'nci'l-)ric

pr!i(r)

*he rules and procedures for prudential regulation of financial-service providers

should be carefully designed for consistency with financial-service provision at

a small scale. %n particular, regulation should be assessed for its impact on


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access and should reflect the riss faced by low-income households and small

firms. !rudential regulation need not be restricted to deposit taers. *o avoid

regulatory arbitrage undermining sustainable access, consistent protection

should drive cross-agency regulatory harmoni4ation.

Principl : Pr!#c#in$ l!3-inc!" 'n( )"'ll c*)#!"r) '$'in)# '4*)) 4%

FSP)

5ow-income and small customers need regulatory protection against abuses by

service providers. F!s should be sub#ect to legislation designed to ensure that

they do not sell customers products that are unsuitable for their needs. 0aret

conduct and other regulations in this area (including anti-money laundering and

combating the financing of terrorism, $0F6)F*" need to minimi4e compliance

costs while retaining effectiveness.

Principl 5: En)*rin$ *)*r% l'3)6 i& *)(6 'r &&c#i

/egulated ceilings on interest rates have often proved to be an ineffective or

even counterproductive measure against predatory lending and have often

tended to wor against increasing access. Where such ceilings are retained, they

should be pitched at realistic levels in relation to F! costs in each maret

segment and ad#usted over time, in line with movements in the wholesale cost

of funds.

Principl 7: En+'ncin$ cr!))-r$*l'#!r% '$nc% c!!pr'#i!n

Where regulation of financial firms or services is split, agencies should

cooperate in policy6regulatory development and supervisory practices to ensureconsistent standards of consumer protection, especially of activities related to

low-income households and small firms. ven if some F!s are not covered

directly by a regulator, policymaers should ensure that access-related issues

relating to those F!s are not neglected.

1.2.,. DIRECT POLICIES USING PUBLIC RESOURCES


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0aret failure is a pervasive and well- and long-acnowledged problem in

finance. *he worldwide financial crisis has dented confidence in previous

beliefs that reliance could be placed solely on maret solutions for access to

financial services. %t has triggered a range of public initiatives designed to

protect or relaunch the flow of credit to various purposes and sectors. *o a

remarable extent, old ideas for direct government action, often using public

resources, have resurfaced. 7et there is no reason to suppose that a cure has

been found for the government failures that have been pervasive in finance over

many decades. $ccordingly, intervention design remains important to ensure

that (new" measures do not distort or suppress what can be achieved without

government funds, and that government funds generate adequate value for

money.

Principl 8: B'l'ncin$ $!rn"n#9) r!l 3i#+ "'r# &in'nci'l-)ric

pr!i)i!n

*he design of any direct government interventions should see to respect the

commercial maret logic as much as possible+especially in regard to cost

effectiveness-and avoid damaging distortions to maret functioning. *o

facilitate maximum scale through leverage of private capital and initiative, the

design of policies and interventions to increase access should avoid stifling

private provision. ome forms of direct government involvement in financial-

service provision may be #ustifiable+for example, when it is otherwise difficult

to overcome maret failures or to deal with incompleteness of private maret provision. enerally such problems require only temporary and catalytic

interventions, and they should be explicitly time-bound. *here need to be

safeguards at state firms against political interference, especially where credit is

being extended. overnance of such firms should be transparent to the public,

modeled on best practices for non-government owned firms. $ny non-

commercial ob#ectives of such firms should be publicly nown, quantified, and

costed. $ll policies for improving access should have clear and measurable


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ob#ectives and their effectiveness should be quantitatively monitored with

transparent public reporting.

Principl ;: U)in$ )*4)i(i) 'n( #'


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unfortunate events such as economic instability, drought, disease, or death that

are part of daily life in many developing countries.

Finance can contribute not #ust to income growth and poverty reduction, the

most important of the 0illennium Development oals (0Ds", but also to

0Ds such as improving education, gender equality, and health, with some

goals more specifically affected. 0ore investment and higher productivity

translate not only into more income and therefore better nutrition and health9 it

also enables parents to send their children to school instead of merely regarding

them as a source of labor. 0oreover, access to finance creates equal

opportunities for everybody. $ccess to financial services helps women in

determining their own economic destiny and increases their confidence and

:say; in their households and communities. 0ore sophisticated financial

marets discriminate less9 they provide capital to those with attractive

investment opportunities, regardless of other characteristics+for firms, si4e,

ownership, and profitability do not matter9 for households, current income,

wealth, education, gender, and ethnicity are irrelevant. %ndeed, financial

development can reduce inequality as it broadens opportunities.

*here is a growing body of empirical evidence+in-depth country studies and

cross-country statistical studies, case studies, and more recently, experimental

analyses+that confirms these analytical predictions and documents how

financial-sector development and access to financial services significantly

contribute to reaching the 0Ds.


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CHAPTER 2

THE PROBLEM


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2 T+ Pr!4l"

*he crucial importance of a well-functioning financial system for supporting

economic activity and generating economic growth has been forcefully

illustrated by recent events. *oday, policymaers everywhere are struggling to

ensure an adequate flow of credit and other financial services without

compromising financial stability.


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2.1 T+ !4>c#i i) r'c+in$ #+!) c*rrn#l%


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*he ey lesson from the current financial crisis is that, in a context of deficient

regulatory, supervisory, and corporate governance practices, financial

innovation can have large adverse systemic impacts. $ related lesson is that a

financial crisis, as with many previous occasions, can have dreadful effects on

the sustained access of large segments of the population to financial services

and their welfare. $nother lesson of the saga of improperly sold mortgages is

the need for better regulation of retail lending. While regulatory reform is

needed, its design must leave room for innovation and the continued expansion

of access on a sustainable basis to creditworthy borrowers, especially at low

income levels. $fter all, the flaws related more to the poor incentives for due

discipline by loan originators and poor ris modeling of complex mortgage-

baced derivatives than to the low and volatile incomes of borrowers.

%t would especially be a tragedy if the crisis were to curtail access for

underserved households and firms in developing countries, on the poorly

founded premise that these are subprime borrowers that :caused; the crisis and

need to be regarded with suspicion. >n the contrary, expanding access to these

borrowers contributes to financial stability, provided it is achieved by using

sound principles.

