# **Appendix 2: A New Composite Series on Household Access to Financial Services**

This Appendix discusses some recent contributions to measuring access of households to various forms of intermediary accounts, and proposed a new composite cross-country indicator of the percentage of the adult population with access to some intermediary account. The new series has the advantage of wide coverage – almost 140 countries – and the drawback of relying for many countries on some rather shaky imputations.

In recent contributions, two basic approaches have been used to get to grips with the problem of measuring overall financial access (Honohan, 2005). One is to go directly to households and survey their usage, whether as part of a wider household survey or a dedicated financial access survey. The other is to make inferences from data in the number of intermediary accounts. The annex proposes a method of using overlaps between the country coverage of the different approaches to arrive at access estimates for 162 countries – or almost three times the number of countries for which there is direct household survey data.

The first method of measuring access, namely the use of sample surveys of households or individuals, is the most satisfactory from a conceptual point of view. The surveys that have produced data here include general household surveys such as the LSMS series (which can include a savings module asking questions about the holding of savings) and specialized financial access surveys, such as the Finscope series which began in Southern Africa and are currently being rolled out in several other African countries. The series of Eurobarometer surveys in the European Union also ask such questions (cf. European Commission, 2005). Unfortunately the number of countries covered by household survey data remains modest, and there are indications of problems with the reliability some of the data collected.<sup>35</sup> The second method is to collect data on the number of accounts maintained at the financial institutions. This has been done in respect of _microfinance_ in 148 developing countries by Christen et al. (2004) of CGAP, building on earlier compilations for more limited groupings. They include not only specialized microfinance institutions, savings and credit cooperatives, credit unions and other socially-oriented intermediaries (including some microfinance-oriented commercial banks) and they term these ‘alternative’ intermediaries.<sup>36</sup> More recently, Peachey and Roe (2006) have augmented the CGAP database with figures for a number of _additional savings banks_ (members of the World Savings Banks Institute), which had not been included by Christen et al. We describe this augmented set as the “WSBI database”. The additions are important. Many of the institutions added by Peachey and Roe, most of them postal savings banks, have very wide outreach by national standards: in 27 countries they represent more than 50 percent of the number of accounts recorded. Furthermore, the additional banks include

> 35 The Eurobarometer surveys have been repeated on a roughly annual frequency with some startling yearto-year jumps in the responses, despite only small change in the questions answered. 36 Christen et al. define their coverage as including intermediaries that have a “double bottom-line”, reflecting social (access to finance) as well as strictly commercial objectives.  They include governmentowned development banks and savings banks.

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