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Income Biggest Barrier to Banking in Developing Countries

Income Biggest Barrier to Banking in Developing Countries

by Leora Klapper, Douglas Randall and Jenny Marlar

WASHINGTON, D.C. -- In high-income countries, the rich and the poor alike have bank accounts, but this is not true in developing countries, according to a Gallup/World Bank study. The richest adults in developing countries are more than twice as likely as the poorest adults to have a bank account -- 62% vs. 24%, respectively.

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These findings are from the World Bank Global Financial Inclusion Indicators (Global Findex) project, the first individual-level, internationally comparable data on how adults worldwide save, borrow, make payments, and manage risk. Gallup collected the data in 2011 in 148 countries and areas for the study, which is funded by the Bill & Melinda Gates Foundation. The country-level data were released in April, and the complete microdata set was made available Dec. 13 through the World Bank's Open Data Initiative, enabling researchers, policymakers, and private-sector leaders to conduct their own in-depth analyses.

More than 2.5 billion adults worldwide do not have a bank account, with the vast majority disproportionately located in the developing world. Lack of access to formal financial institutions makes it difficult for adults to securely save for the future and borrow to make important investments in their education or businesses. Financial inclusion is an important component of a country's financial development, which is linked to economic growth. This analysis includes 102 countries classified as "developing," that is, those countries the World Bank does not categorize as high income.

Despite the differences in account penetration -- defined as having an account at a bank, credit union, a cooperative, post office, or microfinance institution -- across income quintiles, respondents among all income groups cited lack of money as the No. 1 reason for not having a bank account. Even the wealthiest residents in developing countries may not feel they have enough money to justify opening a bank account. High banking costs are another frequently mentioned barrier. For many, the high costs that banks charge to open and maintain an account make owning one an unobtainable luxury.

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Although lack of money and expense are common reasons for not owning a bank account across all income groups, these reasons become less dominant as income rises. Individuals living in high-income households are likely to say they have no account because another family member already has one.

Among lower income groups, proximity to a bank is the most commonly cited reason for not having an account after financial reasons. Adults in low-income households are also more likely to live in rural areas, where bank penetration is low. Even if these residents have enough money to open a bank account, traveling to a bank to deposit or withdraw money may not be practical.

Approximately one in five adults cites lack of proper documentation as a barrier, regardless of income level. Many banks require proof of permanent residence or wages slips, and in countries where large numbers of people are informally involved in the economy, this documentation can be difficult to come by.

Bottom Line

Although having enough money is a major hurdle to account penetration in developing countries, other major obstacles, such as documentation requirements and bank branch penetration, can be overcome. Recent research by the World Bank shows adults living in countries with better enabling environments for accessing financial services -- including lower account costs and greater proximity to financial intermediaries -- are significantly more likely to report owning and frequently using a bank account. The research also finds that policies that promote basic or low-fee accounts or exempt some depositors from onerous documentation requirements are associated with high account ownership among rural residents and the poor.

The complete database and related report, along with the survey in 15 languages, are available at

Access the complete country-level data set, report, and questionnaire at

For complete data sets or custom research from the more than 150 countries Gallup continually surveys, please contact us.

Survey Methods

Results are based on face-to-face and telephone interviews with approximately 1,000 adults per country, aged 15 and older, conducted in 2011, in 102 developing countries. For results based on the total samples, one can say with 95% confidence that the maximum margin of sampling error ranges from ±2 percentage points to ±5.1 percentage points.

For more complete methodology and specific survey dates, please review Gallup's Country Data Set details.

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