2., E


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$lthough building and strengthening financial infrastructures has been a priority

for many countries, too often the emphasis of policy has been on largescale

finance, as with the creation of robust wholesale payments systems and

accounting and auditing rules aimed for large firms. )omplementary

institutional development needed at the retail end, including through the

extension of credit registries to small loans and to small-scale providers, has

tended to be neglected.

!olicy attention has often focused on large, incumbent F!s, considered too

large to fail, whereas the promotion of competition, not least through entry of

new F!s on a sound basis, would do more to improve access. *he overall

institutional environment needs to encourage, not inhibit, competition. For

instance, the potential provision of ey financial services by nonfinancial

providers, including mobile-phone companies and supermarets, has often been

inhibited by ill-considered and arbitrary regulatory obstacles.

2.3.2 Inadequate consumer protection and poorly structured prudential

regulation

Few countries have really effective policies in place to protect the poorly

informed against abuses of their trust. *oo many unregulated !on4i schemes

have been tolerated in practice, even if outlawed in theory. %nsurance companies

have too often run away with the money. Worse, predatory lending has

destroyed the economic lives of the vulnerable.

ven when policy has been targeted at protecting the ill-informed or vulnerable,regulatory measures have often been suboptimal or even counterproductive, as

with some too-constraining interest-rate ceilings. ?eeded regulation against

money laundering and terrorism financing has in some cases imposed a

prohibitive burden on F!s wishing to provide services on a smaller scale.

0ore nuanced reforms are needed.

2.3.3 Subsidies and direct state involvement


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*he role of public subsidy and state-owned financial-service providers has been

a source of continuing controversy. 5arge and poorly designed subsidies

delivered by heavy-handed and poorly managed, state-owned entities have

choed off private provision in some countries, while channeling a

disproportionate amount of the subsidy to relatively prosperous and politically

well-connected users. ut, when left to itself, the private financial system has

often been far from effective in reaching the potential clientele. $ better balance

between public- and private-sector provisions is centrally important.

B!< B: S+!r#c!"in$)


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Despite the acnowledged shortage of interested potential service providers,

heavy-handed regulations have further inhibited entry and innovation in the

provision of savings services. For example, the franchising by bans of nonban

agencies (as collectors of funds and providers of some basic transaction

services" in remote locations can be a very effective way of increasing outreach

and has been implemented safely and on a large scale in some countries, such as

ra4il. ut this has been prevented by unimaginatively and unnecessarily

restrictive prudential regulations in other countries, including advanced

countries. 0any 0F%s have been prevented from offering deposit services by

onerous minimum-capital requirements. *he potential for using networs of

post offices in similar ways has often been left unexploited.

*here are also maret failures in product design, liely reflecting the limited

incentive for any one ban to attract the limited maret of marginal customers.

*raditional savings products of the baning system are often not suited to low-

income households. For example they can entail high minimum charges and

bundle services that are not needed by+and are risy for+such households.

*hey also miss out on desirable commitment features. eneficial experiences

with simple savings products, such as those traditionally offered by savings

bans and gird-based systems in advanced countries, have not spread

universally.

Fifth, insurance products are too often of low quality@ many insurance services

remain excessively slow to pay claims, and premiums are too often charged inlump sums rather than as a series of small installments that better accommodate

customers< cash flow patterns


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CHAPTER ,

PURPOSE OF PRINCIPLES

, PURPOSE OF THE PRINCIPLES

,.1 ENHANCING ACCESS TO FINANCE:

Auite a lot has been achieved over the past quarter-century in improving access

to marginal customers through financial innovation and expanding the margin

of financially viable outreach through cost control+first by the microfinance

revolution and the financial cooperative movement, and then by mainstream bans and other financial intermediaries. $lthough much remains to be done,


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many lessons have been learned. *he important role of policy in enhancing

access has been increasingly recogni4ed over the past several years. iven the

complexity of the issues, however, and the fact that access is often not the main

priority of relevant policy actors, there is a clear need for a set of principles to

guide the policy development in this area. *he danger of inappropriate policy

reactions to the financial crisis poses another reason for policy guidance.

,.2 GOOD POLIC@ PRINCIPLES:

%n many areas of finance+baning, securities and insurance, payment systems,

and money laundering and countering the financing of terrorism- policymaers

worldwide have found it useful to codify what are widely accepted as broad

principles that should govern policy design and implementation.

& *he current principles are proposed as a contribution to this effort as regard

the issues of access to financial services. ecause responsibility for policy

regarding financial access typically cuts across many government departments

and public policies, in no country is there a single label defining such principles.

%n addition, no international association of financial access policymaers exists

to draw up these principles+hence the present document by an international

tas force of (former" policymaers, academics, and practitioners.

ach principle is accompanied by a brief commentary highlighting and

clarifying aspects that the tas force considers liely to be of particular

relevance in many countries. $lthough examples are mentioned to illustrate

certain points, in general the tas force prefers setting out principles rather thanendorsing or critiquing particular cases. *he principles do not amount to a

detailed specification of laws and regulations, procedures, and policies, but

instead represent an underlying framewor that needs to be adapted to local

conditions when implemented. )orrespondingly, assessing existing policies

against these principles can only be done by reference to the national context.

,., THE AUDIENCE:


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*hese principles focus on actions by governments and government agencies,

donors (including and multilateral organi4ations", other policy advisors, and

private-sector actors. Bence, these principles are directed primarily to financial-

sector policymaers charged with improving financial access or whose activities

impinge on financial access offered by any type of F!. While our

recommendations are not addressed to direct-service providers, but more to

public-policy actors, they are based on the philosophy, strongly supported by

empirical evidence, that private financial-services provision is a ey to

sustainable access. %n contrast to other documents describing best practices, the

target audience here is not confined specifically to promoters of microfinance or

agencies specifically charged with regulating microfinance. %nstead,

complementing those other documents, these principles should apply to

policymaers generally, including those whose main focus is not on providing

financial access, but whose policies and actions can influence access. *hese

include the prudential and maret-conduct regulators of of financial marets and

of bans and other financial intermediaries, including financial cooperatives9

competition and licensing authorities9 and the ministries concerned with

legislation governing debt recovery, interest-rate ceilings, and $056)F* (antiC

money laundering and combating the financing of terrorism" policies. *he

principles are also addressed to multilateral organi4ations and donors that play a

central role in designing, advocating, and, in many cases, financially supporting

relevant policy initiatives.,.0 THE GOALS AND OUTLINE OF THE REMAINDER:

