Throughout the past few weeks the Chinese banking regulators have intervened on several occasions to put a halt on some innovative products, including virtual credit cards provided by third-party providers and e-commerce companies. At the end of March, People’s Bank of China also announced that it would cap amounts the Chinese can spend using smartphone payment services.
While financial innovation from bank and non-bank actors can create new kinds of risks for consumers, it can also create huge opportunities for the financial sector to expand scale and reduce transaction costs. A recent CGAP report China: A New Paradigm in Branchless Banking? explores how China’s innovative payment ecosystem could significantly deepen financial access in the country, where more than one hundred million people live in poverty and over sixty percent of the poorest population segment has no access to formal banking services.
Global and national-level policy makers have been embracing financial inclusion as an important development priority. The G20 made the topic one of its pillars at the 2009 Pittsburgh Summit (G20 2009). By fall 2013, more than 50 national-level policy-making and regulatory bodies had publicly committed to financial inclusion strategies for their countries (World Bank 2013a, AFI 2013). And the World Bank Group in October 2013 postulated the global goal of universal access to basic transaction services as an important milestone toward full financial inclusion—a world where everyone has access and can use the financial services he or she needs to capture opportunities and reduce vulnerability (World Bank 2013b).
Policy makers have articulated these objectives in the conviction that financial inclusion can help poor households improve their lives and spur economic activity. But what is the evidence for this type of positive impact? This Focus Note takes impact to mean those effects that can be traced to a specific intervention and that would not have occurred otherwise, thus analysis at the micro and local economic levels focuses primarily on the relatively new evidence from randomized control trials (RCTs) or quasi-randomized impact evaluations. At the macroeconomic level it highlights studies using country panel data comparisons.
Photo Credit: Reza Golchin