Access to Finance, as a Means to Achieve Sustainable Growth ; KIEP Opinions ; No. 87

In: http://hdl.handle.net/11540/10545

Open Access

Abstract

There are great disparities in access to finance across countries and income groups. According to the World Bank Global Financial Inclusion Database, the percentage of adults holding accounts in Asian developing countries stood at only 26.7 percent in 2014, while recording over 93 percent in high-income countries. Meanwhile, far fewer adults hold credit with financial institutions and borrow money from formal financial institutions in low-income countries (8.6 percent) than in high-income countries (18 percent). The account and credit penetration rate is even lower for vulnerable groups such as the poor, women, youth, and rural residents in developing countries. Why does the access to finance matter? Would the enhancement of access to finance benefit economic growth in developing countries and what should the policymakers do to enhance the access to finance? Scholars and policymakers have widely accepted that access to financial services can 1) promote household welfare, 2) encourage the growth of small and medium enterprises, and 3) contribute to sustainable economic growth.