The distance between financial access and usage

More evidence from Chile, Malawi, and Uganda that merely giving bank accounts does not translate automatically to its usage, leave alone outcomes like increased savings,

Bank accounts as currently offered appear unappealing to the majority of individuals in our three samples of unbanked, rural households – even when these accounts are completely subsidized. While we do observe substantial usage among a subset of active users, we are unable to pick up any statistically significant effects on downstream outcomes. This is not surprising since the average impact on total savings is itself relatively modest at best, and noisily estimated. If any, treatment effects on downstream outcomes are likely diffuse since savings purposes are heterogeneous, thus difficult to detect, because of little ability to predict how user households would use the savings.

The authors speculate about two possible reasons - poverty (people are too poor to save any money and thereby use the accounts) and transaction costs (bank branches are far away and the processes associated too complicated).

I would go one step further and add that even if we assume away these two, there is another barrier, which we haven't even seriously though about - demand. Do we have financial products that are tailored to meet the requirements of poor people, especially those reliant on farm incomes? Forget product development, there is very little serious thinking on this last mile gap. 

Fundamentally, the solution to a problem has to start with the product (or service) that caters directly to the issue. In this case, poor people need financial products that meet their requirements, and not just processes and intermediate steps that lead to the desired products. I have blogged earlier about exactly such interventions that meet their requirements.

So, the high prevalence of unused accounts from India's Jan Dhan Yojana, even in areas where poverty is not as acute and where access and transaction costs are marginal, should not come as any surprise. We under-estimate the formidable last mile gaps that come in the way of addressing such problems.