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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
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News | What Type of Access Do Poor and Low-Income People Have to Financial Services? Data Workshop Addresses Measuring the Demand for Financial Services Washington DC, 26 October 2004 – The scope and extension of microfinance has been limited due to a dearth of reliable and comprehensive data on access of poor and low-income people to financial services. With the International Year of Microcredit approaching, a one-day technical workshop organized jointly by UNCDF, the World Bank and the International Monetary Fund discussed the possibilities of developing headline country indicators and census demand information on the accessibility of financial services. Stanley Fischer, Vice Chairman Citigroup and Chair of the Advisors Group for the International Year of Microcredit, chaired the workshop. Fischer opened the workshop by recognizing the need for reliable and comprehensive cross-country data on financial access. He set the tone of the workshop by quoting Lord Kelvin’s remark, inscribed on a wall in the University of Chicago: “When you cannot measure, your knowledge is meager.” The workshop, “Data on Access of Poor and Low-Income People to Financial Services,” took place at the World Bank, and gathered fifty statistics and economics experts from private financial institutions, academia and multilateral agencies. The workshop assessed data available on poor and low-income current and potential financial service clients; discussed data collection methodologies and efforts to date; and charted a way forward to meet the ambitious goal to develop a comprehensive, reliable, global databank on financial access. Leading financial institutions, such as Citigroup, ICICI Bank and Visa International participated, along with the Inter-American Development Bank. The United Kingdom’s Department for International Development (DFID) and the United States’ Federal Reserve Board also attended. Prominent economists, statisticians and researchers came from the Economist, New York University and Princeton, and multilateral agencies, such as UNDP’s Human Development Report Office, the World Bank, the International Monetary Fund and the International Finance Corporation. Kevin Watkins, Director of the Human Development Report, emphasized the role “data plays in simplifying complex realities, and creating healthy competition between countries to improve their ranking in development indices.” Watkins went on to say, “The need for data on financial access is an important element currently missing from the Human Development Report and excluded from the Human Development Index.” Patrick Honohan’s paper, “Measuring Microfinance Access: Building on Existing Cross-Country Data,” laid the foundation of the workshop. Honohan, Senior Financial Sector Policy Advisor at the World Bank, remarked that “a lot of relevant information has been collected, but its reliability, comprehensiveness and comparability all remain somewhat deficient.” He reviewed the range and limitations of existing data, considered the conceptual framework required for moving ahead and discussed the use of alternative methods of data collection with a view to building reliable and comprehensive cross-country data. Honohan’s paper provides a starting point for collaborative efforts. Jonathon Morduch’s (Associate Professor, New York University) vividly described the multi-dimensional nature of microfinance, drawing from field work undertaken in India, Bangladesh and a handful of other countries. Evidently this presents special challenges to the data collection exercise. He concluded by saying that, “access to a bank does not mean satisfactory access to banking, therefore the quality of financial services is an important determinant of how the unbanked would be served.” The next session, moderated by Alan Winters (Director of the Development Research Group, the World Bank), discussed the challenges of collecting cross-country data. The presenter, Thorsten Beck, and discussants Raghuram Rajan (Economic Counselor and Director, IMF) and Dean Karlan (Assistant Professor, Princeton University) deliberated the data needed to build a holistic and systematic picture of financial products and services offered to the poor. Beck showed how econometric methods can be used to better understand the microfinance industry and its contribution; Karlan emphasized the value of real-world experimental techniques to throw additional light on how finance markets behave. Rajan emphasized the political aspects of change, and suggested one important function of microfinance is to help empower the poor and make them part of the constituency for reform. Rajan warned that one should be open experimentation in the early stages of data collection and not set in stone a particular template for we may discover that some new data sources are better than early ones. He concluded that this was not a reason for inaction and we should start the process of data collection, while remaining open-minded as to what data would eventually be most useful. The afternoon sessions of the workshop followed the format of panel discussions. Moderated by Carol Carson, Director of the Statistics Department at the International Monetary Fund, four statisticians evaluated the pros and cons of the various statistical data collection methods. The panel concluded that a combination of data gathering methods would be most appropriate for reliable and comprehensive cross-country data. The workshop culminated
with Stanley Fischer moderating a final panel on the way forward. UNDP, IMF
and the World Bank made commitments to continue this partnership and thrash
out the details of the team and methodology over the
course of the coming months. A comment by a participant after the workshop shows
the appreciation the steering group received, “I gained a much greater
sense of clarity about the microfinance arena and particularly the array of
information considerations we face --truly an impressive group of participants
and an absolutely terrific conference.” The steering group is planning
a follow-up meeting in mid-November. .
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