Each of these functions has its microeconomic counterpart (examples are bracketed above) relevant to the low-income household or microentrepreneur. While the potential for poverty alleviation of access to credit and insurance facilities is easy for all to imagine, the others are also not negligible. For instance, the dramatic fall in the retail price of international money transmission from the US to Latin America was sufficient to allow a regular remittance of $200 to be increased to $215 for the same net cost to the remitting emigrant – an appreciable potential contribution to poverty alleviation in the home country (Orozco, 2004). The value of small savings mobilization facilities to the poor has been established by observation of the heavy transactions costs the poor are prepared to pay for such services (Rutherford, 2001).

However, despite much detailed work that has been done over the past decade or so evaluating various donor-funded microfinance initiatives, it has to be said that the magnitude of the impact on household poverty of improved access (cost and availability) to each of these services is not well-known. Partly this is the result of researchers in impact studies trying to measure too many dimensions of the impact of service-enhancing policy or donor interventions (Honohan, 2004). Evidently collecting information about the access of households and firms as well as on their income and productivity is key to addressing these issues, and equally important is collection of additional information about the users’ characteristics to be used as controls.

# _The supply side: What hinders access?_

If access to financial services has an impact on poverty reduction, the other side of the coin is to explore the determinants of such access. Here there is less agreement on a framework for analyzing the determinants of access for low income households.

There is something to be learnt from the experience of high income countries in dealing with the problem of exclusion from financial services. But, on closer consideration, the problem being addressed in the advanced economies is different in several key respects, mostly associated with the fact that advanced economies have reasonably wellfunctioning financial systems from which only a small minority are excluded from access. In both the US and the UK, for example, fewer than 10 per cent of households are totally excluded from the mainstream financial sector (cf. Kempson et al., 2000). There, the problem is of dealing with a excluded minority, whereas in the low and middle-income countries the problem is one of reaching with financial services what is often an overwhelming majority of the population. For instance, in advanced economies, considerable progress might be made by existing providers designing and adding simpler products with lower unit costs that can meet the less complex financial needs of lowincome households, or facilitating the emergence of niche players that can more effectively reach the excluded. But in lower income countries the challenge may involve existing intermediaries scaling up to a multiple of the number of their existing clients, or large new providers entering the market with a new business model.

Nevertheless, insights from the advanced economy literature are helpful. Here we propose, as a variant on what has been suggested in various other studies<sup>8</sup> , that the 8 For example, Kempson et al. 2000 distinguish between five types of exclusion to financial services: 7