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CMF Policy Brief: Can Formal Banking raise the incomes of the poor?



A recent policy brief published by the Centre for Micro Finance reports the impact of access to formal banking services on the income of the poor. The researchers include lending, savings and payment services as part of formal banking services. Researchers considered banking services provided by public and private commercial and development banks. The paper tries to answer the impact of  (1) savings products? (2) banking technologies (3) expanding banking services (4) having access to credit (5) having access to credit in agricultural populations

The study identifies:

  • Access to formal banking services increases income of people, however, cost of the expansion of banking services is not examined in this study. However, researchers suggest that mobile banking technology can overcome cost constraints.
  • The study analyzed new savings products and identified that savings products an cause households to accumulate assets.
  • Preliminary evidence suggests that improving banking technology (mobile phones) can facilitiate savings, remittances, transfers and increase incomes of the poor households. This allow households to smooth consumption and accumulate savings.
  • Credit is associated with smoother consumption.
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