Barriers for poor people to access appropriate financial services include socio-economic factors e.g., lack of education-illiteracy, gender and age, low and irregular income, and geography, regulatory factors e.g. mandatory requirements of identity documentation and product design factors. 4. A major barrier cited to expand appropriate services to poor by financial service providers is the cost of providing those services including administering small loans.
While transaction costs do not vary in direct proportion to a transaction’s size and larger number of transactions bring down the costs, serving the poor with small value services is not viable using conventional retail banking or insurance approaches. We have to promote technological and institutional innovation as a means to expand financial system access and usage, including addressing infrastructure weaknesses. 5.