Does Poor People’s Access to Formal Banking Services Raise their Incomes?

Publication Details

Pande, R., Cole, S., Sivasankaran, A., Bastian, G. and Durlacher, K. (2012) Does poor people’s access to formal banking services raise their incomes? EPPI-Centre, Social Science Research Unit, Institute of Education, University of London.

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Rohini Pande, Shawn Cole, Anitha Sivasankaran, Gautam Gustav Bastian and Katherine Durlacher
East Asia and Pacific (includes South East Asia), South Asia, Sub-Saharan Africa, Latin America and the Caribbean
Equity Focus
Vulnerable groups
Review Type
Effectiveness review

Main findings

The authors include a total of 12 studies, covering South and South East Asia, Central and South America, and Africa, including the Philippines, Thailand, Vietnam, India, Nicaragua, Kenya, Ethiopia and Tanzania. The majority of interventions focused on supply-side financial services, and two interventions looked at the demand side. The authors report the following findings:

  • As a short-term solution, innovatively designed savings products can increase the income of the poor by addressing behavioural difficulties.  
  • Improved technology, such as mobile phones when used for remittances, transfers and payments to enable savings, can lead to increased household consumption and asset accumulation via increased income.
  • The expansion of formal banking services provided by the State in rural areas has the potential to increase rural wages and agricultural investment and in turn reduce rural poverty.
  • Increased access to credit is associated with improved ability of farmers to generate income through improved production and output, and some evidence suggests that benefits may spill over to members of clients’ social networks. Across all countries, findings suggest that access to credit could lead to higher agricultural incomes, which enable farmers to invest in useful agricultural inputs.
  • There was no evidence on the impact of financial literacy provided with formal banking services. The authors conclude that the observed positive effects of technology-change are limited to mobile-phone technology and do not include things such as debit cards.

 The authors conclude that results could be context-specific, and that further rigorous research is needed in order to understand the impact of other technologies such as debit cards and positive spillover effects on social networks which could render interventions more cost-effective. More research is also needed to understand the long-term effects of innovatively designed savings products that address behavioural constraints.


Improved access to financial services can help people to overcome poverty by increasing their income, increasing their capacity for consumption of and investment in health care, improving their access to education and enabling them to participate in income-generating activities. It may be challenging to provide access to financial services to the poor, because they have limited ability to provide collateral. Informal services used to screen and monitor defaulting clients can be expensive, and service providers usually charge exorbitant interest rates for providing financial services to the poor. State financial mechanisms may be better able to provide poor people with access to financial services by virtue of economies of scale and subsidies for credit-constrained households. However, the take-up of formal financial services by the poor could be low if credit is expensive (not leaving enough margin for profits), or because of informational or social constraints. Despite the large number of programmes in this area, few robust impact evaluations exist, and evidence based on synthesis of empirical studies is scarce. 

Research objectives

This systematic review assesses the impact of access to formal financial services on poor people’s incomes in low- and middle-income countries. Further, it aims to identify gaps in the existing evidence to facilitate future academic research.


The authors included studies that measured the impacts of access to formal financial services or new financial technologies on various measures of income, including labour, business, agricultural income, asset accumulation, savings balance, consumption, poverty and welfare. Such studies conducted since the 1980s in low- and middle-income countries are included in the review. The authors included randomised controlled trials, quasi-experimental studies, observational and econometric studies.

The authors conducted a systematic search of the published and unpublished literature in the English language. They searched various electronic databases, journals and working-paper series, and websites of developing-country national banks, relevant research organisations and NGOs. The authors also contacted experts in the field to provide information on on-going research. They used a theory-based approach to their synthesis, using a program theory to explore causal pathways contextual heterogeneity.  

Quality assessment

The systematic review is based on relatively comprehensive searches for literature and appropriate methods of study selection and analysis. It has some minor limitations. The authors only included articles published in English. While this was due to a lack of time and resources it is a limitation of the review. 

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