While generally agreed, it is worth repeating the goals (often assumed

implicitly". $ natural goal for any policy framewor aimed at improving

financial access is to maximi4e, on a sustainable basis, the availability to as

wide a range of users as possible of suitable financial products at affordable

prices. %t is equally crucial, however, to ensure that this improved access iscompatible with F!s< soundness and stability of the financial system


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(recogni4ing also that stability and access can be mutually supportive" and

users< welfare maximi4ation. Finally, policy should ensure that direct

government and donor involvement is constructive and cost-effective. ased on

these goals, in what follows we present the ten principles that we propose

should guide policy to ensure that financial access is expanded. *he principles

are presented in three sets. *he first set deals with policies that promote

competition and the supply of services that help build the infrastructure and

stimulate informed demand9 the second set, with the regulation of F!s and of

financial products and services9 the third set, with the direct use of public

resources to promote access. ?o principle should be read in isolation from the

others+they are complementary and should be considered together.

,.0.1 Acc)) i))*): *)r)6 pr!(*c#)6 'n( pr!i(r)

$ccess to finance is about who gets offered what products at what price.

5imited access to financial services reduces welfare and slows firm growth9 in

addition, it can increase the ris of financial instability as the poor see to

develop their own means of informal access. $ccess for low-income households

(or individuals" and small firms is more limited than it should be because of

information frictions, distorted incentives, and, above all, disproportionately

high transaction costs. ome of these can be alleviated through policy actions,

and some may be worsened by side-effects of poorly designed policy.

Depending on the point of view of the user or the provider, the problem of

access loos different. %mplementing product designs that meet the needs of both can be the ey to improving access.

sers

$ccess has many dimensions@ services need to be available when desired, and

products need to be tailored to specific needs9 the prices for these services need

to be affordable, including all non-price costs, such as having to travel a long

distance to a ban branch9 and, most important, it should also mae business

sense, translate into profits for the providers of these services, and therefore be


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available on a continuous basis. $ll of this means that access is different than

use. $ccess essentially refers to the supply of services, whereas use is

determined by demand as well as supply. ?ot all households and firms should

be able to borrow unlimited amounts at prime lending rates or transmit funds

across the world instantaneously for a fraction of & percent of the amount. ven

if service providers are eenly competitive and employ the best financial

technology, prices and interest rates charged for financial-services liberali4ation

in a maret economy will necessarily depend on demand factors. For example,

the si4e of loans or insurance coverage on offer will depend on the

creditworthiness of the customer. %n turn, financial inclusion+or broad access

to financial services+does not imply that everyone uses financial services9 it

does mean an absence of unnecessary price or non-price barriers in the use of

financial services.

Products

5acing financial access means being excluded from products that help

individuals, households, and firms cope with ris, accumulate for the future,

pursue income-generating enterprises, and manage their cash flows. $

fundamental but often overlooed function is to facilitate payments transactions.

*he classic financial products are savings, credit, insurance, and payments9 in

practice, though, a specific financial product will bundle together many

different aspects@ a transactions account with a ban may bundle paymentsservices, security against theft of cash, and even a line of credit. *hough

convenient for middle-income customers, such bundling may add costs and

riss for the poor. $ll effective financial products must deal with the problems

of confidence and trust. *hese are at the heart of finance@ a customer will be

reluctant to deal with an F! that might go broe, might fail to protect the

customers< privacy or treat them with lac of respect, or might impose heavy

unanticipated charges. *his is especially the case with poorly educated and


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vulnerable customers. )onversely, an F! will be reluctant to lend to customers

without sufficient indication of their ability and willingness to repay, or to

insure customers when the customers are better informed than the service

provider about their own riss. *he cost and difficulty of overcoming lac of

confidence and trust is a ma#or obstacle to expanding the use of formal financial

services, not least because this cost tends to be high especially for customers

whose potential scale of business is low.

Pr!i(r)

0any service providers long neglected the challenge of adapting product design

and cost to low-income and small-scale customers, and such neglect still limits

the outreach of many of the larger bans and F!s (though some indirectly

support outreach by offering relevant wholesale services to micro-oriented

providers". /ecent experiences show, however, that F!s can overcome these

obstacles and reach small, remote, or disadvantaged clients through innovative

product design adapted to the clients< needs and constructed with a view to

minimi4ing unit costs. arious service providers that have developed a range of

products to help accomplish these tass now exist in all countries. *he type of

provider ranges from large international bans and insurance companies,

through national, regional, and local savings bans and credit unions or

cooperatives (with varying degrees of formal organi4ation", to speciali4ed

microfinance firms, money transmission agencies, and+for some services

nonfinancial firms such as supermaret chains. %n a more limited way, lessformal entities ranging from licensed credit cooperatives to unlicensed money

collectors and rotating savings and credit associations can offer similar, albeit

more limited and sometimes less reliable, services. =nfortunately, there have

always been some providers that have exploited vulnerable customers with fae

:access; to inappropriate or overpriced products, or simply fraud and theft.

,.0.2 G!'l) &!r 'cc)) p!lic%


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G!'l 1: A'il'4ili#% !& )*i#'4l pr!(*c#) '# '&&!r('4l pric)

*his is the primary goal of any access policy. vidently, the terms :suitable;

and :affordable; are shorthand for much detail, relating to such aspects as

sustainability, cost of provision, and soundness of the providers.

Payments services

!ayments services, including remittance services, should be reliable, speedy,

and low-cost+even for small transactions. *echnological and other standards

can facilitate this.

Savings services

asic accounts offering a (constrained" range of essential services appropriate to

the needs of poor households should be available at affordable price+and

where appropriate bearing interest+and convenience, and the integrity of the

funds saved should be ensured.

Credit services

*he range of creditworthy borrowers who can obtain credit at reasonable terms

should be as wide as possible. $nd the poorly informed should be protected

from unscrupulous or recless lenders who may induce customers to become

more heavily indebted than they can support and6or impose hidden and

unwarranted costs in the event of delinquency.

