Financial Outlook of the OIC Member Countries 2017
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2.2 FINANCIAL ACCESS
Financial access (inclusion) can briefly be defined as the use of financial services by individuals
and firms. Financial access helps peoples and corporations to get benefit of new business
opportunities, invest more in education, save for future, and insure against various risks etc.
This topic has been of growing interest all over the world, and considered as one of the main
areas particularly in emerging and developing economies for the further development of
financial markets. The benefits of the financial intermediation and markets are believed not
being used by all sectors and population which resulted negative effects on inclusive economic
growth, poverty alleviation, income distribution and efficient allocation of resources etc.
Cihak, Demirgüç-Kunt (2012) highlights the importance of financial access of the different
groups of economic units as follows: ‘A well-functioning financial system allocates capital
based on the expected quality of the project and entrepreneur, not on the accumulated wealth
and social connections of the entrepreneur. A well-functioning financial system that overcomes
market frictions will more effectively provide financial services to a wide range of firms and
households, not just large companies and rich individuals. Thus, to develop informative
proxies of financial development, it is useful to move beyond financial depth and also include
indicators of financial access—the degree to which the public can access financial services.’
A common proxy variable of access to financial institutions is the number of bank accounts per
1,000 adults. Other variables in this category include the number of bank branches per
100,000 adults (commercial banks), the percentage of firms with line of credit. When using
these proxies, the following points should be kept in mind on their weaknesses: The number of
bank branches is becoming increasingly misleading with the move towards branchless
banking. The number of bank accounts does not suffer from the same issue, but it has its own
limitations (in particular, it focuses on banks only, and does not correct for the fact that some
bank clients have numerous accounts)31.
Bank account per 1,000 adults is one of the main indicators of access to financial services
which refers to ‘the number of depositors with commercial banks per 1,000 adults’. As a result
of the underdeveloped nature of economic and financial markets as well as low level of
financial inclusion, this level for low income group countries has been lagging behind the
world averages significantly. While the world average was recorded as 638 in 2015, the OIC-
LIG was realized as 120 in the same year. However, levels of OIC averages over this period
closed to the world averages mainly due to the high level of bank accounts opened by adults in
OIC-HIG and OIC-UMIG countries which have exceeded the world averages significantly
recorded as 1,123 and 961 respectively. This indicates that there is a close correlation between
economic growth, income level and banking activities in a particular country.
31 Cihak, M., Demirgüç-Kunt, A. “Benchmarking Financial Systems Around The World 2012, World Bank”