Measuring Financial Inclusion of Adults Engaged in Agricultural Activities: Lessons from Demand-Side Surveys

Transcription

1 Measuring Financial Inclusion of Adults Engaged in Agricultural Activities: Lessons from Demand-Side Surveys Leora Klapper Lead Economist, Finance and Private Sector Development Team Development Research Group

2 Overview What information is available on Financial Inclusion for individuals and households engaged in agriculture? Paper reviews and draws lessons from publicly available sources of data on financial inclusion and financial literacy among adults that work in agriculture covering multiple countries. The following dataset are included: 1. The Living Standards Measurements Study Integrated Surveys on Agriculture (LSMS-ISA) 2. The Financial Capability and Consumer Protection surveys (FCCP) 3. The Financial Inclusion Insights database (FII) 4. The Global Financial Inclusion database (Global Findex)

3 Lessons learned No existing data source stands out in providing comprehensive insights on financial inclusion for individuals that are engaged in agricultural activities. To provide better insights and make comparisons across market segments and over time more rigorous, it is important to precisely define the groups of interest. Currently, there is no harmonized definition of individuals/households that clearly identifies those that are agriculturally dependent. Well defined and harmonized definitions would enable comparative research. But most important is precision, transparency, replicability Collecting data on the individual instead of the household level is preferred. Data collected at the household level masks important disparities within the household. For data collected at the household level, considering only the agricultural activities of the person being interviewed (rather than those of the household as a whole) may be more appropriate. New technologies can improve data collection and reduce its costs. Using computer-assisted personal interviewing (CAPI) allows for faster data collection and processing.

4 Lessons learned Data from multiple sources indicate a gap in financial inclusion between adults/households engaged in agricultural activities and others. Gaps exist for financial attitudes as well. The gaps cannot be completely explained by differences in income or employment status Agricultural Dependency is difficult to identify given the nonuniform definitions across different data sources A series of well-defined and detailed questions on specific agricultural activities and corresponding financial transactions would allow policymakers and researchers to target gaps in financial services and design appropriate financial products

5 Lessons learned The data point to digital solutions to expand financial inclusion among adults engaged in agricultural activities Those who receive payments for selling agricultural goods or wage-earning agricultural workers could benefit from receiving these payments and wages directly into an account. Experiences in East Africa shows that mobile technology can provide access to formal financial services in places where traditional services like bank branches are lacking. What is the impact of moving to digital payments on agriculture sector? Provides a channel for saving and transferring money safely (Jack & Suri, 2010; Mbarathi & Diga, 2014) Improves access to formal banking and insurance services (Kirk, Steele et al, 2011; Mbiti and Weil, 2011; Manfre & Nordehn, 2013) Facilitates distribution of wages, social transfers and subsidies to agricultural workers (Aker, Boumnijel et al, 2014, Muralidharan, Niehaus et al, 2014) Supports agricultural extension services by improving information dissemination (Seetharam & Johnson, 2015; Gilissen, Sommeliing et al, 2015)

6 Strengths and Weaknesses of Data sources Data source LSMS-ISA FCCP FII Global Findex Strengths Panel Survey x Broad country coverage x Detailed information on: - agricultural related activities x - financial inclusion x x x - food security x x** - financial literacy x x** Weaknesses Limited Country Coverage x x x Relatively small sample sizes x x Limited information on: - agricultural related activities x x x - financial inclusion x* * Financial inclusion modules in the LSMS-ISA surveys are not standardized ** Information on food security (FAO) and financial literacy (MFH) in the Global Findex is based on external modules that are forthcoming.

7 The Living Standards Measurements Study Integrated Surveys on Agriculture Nigeria (2010 and 2012): Households are engaged in agricultural activities if the household head or any member of the household cultivated land, raised or owned animals, or produced any agricultural by-products from their farm and/or livestock. Household engaged in agricultural activities Owned an account 18% Kept account 13% Closed account 5% Owned an account 21% Unbanked 82% Opened account 7% Remained unbanked 75% Unbanked 79% Of the 51 percent of households that were engaged in agricultural activities in both years, 18 percent had a bank account in 2010 and 21 percent had an account in Account ownership is not consistent over time; some households closed their account while other households opened one.

