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Ownership and Use of Accounts in Africa

15.12.2012Leora Klapper

What percentage of adults in Africa use formal financial services? How do patterns in account ownership vary across regions or countries within Africa? The Global Financial Inclusion (Global Findex) database can answer these questions and more using over 40 variables that allow us to compare how adults in Africa use formal financial services to save, borrow, make payments, and manage risk. The data for Africa comes from more than 40,000 interviews across 41 economies and we can disaggregate each indicator by gender, age, education, income, and urban or rural residence.

The Global Findex data show that 23% of adults in Africa have an account with a formal financial institution as compared to 41% of adults across all developing countries. The data also highlight large disparities in account ownership within Africa. For instance, although 51% percent of adults in Southern Africa have a formal account, only 11% have one in Central Africa.

Who are the unbanked? How do they manage their daily finances and plan for the future? In Africa, men are more likely than women to have a formal account, though the gender gap is smaller than in other regions. Adults with a tertiary education and those falling in the highest 20 percent of income earners are also more than four times as likely as those with lower education levels or falling in the bottom 20 percent of income earners to have an account.

Why don’t more Sub-Saharan and North Africans use formal accounts?  Well, about 30% of non-account holders cite the lack of money as the only reason why they don’t have an account. But other commonly reported reasons include cost, distance and lack of documentation. For instance, In West Africa, documentation is the second most cited reason, with 36 % of adults giving this as a reason. Fixed fees and high costs of opening and maintaining accounts seem to be particularly important hindering factors in Eastern and Southern Africa. For example, in Uganda maintaining a checking account costs the equivalent of 25% of GDP per capita annually, which might explain part of the reason why 54% of non-account holders do not have an account.

In response to these barriers to account ownership, a growing number of Africans are turning to new alternatives to traditional banking made possible by the rapid spread of mobile phones. Millions of adults use mobile money for affordable and accessible banking services, particularly in rural areas. In the region, 16% of adults used a mobile phone in the past year to pay bills or send or receive money. These individuals may otherwise be excluded from the formal financial sector. For instance, though 68% of adults in Kenya reported using a mobile phone to make payments in the past year, 43% of those who reported mobile phones to make payments or send or receive money did not have a formal account.

We are interested not only in account ownership, but also the use of accounts to save. Overall, 36% of adults in Africa report having saved or set aside any money in the past 12 months, similar to the worldwide average. Yet, in Africa only 13% of adults (and 35% of savers) report having saved at a formal financial institution in the past year and again there is a wide variation within Africa. For example, only 16% of adults (and 50% and 35% of savers, respectively) in Sothern and West Africa report having saved at a financial institution, while only 4% of adults (and 27% of savers) report having formally saved in North Africa.

Despite the low proportion of formally banked adults, the share of adults using community-based saving methods remains high. These “semi-formal” savings methods often serve as alternatives to the formal financial sector. Indeed, 19 percent of adults who reported saving in Sub-Saharan Africa said they used a community-based savings method or saved using a person outside of their family, including 44% of adults in Nigeria.


What are the key take away messages in the data?  First, that despite the recent financial sector growth in Africa over the past decades, many individuals and firms are still excluded from access to financial services in African countries. The gap in financial inclusion is largest among women, the poor, the less educated and those living in rural areas.

Second, that cost, distance, and documentation requirements are important reported obstacles to the use of formal accounts.  Removing physical, bureaucratic, and financial barriers to expand financial inclusion is challenging since this also requires addressing the underlying structural causes such as low income levels and weak governance.  Nevertheless, measures to improve contestability of financial systems and underlying information and regulatory environment are also likely to speed up the introduction and adoption of new products, processes, and technology that may help further lessen these barriers, especially in Africa. The most evident example is the recent success of mobile money in East Africa which shows that innovations can bring about dramatic changes in how people engage in financial transactions by lowering entry barriers, reducing costs, and expanding access.

Third, data is powerful! We now know a lot more than we used to about the financial behaviors of adults worldwide. To that end, we’ve just released the complete Global Findex micro dataset through the World Bank’s Open Data website. This means easy access to over 150,000 individual-level observations, representing adults in 148 economies and 97 percent of the world’s adult population. Users can download the complete worldwide dataset, or datasets by country.

For more information, please refer to the Financial Inclusion Data or the Global Findex web pages.

Lora Klapper is a Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank. Since joining the Bank as a Young Economist in 1998, she has published articles on entrepreneurship, access to finance, corporate governance, and risk management. Her current research focuses on household finance and measurements of financial inclusion.  Prior to coming to the Bank she worked at the Board of Governors of the Federal Reserve System, the Bank of Israel, and Salomon Smith Barney. She holds a Ph.D. in financial economics from New York University Stern School of Business.


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