Global Financial Development Report 2014: Financial Inclusion and Financial Exclusion

In the first chapter of the report (Global Financial Development Report 2014) the main focus is on Financial Inclusion and Financial Exclusion. The chapter is describing that financial systems provide different type of financial services to the individuals and firms. The basic purpose of the report is that what the main role of financial inclusion on economic development. If there is an absence of financial inclusion in the economy it causes poverty and slow economic growth. So we find in this chapter why financial exclusion exists in the economy that causes continuous income inequality and slow growth.
Financial Inclusion:
It means the number of individual, groups and firms use financial services. They use these services for different purposes. But there is a difference between use and access, some have access but they do not know how to use it and some use these services. So there are number of people who are using financial services and others do not. In the non-users individual and firms there is a number of reasons some do not use because they do not need, religious and cultural reasons, indirect access, high risk and insufficient income, asymmetric information and due to market imperfections. If high prices cause high population exclusion it shows the regulatory barriers and lack of competition.
The market which gives the financial services is differing from the market of commodities. In a paper which published in 1981 by Stiglitz and Weiss they give explanation on market differentiation, particularly credit and insurance. These markets have the serious problem of adverse selection and moral hazard. The involuntarily excluded user are facing problem in market due to asymmetric information. Even in the financial institutions ...

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...t scenario. For short term loans people opt for the credit cards but as compared to global scenario its usage is still less in the developing countries. As credit cards has made the short term crediting much easier so the adults in high income economies don’t go to financial institution for short term credit. But when we analyze the normal credit trend then we can see that people go for formal sources of credit in the high income economies while in term of low income economies they go for informal sources and reports showed that social norms is one of the factor towards such trends. This trend also changes with the change of economies and influenced by the individual characteristics like health issues. There are also large differences in the mortgage usage data in terms of income levels as it is higher in higher income economies as lower in low income economies.