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Access to Finance Study (A2FS) Fatimah Afzal Project Coordinator

Access to Finance Study (A2FS) Fatimah Afzal Project Coordinator. Access to Finance Study (A2FS) Presentation Structure. Background - Why Interest in access to finance? - Key players Objectives and A2FS set-up in Pakistan Value of the information and how it can help

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Access to Finance Study (A2FS) Fatimah Afzal Project Coordinator

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  1. Access to Finance Study (A2FS) Fatimah Afzal Project Coordinator

  2. Access to Finance Study (A2FS)Presentation Structure • Background - Why Interest in access to finance? - Key players • Objectives and A2FS set-up in Pakistan • Value of the information and how it can help • The Access Indicators • Information at work – examples from Africa

  3. Background • Access to finance  economic growth  poverty alleviation • Interest among international agencies • GoP committed to private sector solutions for economic growth and poverty reduction But • Limited comprehensive data to guide policy formulators and financial services providers • More supply side and less demand side information • Lack of standardized tools to for measuring access Consequently • Internationally collaborative efforts to harmonize financial access surveys • WB, DFID, UNCDF, CGAP and FinMark (some of the major players harmonizing research efforts)

  4. FinMark Trust • Established in 2002 in South Africa • Agenda to make financial markets work for poor • Several programmatic interventions, including FinScope FinScope • A survey tool (a questionnaire) developed in 2002 • Provides insights into the financial behavior of individuals and SMEs • Supports process of changing financial markets so that individuals and SMEs have better access to financial services • A resource for countries in Africa and elsewhere • South Africa – FinScope developed here in 2002 • Lesotho, Swaziland • Zambia, Tanzania • Kenya, Uganda • Nigeria, Egypt • And now Gana & Pakistan - Test cases for WB & FinScope

  5. A2FS Stakeholders - Pakistan World Bank (WB) Swiss Agency for Development & Cooperation (SDC) Department for International Development (DFID) Government of Pakistan (MoF) - The Client - Close Coordination with SBP Pakistan Microfinance Network (PMN) The Implementing Agency FinMark Trust/FinScope Technical Experts Potential Users of Survey Data AC Nielsen Pakistan Limited The Market Research Company Government of Pakistan MoF, SBP Financial Service Providers Federal Bureau of Statistics (FBS) (Sample Design Supplier) Development agencies & researchers

  6. A2FS Implementation Approach - Pakistan Questionnaire development • Adapting WB-FinScope questionnaire to Pakistan • Inputs from stakeholders • Rigorous concept testing & pilot testingFebruary 2006 Sample Design • FBS to provide sample design • Robust random probability sampling Actual Field Work • AC Nielsen • Intensive orientation and training of enumerators • Strict guidelines for respondent selection and substitution • Close monitoring and quality checks June, 2007 Data Dissemination and Application • Assistance in mining data and its application Post June 2007

  7. A2FS Sample Coverage - Pakistan the value proposition…. Market Continuum • 10,500 respondents – rich & poor • Women and men • Urban & rural areas (four provinces & AJK) • Area based sampling

  8. What A2FS Offers the value proposition…. • Reflection of consumers demand & use for financial products and services • Who is engaging with financial services sector & how? • Why people are not using financial services? • Inclusion of psychographics – exploring beyond the traditional reasons for non-access • A Segmentation Model – which is not just income based Consumers, Consumers, Consumers, Consumers, Consumers

  9. A2FS – Data PrioritiesQuestionnaire focuses on…. Informal & Formal Financial Products & Services • Demographics • Socio Economic Lifestyle Characteristics • Household and Individual Respondent’s Income • Financial Behavior of a Household and Individual • Savings (including National Saving Scheme Products) • Loans, Credit and Insurance • Payment and Receipts • All other categories of financial products & services • Financial Services Provider Differentiators • Technology • Financial literacy • Psychographics/Attitudes

  10. A2FS’s Value Proposition…. • Documentation of barriers • Development of policy lessons • Benchmarking and tracking change • Mobilization of support for policy change • Product development & targeting new segments • Cross country comparisons • Identification of areas for further research & analysis

  11. Access Strand of Financial Services - SA Developmental frontier (45%) Formally served (55%) Banked Financially excluded Black Female 30 – 44 years Tribal land LSM 1- 4 Black and colored 16 – 29 years Tribal, rural and urban informal LSM 1 - 6

  12. Landscape of access Botswana and Namibia % of the respondents (%of adult pop) FinScope 2004 Namibia Botswana Transactions 100 Transactions 75 100 50 50 75 25 43 50 Insurance Savings 0 23 41 25 25 Insurance Savings 51 0 33 21 Credit/loans Credit/loans Functionality Measures – Landscape of Access

  13. Sub-Indicators may be constructed, such as… • % receiving savings or credit through informal providers • % who are formally included among the poor • % saving in certain financial instruments

  14. Information - Deepening and broadening financial markets • Financial Service Providers innovate and develop new products and explore new markets • Governments create improved policy and regulatory environment • International Development Agencies assist creation of inclusive markets which cater to financial services needs of poor • Researchers and others Stakeholders identifying areas of deeper inquiry New partnerships More communications Exposed information gaps Previously unidentified segments & niches Changed paradigms Systemic change

  15. 2005 syndicate members

  16. The Survey at Work - Examples from Africa • Bank Windhoek, Namibia – Serving the Bottom of the Pyramid • ABSA Bank, South Africa – Understanding segments within the poor • Insurance industry and Banks, SA- Understanding Financial Literacy requirements • Botswana– helping to improve the policy environment • South Africa’s National Treasury – reaching a trade off between financial stability and financial access

  17. What A2FS is Not • “Sit-on-the-shelf ” research! • A specific product/market potential sizing research • An answer to everything – it’s a macro study that should inform other studies

  18. Thank You!

  19. The Financial Access Indicators Challenges in constructing the indicators • Access and usage • Unit of response – individual or household? • Measuring Access: Institutions, services or products? • Degree of Access

  20. Are the Lower Markets Profitable? • The Prahalad view – a fortune at the bottom of the pyramid? • May not be obvious at first – the ICICI experience • A source of incremental profit where traditional markets are mature • Where the low unit cost: high volume economics can be made to work • Where the cost of the R&D has already taken place – leveraging/replicating know-how • Where infrastructure improvements bring a market within reach • Where the long term reward is sufficiently exciting to merit sub-optimal profits in the short term

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