Insurance services

*he reach of affordable formal insurance should be as wide as is consistent

with sustainability, ensuring both sustained financial health of the providingcompanies and protection of the interests of the insured. 0edical emergencies,

disability, death, and weather, auto, household, and fire riss are among the ey

riss for which adequate insurance should be available. %n all cases adequate

information should be available to potential users about the alternatives and

their costs. *o support this, the maret for such services should be transparent

and have adequate consumer protection.

G!'l 2: Acc)) 3i#+ )#'4ili#%


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$n important goal of specific policies with respect increasing access is to ensure

that constraints are addressed in ways that do not threaten the stability of the

financial system. %nstead they should build a competitive industry supported by

a sound infrastructure.

G!'l ,: i) *) !& $!rn"n# 'n( (!n!r )*pp!r#

*he budgetary costs of public interventions to promote financial access need to

be commensurate with the benefits gained. *he design of such interventions

needs to consider moral ha4ard and other adverse side-effects, including

systemic effects. 0oreover, interventions should be designed to avoid chilling

private innovation that might have more sustainable long-term effectiveness


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CHAPTER 0

POLIC@ PRINCIPLES FOR EPANDING

FINANCIAL ACCESS


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0 P!lic% Principl) &!r E


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eligible for a license to provide financial services (and de-licensing criteria"

should be qualitatively similar, irrespective of the scale of operation and

clientele envisaged. )riteria need to be applied, however, in an institutionally

neutral manner and proportionate to the complexity and scale of operation.

*hus, the definition of required qualifications for entry should not be such as to

exclude credible local or foreign entrants liely to open up supply to an

underserved or normally excluded clientele. ut neither should de-licensing

criteria favor the continuation of unsustainable F!s, even of they cater to

underserved or excluded clientele.

0.2 Principl 2: B*il(in$ l$'l 'n( in&!r"'#i!n in)#i#*#i!n) 'n( +'r(

in&r')#r*c#*r

P!lic%"'r) )+!*l( 3!r 3i#+ "'r# p'r#icip'n#) #! li"in'# 4'rrir)

'n( i(n#i&% $'p) in #+ in)#i#*#i!n'l in&r')#r*c#*r rl'n# #! )"'ll-)c'l

)*ppl%. T+i) incl*() n)*rin$ #+'# p'%"n#) 'n( c!ll'#r'l )%)#") 'n(

+'r( in&r')#r*c#*r l"n#) &!r r#'il #r'n)'c#i!n) 'r ''il'4l 'n( +'

' l!3 *ni# c!)#. In p'r#ic*l'r6 c!ll'#r'l 'n( in&!r"'#i!n in&r')#r*c#*r)

n( "!(rn )*pp!r#i l$i)l'#i!n 'n( r$*l'#i!n). T+ )#'# +') ' cn#r'l

r!l in n)*rin$ #+ ''il'4ili#% 'n( "'in#n'nc !& "*c+ !& #+i)

in&r')#r*c#*r.

*he infrastructure needed to support financial access ranges from information

databases, such as credit bureaus and credit, collateral, and other real estate

registries, to legal and social institutions needed for speedy and fair settlementof debt disputes, to the physical, such as electronic networs for payments

system. *he state has a central role in ensuring the availability and maintenance

of much of this infrastructure.

!.2.1 Soft infrastructure

(a) Legal and judicial

$ balance has to be struc between the rights of collateral holders and their

clients, recogni4ing that a heavy presumption in favor of clients may have the


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perverse effect of reducing access. *he large differences across countries in the

costs of securing property rights and collateral, with proven consequences for

access to financial services, suggest much scope for policy interventions.

1udicial efficiency, including improvements in court procedures, can help lower

the cost of debt recovery, thereby facilitating access. peciali4ed commercial

courts or debt-recovery tribunals may help expedite #ustice and ensure well

informed #udgments9 if well designed, their effectiveness need not be limited to

high-end and complex cases. $ financial services ombudsman can mae a

valuable and relatively low-cost complementary contribution. )larification of

tax treatment of financial products and providers, ranging from basic matters

such as returns on ban deposits to leasing and loan-loss provisioning, can

enhance supply.

(b) Information

*he collection and availability of information through credit registries and

credit bureaus can greatly enhance the ability of the creditworthy to establish

their credentials as suitable borrowers. %deally, both negative and positive

information is available on a wide category of borrowers and other financial-

services users, including small-scale users. *he provision of negative

information is commonly easier9 positive information often requires legal

changes, including on data sharing among and within financial intermediaries.

tandardi4ation of accounting, audit, and firm-disclosure rules can also help.

overnment


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private registry may be better in offering a wider range of alternative or

complementary value-added information services, provided that competition

policy ensures that access to it is not hindered.

"ard infrastructure

Bard infrastructure is also needed. nsuring the secure operation of a wholesale

payments system is generally accepted as a function calling for central policy.

5ess widely acnowledged, but even more important for access, is the need to

ensure the infrastructure for retail-payment systems. *his includes not only

traditional aspects such as facilities for handling and storing currency notes in

remote areas, but also the development of an extensive electronic retail-payment

system that all F!s and their customers can use at fair prices. *his requires, at

least, an electronic communications networ, interoperability of switches, and

establishment of technical standards for retail payments. *he government


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financial services. F!s play a crucial role in fostering informed consumers,

among others, by maing information available in a manner suitable to small-

scale clients. *he government can play an important role in encouraging

private-sector education initiatives. For some education and confidence-building

measures, however, the government is best placed to tae the initiative.

!.3.1 #ey gaps in financial literacy

%nadequate planning for old age or illness, over indebtedness, and lac of

understanding of relevant financial products (and of their usefulness in

managing household and business affairs" are among the most serious financial-

education gaps. >ften there are also deficiencies in maing complex price

comparisons and budgeting. ut financial education is not #ust a question of

communicating facts. %t should also address the lac of informed demand

deriving from distrust, a history of being discriminated against, lac of

reliability, and cultural issues. ducation and public information campaigns

focused on financial literacy thus need to tae a broad perspective. 0echanisms

of social mobili4ation for building trust and confidence can also play an

important part.

!.3.2 $esigning program content

Designing good, cost-effective financial literacy programs requires consultation

with F!s and their industry associations to mae sure that the messages are

couched in terms that are well adapted to local maret conditions. For example,

the particular ris of getting into an over indebted situation could depend on the pattern of charges and terms made by F!s and the volatility of individual

income and spending needs. !otential borrowers need to be informed about the

worings of the credit-information system so that they can avoid behavior that

might unwittingly exclude them from credit access.

