Barriers to Formal Saving: Micro‐ and Macroeconomic Effects

Abstract

This paper examines different barriers to formal saving, considering various interventions and their possible effects at microeconomic and macroeconomic levels. It presents a comprehensive review of the literature, based on a detailed classification of the barriers associated with supplyside factors, related to access to financial products, and demand-side barriers, related to the use and frequency of use of those products. The paper concludes that this classification and analysis contributes to a fuller understanding of the question of financial inclusion, and how to achieve it.

Inclusive health and life insurance adoption: An empirical study in Guatemala

“…In addition, as with the use of formal savings products (Di Giannatale & Roa, 2019; Dupas et al, 2017), we conjecture that the lack of adoption of inclusive insurance products among vulnerable populations is often caused by poverty and by supply‐side aspects that need improvement (e.g., lack of physical financial access, and pecuniary and non‐pecuniary barriers). It might be necessary to understand whether the characteristics and quality of the inclusive insurance products themselves as well as the service people receive when facing adverse health shocks actually meet their needs, and help improve the well‐being of vulnerable populations.…”

Alternative business finance: insights from selected informal savings groups in Uganda

“…For some members, their groups did not specify a limit on the initial deposit, while others did as seen in Table 1. Previous researchers have pointed out similar organizational arrangements in other countries (Mutebi et al, 2017;Giannatale and Roa, 2019). These have been categorized as ROSCAs, non-rotating savings and credit associations (NROSCAs) (Lakuma et al, 2019), youth clubs, church groups, pilgrimage funds, burial societies and mutual-help groups (Bank of Uganda, 2013).…”

Reaching Financial Inclusion: Necessary and Sufficient Conditions

“…Even as they integrate these different perspectives, most studies exclusively address the supply side, focused on access to financial services (e.g., Di Giannatale & Roa, 2019;Grohmann et al, 2018). This approach is reasonable; improving access to financial services can allow (1) monetary authorities to stabilize prices, so that the financial system can stimulate economic growth; (2) diminished uses of cash for transactions, such that more payments take place through formal systems, which should increase banks' confidence in customers; (3) banks to lend more and potentially reduce the incidence of poorly performing loans; and (4) banks to attract more deposits to be better positioned to lend to individuals or businesses (Adentuji & David-West, 2019).…”

“…This approach is reasonable; improving access to financial services can allow (1) monetary authorities to stabilize prices, so that the financial system can stimulate economic growth; (2) diminished uses of cash for transactions, such that more payments take place through formal systems, which should increase banks' confidence in customers; (3) banks to lend more and potentially reduce the incidence of poorly performing loans; and (4) banks to attract more deposits to be better positioned to lend to individuals or businesses (Adentuji & David-West, 2019). In line with this focus on the problem of FI and the barriers on the supply side, such as information asymmetries and transaction costs (Levine, 1997), or the impact of financial market structures on access to finance (Owen & Pereira, 2018), government policies tend to reflect the supply side, offering solutions such as opening more bank branches, adding ATMs to isolated areas, or developing basic saving products that are available for free (Di Giannatale & Roa, 2019).…”