8 The Living Standards Measurements Study Integrated Surveys on Agriculture Nigeria (2010 and 2012): Other households are more likely to own an account. The data shows that this even the case after controlling for household income. Difference between the two groups might be explained by other factors; rural residency, household size. Income group of households Bank account ownership of households involved in agricultural activities (%) Bank account ownership of other households (%) The poorest 20 percent 6 17 The 2nd 20 percent 8 34 The middle 20 percent The 4th 20 percent The richest 20 percent 51 81

9 Making provisions for old age Saving Controlled budgeting Farsightedness Not overspending Using information and advice Monitoring Expenses Living within means Planning for unexpected expenses The Financial Capability and Consumer Protection Surveys Mozambique (2013): Adults are engaged in agricultural activities if in the past 12 months they received any money or in-kind payments or support from the sales of livestock, crops, etc. An estimated 52 percent of adults are engaged in agricultural activities A unique feature of the FCCP surveys is the information on financial behavior and attitudes; captured, for example, in the Financial Capability Scores. Adults involved in agricultural activities Other adults The scores illustrate differences in financial capabilities between the two groups: Adults engaged in agricultural activities have a higher score than other adults on making provisions for old age, but a lower score on planning for unexpected expenses. Even after controlling for income, adults that receive income from agricultural activities are still less likely to plan for the future

10 The Financial Inclusion Insights Database Pakistan (2014): Adults are engaged in agricultural activities if their main or secondary job is a farmer or farm worker. An estimated 10 percent of all adults 22 percent of adults in the labor force are engaged in agricultural activities. A unique feature of the FII is detailed information on digital financial services such as use of mobile money services, mobile phone ownership and access. Use a mobile money service Own a mobile phone Use someone else s mobile phone A comparison is made with other adults in the labor force so that only adults with a job are considered. Adults that work as a farmer or farm worker are less likely to use a mobile money service than other adults in the workforce. An underlying reason may be the reported gap in ownership and access to a mobile phone. (Though there is no gap in reported reasons for not having a phone, such as I don t need one ) Own a SIM card Adults earning income from agricultural activities Adults active in other activities

11 The Global Findex Database Select Countries (2014): Adults are engaged in agricultural activities if they receive payments in cash, into an account, or through a mobile phone for selling their or their family s agricultural products, crops, produce, or livestock. Of those that receive agricultural payments potential opportunity to In cash only and has an account (%) In cash only and has no account (%) expand account ownership ( in million) Ethiopia 22% 75% 16 Indonesia 29% 66% 33 Kenya 44% 17% 2 Pakistan 22% 69% 17 Rwanda 40% 45% 1 Tanzania 19% 56% 8 Vietnam 28% 70% 14 Zambia 17% 63% 2 Kenya, Tanzania, Uganda, and Rwanda stand out as examples where a relatively large share of agricultural payments are sent to a mobile phone. There is a large potential to expand financial inclusion by digitizing agricultural payments that are currently received in cash; Electronic payments to an account for the sale of agricultural payments can increase the security of these payments and provide a first point of entry in the formal financial system.

12

13 Gender and Agricultural Payments 40% 35% 30% 25% 20% 15% 10% 5% 0% Receive Agricultural Payments (% adults) men women men women men women men women men women men women East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East South Asia Sub-Saharan Africa through a mobile into an account only in cash only Women are less likely to receive agricultural payments than men However, conditional on receiving agricultural payments, there is little difference in the way the payments are being received.

14 Gender and Agricultural Payments A large share of adults that receive agricultural payments in cash only do not have a bank account. There is a large potential to expand financial inclusion by digitizing agricultural payments that are currently received in cash. potential opportunity to expand account ownership (in millions) women men East Asia & Pacific Europe & Central Asia 8 9 Latin America & Caribbean 5 9 Middle East 2 4 South Asia Sub-Saharan Africa 65 61