# **Box 2:  Examples of Regulatory Measures to Enhance Access**

Examples of experience in developed countries show different models how access to basic financial services can be achieved. The different models are based on various levels of government intervention.

<u>Example Germany – Raising awareness: A public debate about the right of everyone to have a</u> checking account resulted in a voluntary undertaking in 1995 by all associations of Germany’s private credit institutions to open checking accounts for everyone on a deposit basis. These accounts provide the client with access to cash withdrawal and payments, transfer and deposit services, but not automatically to overdraft facilities. Income levels and credit history are not accepted reasons for a bank to reject opening an account. The only reason why a bank can reject opening an account is client engagement in money laundering or other forms of fraudulent behavior. This declaration preempted national regulation and government intervention in the private banking sector. Consumer protection agencies monitor the compliance of private banks with this undertaking. Separately, public credit institutions, such as savings banks, are obliged by federal state law to open a checking account for everyone under similar conditions.

<u>Example Canada – Government guidelines: The Government of Canada set out guidelines in</u> 2001 to ensure access to basic financial services for all Canadian citizens. These obliges banks to provide low cost accounts with the following features: (i) no charge for deposits, (ii) the use of a debit card, (iii) check-writing privileges, (iv) free updated account statement or passbook record, (iv) 8 to 15 debt transactions per month, (v) a maximum monthly fee of $4. The Financial Consumer Agency of Canada monitors if financial institutions respect their public commitments according to these guidelines.

<u>Example US</u> – Government regulation: Through the community reinvestment act (CRA) of 1977, the US government obliged banks to reinvest deposits in the communities where they are received from, and having institutions serve the areas in which they have a physical presence. CRA established a point system which rates banks according to their provision of lending and savings services to low income neighborhoods. These ratings were subsequently published and taken into consideration in the approval of decisions on bank mergers and acquisitions and other regulatory decisions. Bank compliance with the CRA is subject to regular reporting and monitoring by the Federal Financial Institutions Examination Council.

9. **With the exception of housing finance, no regulatory incentives exist to enhance the provision of credit to low income clients.** Following the significant decline in available housing finance after the banking crisis, the Government put in place a framework to increase micro housing lending (see Box 3). As the household survey shows, demand for personal loans is high, in particular among the lower income groups (see Chapter 3). Measures to provide incentives for the “downscaling” of banks toward the microcredit market could be considered, based on the experience of other countries<sup>29</sup> .

> 29 However, as the case of Brazil has shown, the provision of microcredit at subsidized interest rates, or based on earmarked resources, is not a sound basis for expansion.

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