Income is Biggest Barrier to Banking

Income is Biggest Barrier to Banking


A Gallup/World Bank study says that more than 2.5 billion adults worldwide do not have a bank account, with the vast majority located in the developing world.

Lack of access to formal financial institutions makes it difficult for adults to save for the future and borrow to make important investments in their education or businesses.

The World Bank Global Financial Inclusion Indicators (Global Findex) project provides data on how adults worldwide save, borrow, make payments, and manage risk.

Gallup collected the data in 2011 in 148 countries and areas for the study. The analysis includes 102 countries classified as “developing,” that is, those countries the World Bank does not categorised as high income.

High banking costs cited

Account penetration was defined as having an account at:

  • a bank
  • a credit union
  • a cooperative
  • a post office
  • or microfinance institution.

Respondents among all income groups cited lack of money as the number one reason for not having a bank account.

High banking costs are another frequently mentioned barrier. For many, the high costs that banks charge to open and maintain an account make owning one an unobtainable luxury.

Shared bank accounts popular

Although lack of money and expense are common reasons for not owning a bank account across all income groups, these reasons become less dominant as income rises.

Individuals living in high-income households are likely to say they have no account because another family member already has one.

No bank in the vicinity

Among lower income groups, proximity to a bank is the most commonly cited reason for not having an account after financial reasons. Adults in low-income households are also more likely to live in rural areas, where bank penetration is low.

Even if these residents have enough money to open a bank account, traveling to a bank to deposit or withdraw money may not be practical.

Documentation a challenge

Approximately one in five adults cites lack of proper documentation as a barrier, regardless of income level. Many banks require proof of permanent residence or wages slips, and in countries where large numbers of people are informally involved in the economy, this documentation can be difficult to come by.

Alison Job
Alison Job holds a BA English, Communications and has extensive experience in writing that spans news broadcasting, public relations and corporate and consumer publishing. Find her at Google+.