!.3.3 %et&ods of dissemination

0any countries have now adopted financial literacy programs using different

channels and adapted to national and local maret realities. *here is still limited


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evidence on the effectiveness of different approaches, however, and further

research is needed. 0oreover, it is well nown that information is not enough to

ensure that individuals will mae rational financial decisions9 complementary

policies may be needed.

0.0 Principl 0: En)*rin$ #+ )'&#% 'n( )!*n(n)) !& &in'nci'l )ric

pr!i(r)

T+ r*l) 'n( pr!c(*r) &!r pr*(n#i'l r$*l'#i!n !& &in'nci'l-)ric

pr!i(r) )+!*l( 4 c'r&*ll% ()i$n( &!r c!n)i)#nc% 3i#+ &in'nci'l-

)ric pr!i)i!n '# ' )"'ll )c'l. In p'r#ic*l'r6 r$*l'#i!n )+!*l( 4

'))))( &!r i#) i"p'c# !n 'cc)) 'n( )+!*l( r&lc# #+ ri)) &'c( 4% l!3-

inc!" +!*)+!l() 'n( )"'ll &ir"). Pr*(n#i'l r$*l'#i!n n( n!# 4

r)#ric#( #! (p!)i# #'r). T! '!i( r$*l'#!r% 'r4i#r'$ *n(r"inin$

)*)#'in'4l 'cc))6 c!n)i)#n# pr!#c#i!n )+!*l( (ri cr!))-'$nc%

r$*l'#!r% +'r"!ni'#i!n.

*he goal of prudential regulation and supervision is to ensure the safety and

soundness of F!s and thereby ensure the protection of depositors, money

transfer users, and overall financial stability. /egulation and supervision

includes capital-adequacy requirements, governance and management issues,

reporting and auditing, and many other aspects.

!rudential regulation is as important to small customers as it is to large ones@

good prudential regulation and supervision of formal financial intermediaries

will enhance sustainable access. xpanding access to a wider clientele will notnecessarily entail heightened riss for the financial sector9 on the contrary,

failing to do so can be destabili4ing in other ways, from financial, economic,

and social points of view.

!.!.1 '&ere t&e ris(s lie

!rudential regulation should address the question, :Who is taing the ris on

whomE; Deposit-taers present riss to their depositors9 borrower


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both to ill-informed borrowers and to lenders. Within these categories there will

be differences+for example, among the regulation of full-service bans, ?>-

run microfinance firms, or credit unions. *he focus of prudential regulation has

traditionally been on deposit-taing institutions, but it is also applicable to other

F!s, including insurance companies. $ttention needs to be given to each of the

main financial services@ deposits, payments, credit, and insurance.

!.!.2 )ccess*friendly regulation

*he access agenda must not erode prudential goals, but regulation and

supervision need to be access-friendly. Where access has expanded on a more

sustainable basis, it has often been underpinned by a responsive policy

framewor geared toward improving access. *his means, among other things,

that regulation and supervision modalities need to be adapted to the riss and

scale of small-scale service provision and small financial firms. Bowever, in all

of this, rules and their operation have to be examined and monitored

systemically to ensure that they are not vulnerable to misuse or regulatory

arbitrage. *he costs of supervision and limited supervisory capacity need to be

recogni4ed in regulatory design9 there is little point in regulating what cannot be

supervised. !olicymaers need to find ways of ensuring in practicable and cost-

effective ways that small-scale F!s operate in a sound manner. %n particular,

the extensive reporting burdens that are applied to complex, full-service bans

in their conduct with costumers should not be applied in the same way to

relatively simple F!s focusing on small-scale customers and simple products.$pplying different reporting requirements is a practice followed in many

advanced economies, with good outcomes.

0any other examples can be provided of how regulations governing such

F!s embody rigorous standards of safety and soundness while maing

ad#ustments for the nature of the business. !rudential regulation of small loans

can be lighter than that of large loans, especially given the generally low

correlations among riss on individual transactions. 0any 0F%s and some


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commercial F!s operate at too small a scale to reach the minimum capital sum

required for a standard deposit-taing license. y lowering the minimum capital

amount while requiring a high minimum capital ratio and adopting other

safeguards, such as limiting the scope of activities, prudential goals can still be

achieved. (Bowever, moves in this direction need to respect the indivisibilities

and minimum scale involved in safe provision of deposit and insurance services,

for example". uch innovative design can offer protection that in the context of

0F%s is both more effective and more easily complied with than normal

baning rules.

Financial integrity regulation (for example, $056)F*" is a particular case

where special treatment for providers of small-scale financial services is

appropriate.

?ational $056)F* regulations and procedures should be adapted (while

ensuring achievement of their main ob#ective" in the case of small-scale

transactions so that they do not create a severe barrier to access. ffective

alternatives to the traditional ways of establishing identity, income, and so forth

need to be developed for low-income groups, as has already been done

successfully in several developing countries.

!.!.3 Regulatory arbitrage

/egulatory arbitrage occurs when differences in the regulation of various types

of F! or financial services are exploited to evade the purpose of the regulation.

iven the many organi4ational forms that exist among F!s catering to low-income people and small firms, the danger of regulatory arbitrage is ever

present. $s far as possible, similar products should be regulated in a way that is

consistent across different F!s. *his requires close coordination among

different regulators. ince nonfinancial firms can play important roles in the

provision of financial services, they too may need to be regulated. *he scope

and applicability of rules, however, will need to be adapted to local maret

conditions. /egulatory provision for third-party ban agencies in ra4il and


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money transfer through cell phones in enya and elsewhere are examples of

this.

*o best use limited supervisory resources, entities that are not systemically

important should be supervised lighter. %t is also important that unwarranted

regulation does not discourage healthy entrants or useful innovations (as have

occurred in unregulated entities". /egulation of some categories of F!s, such

as those that lac complexity in governance, operations, or ris, or that are

exclusively funded by strictly regulated entities (or ?>s funded by donors",

can therefore be lighter. Bowever, no ma#or category of F!s should be wholly

outside regulatory and information systems. $nd cross-agency cooperation is

essential to reduce transaction costs and avoid coordination failures.

