What is Financial Access?

The Financial Access Initiative is a research center focused on exploring how financial services can better meet the needs and improve the lives of poor households.  The Financial Access Initiative, housed at the Robert F. Wagner Graduate School of Public Service at New York University, was founded in 2006 by economists Jonathan Morduch (New York University), Dean Karlan (Yale University), and Sendhil Mullainathan (Harvard University). The initial funding  was provided by the Bill & Melinda Gates Foundation.

At the Financial Access Initiative we

  1. Systematize evidence and communicate lessons. We clarify and organize what is known (and what needs to be known) about the uses of, unmet needs for and impact of all types of financial services in poor households. Emphasis is placed on presenting the information in actionable frameworks useful for investors, donors, providers, regulators, and others who affect poor households access to financial services.
  2. Generate new evidence. Through rigorous research and analysis, including randomized controlled trials and financial diaries, we fill important knowledge gaps on the nature of demand for financial services; the extent of impacts of financial access on incomes, businesses, and broader aspects of well being; and mechanisms that can increase impact and scale.
  3. Frame policy and regulatory issues. We describe policy options for central bankers and regulators focusing on experiences across countries, hurdles, and possibilities always making clear the direct effects and trade-offs of policy choices.

Why the Initiative is important?

Making quality financial services available to poor households is not a new goal. Yet, the best estimates suggest that half the world is still unbanked. A wide variety of actors are attempting to tackle this problem in a variety of ways. Public and private institutions, as well as energetic and dedicated individuals, are working to dramatically expand financial access. Central banks are trying to sort through difficult policy options; donors and investors are active participants in this process, often influencing what types of services are available ; and commercial banks are experimenting with how they can broaden their customer base either directly or by working through other institutions.  The global financial crisis, as well as more localized problems in diverse contexts like Nicaragua, Bosnia and India, indicate that expanding access to finance can have negative as well as positive impact.

There are real trade-offs in expanding financial access. Regulations designed to protect consumers can limit access. Subsidies can solve market failures or distort markets further. Investments can expand or erode social impact. To make sound decisions when confronted by these trade-offs, we need better questions and better answers.

Which financial services matter most to poor households? How does regulation affect which customers are served? How can donors provide smart subsidies? What types of institutions and funding mechanisms are likely to deliver the financial services that have the biggest positive impact on poor households? How can the wise use of financial services be encouraged? How will emerging technologies such as mobile payments affect the cost, the use, and impact of financial services? How does access to financial services affect welfare beyond income and assets?

Today, with a robust start but much more innovation needed, the time is right to explore debates, expand conceptual frameworks, and collect better evidence—and put promising ideas into practice.