Financial Inclusion and Characteristics of the Unbanked: A Survey Analysis

In this paper the Global Financial Inclusion database is used to run regressions on borrowing and emergency funds, on 150 different countries, over two years. In this study, I look into the ability of the unbanked to access financial funds from informal sources. Besides that, I research the ability of the unbanked to raise emergency funds. Ordinary least squares regressions with country-year fixed effects and robust standard errors are used. This study provides confirmatory evidence that having a bank account is beneficial, when money for emergencies is needed. There are signs of substitution of formal financial services. The most convincing evidence is found for the unbanked who use a family member’s account. They have higher probablility of getting money for emergencies, and in some cases seem more effective than having their own account. Females, poor, and uneducated groups are the most vulnerable. Especially those who are restricted by bureaucracy. Borrowing from friends and family happens mainly in Asia, but mainly by the banked. A possible reason that the unbanked are less likely to borrow from relatives, is lack of reliability. I also find that lack of money is the main barrier for the poor to becoming banked