!.!.! +nsuring t&at t&e content of regulations is beneficial for access

?otwithstanding recent conspicuous regulatory failures (including the failure to

detect vast, fraudulent pyramid savings schemes" the potential benefits of

regulation for depositors and investors are clear. ut some difficult #udgments

are to be made when it comes to regulating the degree of ris taen by a F!.

*he treatment of repayment delinquency is an example.3 nsuring that relevant

regulations balance the benefits of improved access with the heightened riss

requires careful experimentation and monitoring.

0. Principl : Pr!#c#in$ l!3-inc!" 'n( )"'ll c*)#!"r) '$'in)#

'4*)) 4% FSP)L!3-inc!" 'n( )"'ll c*)#!"r) n( r$*l'#!r% pr!#c#i!n '$'in)#

'4*)) 4% )ric pr!i(r). FSP) )+!*l( 4 )*4>c# #! l$i)l'#i!n ()i$n(

#! n)*r #+'# #+% (! n!# )ll c*)#!"r) pr!(*c#) #+'# 'r *n)*i#'4l &!r

#+ir n(). M'r# c!n(*c# 'n( !#+r r$*l'#i!n) in #+i) 'r' AMLCFT/

n( #! "ini"i c!"pli'nc c!)#) 3+il r#'inin$ &&c#in)).


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)onsumer protection and maret-conduct regulation should aim to ensure that

the design, pricing, and mareting of products offered to low-income

households and small firms is not exploitative of maret power and of these

consumers< limited ability to verify in advance the appropriateness, riss, and

value for money of financial products. )onsumer protection is of special

importance for this segment, especially for credit and insurance products.

=nregulated credit providers have been documented to offer credit products that

impose heavy individual penalties for delinquency to vulnerable customers with

low, fluctuating incomes. %ndeed, unscrupulous F!s may design their pricing

and charging structures with the deliberate intention of exploiting such users<

naivetG.H 5iewise customers may be offered insurance against riss that are

irrelevant to them, with exemptions that prohibit them from maing successful

claims, or at premiums that are disproportionate to the riss that they generate.

!.,.1 Responsibility of -SPs

$ basic requirement is that F!s are truthful and transparent in the way they

represent the products to the clients. *his includes full disclosure of interest

rates and charges. etter financial literacy and consumer information can help

prevent misuse (cf. principle 3", but in many cases reliance on those approaches

will be grossly insufficient. xperience shows that even for a simple loan

product, many consumers cannot mae the relevant calculations and are swayed

by simple rules of thumb, such as the initial weely repayment required on aloan+even when that repayment is sure to balloon later. For more complex

products such as derivative-based commodity-price insurance (potentially very

useful for small farmers", essentially none of the target consumers can mae an

evaluation of value for money.

For these reasons, primary responsibility must be placed on F!s to ensure that

they do not sell products that are unsuitable for customers< needs, lend more

than the customer can service, or explain products inadequately. F!s should


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also be required to ensure ethical staff behavior, avoid coercive collection

practices, and have adequate mechanisms for the redress of customer

grievances.

!.,.2 Privacy

While privacy of customer information is also an important protection against

damaging abuses, overly complicated privacy legislation can inhibit access. %n

many countries laws complicate the process of authori4ing the sharing of a

borrower


36/51


?onfinancial firms also can play important roles in facilitating the provision of

financial services. ervices provided through third-party ban agencies, money

transfer through cell phones, and consumer credit provided through retail stores

are examples. usiness-conduct rules may therefore need to apply to these

entities as well. pecific regulations could include protocols for real-time fund

transfers, ensuring no commingling of customer and provider funds, along with

mandatory training and certification of staff handling financial services in

nonfinancial firms. *ruth-in-lending and anti-tying regulations need to ensure

that financial firms do not exploit their role in financial services provision as a

way of forcing purchases of their nonfinancial products.

0.5 Principl 5: En)*rin$ *)*r% l'3)6 i& *)(6 'r &&c#i

R$*l'#( cilin$) !n in#r)# r'#) +' !n pr!( #! 4 'n in&&c#i !r

n c!*n#rpr!(*c#i "')*r '$'in)# pr('#!r% ln(in$6 'n( +' !n

#n(( #! 3!r '$'in)# incr')in$ 'cc)). +r )*c+ cilin$) 'r r#'in(6

#+% )+!*l( 4 pi#c+( '# r'li)#ic ll) in rl'#i!n #! FSP c!)#) in 'c+

"'r# )$"n# 'n( '(>*)#( !r #i"6 in lin 3i#+ "!"n#) in #+

3+!l)'l c!)# !& &*n().

iven their profile, usury laws and other administrative ceilings on interest rates

warrant a separate principle. $lthough a case can be made for controlling the

abuse of monopoly power or information asymmetry through interest ceilings,

the ob#ectives of usury laws can often be better achieved by a combination of the other principles.

With administrative costs high as a fraction of loan si4e, brea-even interest

rates on small loans tend to be high even for well-managed and cost-conscious

0F%s and other providers of small loans. /eal (inflation-ad#usted" lending rates

in the range of &I to H' percent per annum or even higher can be required to

cover costs. $s a result, imposing unduly low administrative ceilings can+if they are effectively enforced+prevent unsubsidi4ed lending to certain target


37/51


groups. *he potential of 0F%s to offer relief from the often oppressive and

exploitative practices of illegal or unregulated lenders can then be limited by the

imposition of unduly constraining interest-rate ceilings. !aradoxically, tighter

interest-rate regulation can result in over indebtedness, as low-income

consumers unable to access legal sources of credit end up using more expensive

illegal alternatives.

$n additional difficulty with administrative ceilings is that they are often made

ineffective by opaque loan-pricing structures, including heavy penalty fees for

delayed repayments that result in total costs of credit greatly exceeding that

envisaged in the ceiling even when the interest rate, narrowly defined, complies

with the regulation.

0ost developed countries have greatly liberali4ed such laws, allowing extensive

exemptions. ome have finessed the issue by establishing multi-tiered usury

ceilings with a much higher ceiling for microfinance, but this has the perverse

effect of excluding other providers not so classified.

