Banking On The Poor: The World Bank and World Poverty (MIT Press Classics) by Robert L. Ayres

1. Overview

In Chad, one of the world’s poorest countries, there are
barely nine bank accounts per thousand adults. In
Rwanda, Liberia, and Madagascar, where per capita
incomes are higher, the figure is about 35 accounts per
thousand adults. South Africa is one of the richest
countries in Africa, with a per capita income of more
than $5,300, about 10 times that of Chad. There, one
finds about 550 bank accounts for every thousand adults.
Mauritius, another relatively rich country in Africa, has
the subcontinent’s highest density of accounts—2,010
per thousand adults (figure 1.1).
Among countries with similar levels of per capita income,
one finds different levels of access to banking services.
Mali and Bangladesh, for example, have a similar per
capita income of around $425, but the number of
accounts per thousand adults is five times as high in
Bangladesh as in Mali. Cape Verde and Swaziland also
have similar levels of income ($2,200–$2,350 per capita).
But Cape Verde has almost twice as many bank accounts
per thousand adults as Swaziland. Cost and convenience
may explain a good part of the difference. Monthly fees
for holding an account in Mali are three times as high as
in Bangladesh, and the number of documents needed to

open an account in Swaziland is 3.6, compared with 2.0
in Cape Verde.
The access to banking services in developing countries is
even lower than suggested by the figures on density of
bank accounts, because some people have multiple bank
accounts. Regulators count checking, savings, and time-

deposit accounts separately—yet each banked person
may have all three. Also, the numbers of accounts do not
separate business accounts from individual accounts.
Taking this into consideration, the number of banked
adults in a country like Chad may be as low as three in
1,000.
Want to bank? Get a formal job
Among the several factors that affect the likelihood that
an individual will have a bank account, the most
powerful is income (figure 1.2).2 The poorest people in
many countries do not use the banking system because
they do not have enough money to make it worthwhile.
And banks may not find it worthwhile to provide them
with services. FinMark Trust of Africa notes that “the
greatest perceived barrier to access is the absence of

sufficient income” (FinScope/Bankable Frontiers 2007).3 A
recent World Bank study, Finance for All?, reaches a similar
conclusion (Demirguc-Kunt, Beck, and Honohan 2008).
Of the reasons cited for being unbanked in a survey done
in South Africa, (FinScope/Bankable Frontiers 2007) lack
of income (or lack of a job) was cited by 78 percent of
respondents, compared with only 13 percent who cited
documentation needs, fees, or distance. Another 9 percent
of respondents said that they were unbanked by choice,
did not need an account, or did not trust banks.
In most developing countries, the middle class consists
largely of people who hold formal, salaried jobs (Banerjee

and Duflo 2006). It is also true that few of the poor hold
such jobs. In urban Indonesia, for example, only 38 percent
of the poor, defined as those whose daily per capita spending
is less than $1 a day, are salaried.4 By contrast, 77 percent of
the lower-middle class, those with daily per capita spending
of between $2 and $4, have a salaried job. For those in the
upper-middle class (with daily per capita spending of
between $6 and $10), that proportion jumps to nearly 90
percent. In poor countries, most people are employed in the
informal sector and lack a steady income. In Mozambique,
for instance, more than 80 percent of the population works
in the informal sector.
People who have a formal job are more likely to need and use
formal banking services. In India, for example, 91 percent of
the households in which the main earner holds a salaried job
are banked, in contrast to 38 percent of the households in
which the chief earner is a daily wage laborer. Those with
formal jobs that pay a regular salary not only have more
income but also expect stable income in the future (figure
1.3). They are likely to find banking services useful, just as
banks are likely to find them to be desirable customers.
To create more formal jobs, businesses need to grow. But
credit constraints often limit that growth. Easing access to
credit, by contrast, can boost revenue and employment
growth. In a sample of Eastern European firms surveyed

Banking On The Poor: The World Bank and World Poverty (MIT Press Classics) by Robert L. Ayres