In Latin America and the Caribbean the two most commonly cited reasons for not having an account after lack of enough money are that accounts are too expensive and that the respondent has no need for an account. But almost no one cited either of these reasons as the only one. This again suggests that as barriers such as cost are reduced, those who are now without an account are likely to be interested in having one.

Affordability is an important barrier to financial inclusion beyond just Latin America and the Caribbean. Globally, 23 percent of adults without an account at a financial institution cited this reason. Fixed transaction costs and annual fees tend to make small transactions unaffordable for large parts of the population in developing economies. These high costs often reflect a lack of competition and underdeveloped infrastructure, both physical and institutional. New technologies and innovative business models such as mobile banking and agent banking can help increase the affordability of financial services.

Documentation requirements are another important barrier to account ownership, cited by around 18 percent of adults without an account across all regions. These requirements may especially affect people living in rural areas or employed in the informal sector, who are less likely to have formal proof of domicile or wage slips. Recognizing that overly cautious Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) safeguards can have the unintended consequence of excluding legitimate customers from the financial system, the Financial Action Task Force, an intergovernmental standard setting body, has emphasized the need to ensure that such safeguards are proportionate and that they support financial inclusion.<sup>3</sup> Lack of trust in financial institutions can be a difficult barrier to overcome. Distrust can stem from cultural norms, discrimination against certain population groups, past episodes of government expropriation of banks, or economic crises and uncertainty. In Europe and Central Asia 30 percent of adults without an account at a financial institution cited lack of trust as a reason for not having one, about three times the average share in other developing economies.

Religious reasons were cited by 5 percent of adults without an account in developing economies. In a handful of countries with almost exclusively Muslim populations, including Niger, Turkey, Turkmenistan, and Uzbekistan, around 25 percent of adults without an account reported religious reasons as a barrier. In these countries, developing products compatible with the principles of Islamic finance could be a key to expanding account ownership.<sup>4</sup>

# Is there voluntary financial exclusion?

Some people argue that low rates of financial inclusion are due in part to voluntary financial exclusion—that the unbanked do not have an account because they choose not to have one. Data do not support this argument. As noted, only 4 percent of adults without an account at a financial institution reported lack of need as the only reason for not having an account. And while another 26 percent of adults without an account cited this reason as well, they also identified other reasons, such as lack of enough money, accounts being too expensive, or financial institutions being too far away. This points once again to the potential demand for account ownership that is likely to emerge as barriers of cost and distance are reduced.

> THE GLOBAL FINDEX DATABASE 61