0.7 Principl 7: En+'ncin$ cr!))-r$*l'#!r% '$nc% c!!pr'#i!n

+r r$*l'#i!n !& &in'nci'l &ir") !r )ric) i) )pli#6 '$nci) )+!*l(

c!!pr'# in p!lic%r$*l'#!r% (l!p"n# 'n( )*pri)!r% pr'c#ic) #!

n)*r c!n)i)#n# )#'n('r() !& c!n)*"r pr!#c#i!n6 )pci'll% !& 'c#ii#i)

rl'#( #! l!3-inc!" +!*)+!l() 'n( )"'ll &ir"). En i& )!" FSP) 'r

n!# c!r( (irc#l% 4% ' r$*l'#!r6 p!lic%"'r) )+!*l( n)*r #+'# 'cc))-

rl'#( i))*) rl'#in$ #! #+!) FSP) 'r n!# n$lc#(.

*he architecture of regulatory agencies differs from country to country, and has

been changing quite a lot in recent years. ome countries centrali4e prudential

and consumer protections, others separate them9 some have separate regulators

for different forms of F! (bans, insurance, capital marets, 0F%s, and so on+

the so-called :silo; approach", while others have a single supervisory authority.

?o clear guidance exists on what structure is best for financial-sector stability,efficiency, or access. Whatever the architecture, rules should be as consistent as


38/51


possible across financial-service providers and instruments, so that providers

offering and services performing the same function are treated similarly. *his

applies not #ust to regulation and supervision, but also to consumer protection,

taxation, and subsidies.

pecial attention needs to be given in this context to cross-selling and bundling

of products. While simplicity is often a virtue in product design for low-income

households and small firms, valuable product innovation addressing important

needs of this maret segment sometimes entails the bundling of products from

different suppliers (for example the selling of insurance by bans". $chieving a

good balance here can require close cooperation between different regulators.

*here is no clear presumption as to whether responsibility for consumer

protection should be within the same organi4ation as the prudential authority.

Baving both functions together can facilitate coordination, though perhaps at

the cost of consumer protection being subordinated to prudential considerations.

Whatever the structure, the agency administering consumer protection

regulation should have sufficient powers, resources (sub#ect to competing

budget claims" and standing compared to other financial regulators.

/egardless of structures, supervisory authorities need to wor together actively

to aim to achieve financial inclusion. pecial tax and regulatory privileges

granted to one form of F! regarding their access wor (as may happen more

liely with a silo approach" can have the effect of shutting off potentially

innovative competition from other F!s. *his needs to be guarded against.0.8 Principl 8: B'l'ncin$ $!rn"n#9) r!l 3i#+ "'r# &in'nci'l-

)ric pr!i)i!n

T+ ()i$n !& 'n% (irc# $!rn"n# in#rn#i!n) )+!*l( ) #! r)pc#

#+ c!""rci'l "'r# l!$ic ') "*c+ ') p!))i4l)pci'll% in r$'r( #!

c!)# &&c#in)) 'n( '!i( ('"'$in$ (i)#!r#i!n) #! "'r# &*nc#i!nin$.

T! &'cili#'# "'


39/51


ini#i'#i6 #+ ()i$n !& p!lici) 'n( in#rn#i!n) #! incr') 'cc)) )+!*l(

'!i( )#i&lin$ pri'# pr!i)i!n.

S!" &!r") !& (irc# $!rn"n# in!l"n# in &in'nci'l-)ric

pr!i)i!n "'% 4 >*)#i&i'4l&!r c#i) !& )*c+ &ir")

)+!*l( 4 p*4licl% n!3n6 ?*'n#i&i(6 'n( c!)#(. All p!lici) &!r i"pr!in$

'cc)) )+!*l( +' cl'r 'n( "')*r'4l !4>c#i) 'n( #+ir &&c#in))

)+!*l( 4 ?*'n#i#'#il% "!ni#!r( 3i#+ #r'n)p'rn# p*4lic rp!r#in$.

0.8.1 Di)'pp!in#in$


40/51


involved in access to financial services for special groups, at least for an interim

period.

nsuring robust and transparent governance systems, insulated as far as possible

from narrow political pressures, is a prerequisite for an effective role in direct

service provision. $ny such institution should be made sub#ect to clear and

explicit governance procedures, strict auditing and reporting (including of all

type of contingent riss", and a high level of public transparency, including

explicit and formal rules dealing with political directives to management.

!..3 0uidelines for public provision

Direct government involvement, whether through government-controlled

F!s, administrative mandates, or taxes and subsidies (principle J", should be

guided by clear ob#ectives and be delivered in the most cost-effective way.

*he goal of each intervention should be clearly understood. pecial-purpose

government agencies need to be confined to achieving the ob#ectives set for

them, and not be allowed to pursue a wider agenda of their own. $ny

noncommercial ob#ectives of such firms should be publicly nown, quantified,

and costed. Where the problem is seen as transitory, there should be a time

bound exit plan for any state providers.

)ommercial logic should be pursued as far as possible, with special allowance

made only for the clearly identified maret failures that prompted the

intervention. *his logic will facilitate identification of what can best continue to

be provided by the private financial system, and what calls for government provision. ince access will only be extended widely if service delivery

becomes cost-effective, a top priority for any government provision in this area

must be cost-effectiveness in delivery.

>ne valuable service that government-owned firms may offer is to be the

provider of last resort for such services as basic payments service or basic ban

accounts, which are less sub#ect to political capture and can have economies of


41/51


scale. $lternatively (and probably more efficient and practicable", this function

can be mandated to the private sector (see principle J".

Where public and private providers operate side by side, governments have

tended to favor the public entities9 this should be avoided. %ndeed, despite the

errors made by private financiers in the recent crisis, it can be argued+and

ample evidence supports+that in its normal everyday functioning, much of

finance is inherently better suited to private-sector provision. %n order to

facilitate achievement of maximum scale through leverage of private capital and

initiative, the design of policies to increase access should avoid stifling private

provision or undermining the framewor that supports them.

!..! $onor issues

Donor agencies have played an important role in promoting access+for

example, by their support of early microfinance experiments. Bowever, donors

must ensure that they do not excessively subsidi4e interventions and create

unfair competition, thereby undermining the performance of providers that do

not receive preferential support and discouraging them from expanding to less

easily served customers.

%n general, therefore, the principles proposed above for government also apply

to interventions made or funded by donor agencies. %ndeed, some donor

agencies have already defined principles for their financial support to ensure

that they complement financial development more generally. Furthermore,

donors need to be accountable both to their own taxpayers and to thegovernments and public of the country they operate in. %n addition, different

donors should ensure coordination with each other so that their interventions are

compatible among each other and with government initiatives. %n particular,

they should not undermine the well-designed interventions of others.

0.; Principl ;: U)in$ )*4)i(i) 'n( #'


42/51


+il )!" pr"'nn# l"n# !& )*4)i(% c'n in )!" c')) 4 nc))'r%

#! &!)#r 'cc))6 #+ ()i$n !& )*4)i(i) )+!*l(6 3+r p!))i4l6 4 #i"-

4!*n( 'n( 'i"( '# "'in$ in)#i#*#i!n) 'n( 'cc)) )l&-&in'ncin$ 'n(

)*)#'in'4l. All &!r") !& )*4)i(i) 'n( p!lic% c!)#) )+!*l( ') &'r ') p!))i4l

4 'cc!*n#( &!r 'n( 4 i#"i( cl'rl% in #+ n'#i!n'l 4*($#. An%

$!rn"n#-pr!i(( !r -(irc#( cr(i# !r !#+r i"plici# !r


43/51


*he existence of subsidi4ed products can undermine the viability of the

financial intermediary


44/51


Developing and adapting standards and products to users< needs is a function

largely best done by maret suppliers. *he design of appropriate products can in

some circumstances, however, call for collective action. $ fragmented maret

may benefit from the government coordinating and convening research of

product needs and ensuring product development. Where necessary to overcome

coordination problems, it can be useful for policymaer to wor directly with

F!s to adapt standards and products to user needs. !olicymaers can also

approve specific products as meeting quality-assurance standards, which can

assist in consumer protection (principle K". $ ey goal of such efforts would be

to mae it feasible and profitable for mainstream F!s to cater to the excluded.

!.., Taation

*he design of taxation of financial intermediation should also be access

proofed.

For example, taxes imposed as percentages of interest rates on loans tend to be

anti-access (given the higher pretax rates of interest involved".

Financial-transaction taxes also may discourage the use of formal financial

intermediaries, thereby limiting access. Where tax falls unevenly on different

classes of service providers, competition can be distorted and even eliminate the

profitability of pro-access initiatives if more heavily taxed.

0.1= Principl 1=: En)*rin$ ('#' c!llc#i!n6 "!ni#!rin$6 'n( 'l*'#i!n

G!rn"n#) )+!*l( n)*r c!llc#i!n !& )*&&icin# ('#' #!

'll!3 &!r #+ (#r"in'#i!n !& #+ $'p) in 'cc)) #! &in'nci'l )ric) #+'#

3ill &'cili#'# pri'# )c#!r )!l*#i!n)

pr!i( 'cc!*n#'4ili#% !& p*4lic p!lic% &!r "!ni#!rin$ 'n( 'l*'#i!n !&

#+ &&c#in)) !& pr!-'cc)) p!lici) 'n(6

+lp 4*il( ' 4##r6 r)'rc+-4')( *n(r)#'n(in$ !& 3+'# 3!r) in

rl'#i!n #! 'cc))


45/51


$t the most basic level, baseline and regularly updated data are needed on the

(lac of" access to financial services. overnments can play an important role

here, for example, by conducting household surveys with specific requests for

information about access to financial services, and by requiring financial

institutions to report on a regular basis on financial-services outreach. Where

quantitative access targets are imposed or adopted there is even more need for

data that verify compliance. $s much as possible, these data need to be

internationally comparable.

%mpact evaluation needs go beyond these data. %deally the quantitative base for

policy should be analy4ed at the design stage with rigorous methodologies,

using pilots, baseline surveys, and control groups. Different types of data are

needed for this@ benchmaring, micro-impact studies, and financial literacy

studies. *his should determine the si4e and distribution of the policy


46/51


CHAPTER

CONCLUSION

CONCLUSION


47/51


Despite the rapid growth in finance worldwide over the past quarter century-

now interrupted by the global financial crisis+many low-income households

and small firms remain excluded from access to many financial services,

especially in developing countries. *he ten principles deal with three issues@

•xpanding financial access, including best practices for stimulatinginformed demand as well as for adequate competition among suppliers9

• /egulation of financial service providers, and

• $voiding distortions when public resources are used to provide financial

services.

=sing these ten principles one may achieve access to many financial services.

*he principles are directed not only to policymaers and other actors whose

main focus is to provide financial access, but also to those whose policy actions

can influence access. *hese include the prudential and maret-conductregulators of financial marets and of bans and other financial intermediaries9

competition and licensing authorities9 and the ministries concerned with

legislation governing interest-rate ceilings, and antiCmoney laundering and

combating the financing of terrorism policies.


48/51


CHAPTER 5

REFERENCES


49/51


5 REFERENCE

. /hyne, li4abeth. 2''J. !icrofinance for "an#ers and Investors$

%nderstanding t&e 'pportunities and C&allenges of t&e !ar#et at t&e

"ottom of t&e Pyramid. ?ew 7or@ 0craw Bill.

2. !owell, $ndrew, at al. 2''H. :%mproving )redit %nformation, an

/egulation, and upervision@ >n the /ole and Design of !ublic )redit

/egistries.; World an !olicy /esearch Woring !aper 3HH3.

3. Bonohan, !atric. 2''H. :Financial ector !olicy and the !oor@ elected

%ssues and vidence.; World an Woring !aper H3. Washington, D.).@

World an .H. ec, *horsten, $slL DemirgMN-unt, and 0aria oledad 0artine4 !eria.

2''O. :/eaching >ut@ $ccess to and =se of aning ervices across

)ountries.; ournal of inancial *conomics. PI(&"@23HC2KK.

+. aily, 0artin ?eil, /obert . 5itan, and 0atthew . 1ohnson. 2''P. ,&e

'rigins of t&e inancial Crisis. Fixing Finance eries ?o. 3. Washington,

D.).@ *he rooings %nstitution.

. $nderloni, 5uisa, at al. 2''P. inancial Services Provision and

Prevention of inancial *xclusion. russels@ uropean )ommission.

O. )alomiris, )harles, )harles 0. ahn, and tanley D. 5onghofer. &JJH.:Bousing-Finance %nterventions and !rivate %ncentives@ Belping

0inorities and the !oor.; ournal of !oney Credit and "an#ing

2K(3"@K3HCKOH.


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