Corporate Governance and Access to Finance - ESBG

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The definition of Access to Finance presents certain differences in WBSImembers depending on the level of development of their countries.In emerging and developing countries, Access to Finance is closelyconnected to the notion of financial inclusion: the provision of access toappropriate, convenient, usable, valuable and affordable financialservices and products to the widest part of the population, especiallythrough the delivery of basic banking services to the low income peopleand the still unbanked, as a way out of poverty (WSBI SantiagoDeclaration). In industrial countries, where the majority of the populationhas access to financial services, the objective is to prevent and avoidfinancial exclusion, in particular in the case of the most vulnerable partsof the population (eg. unemployed, population in rural or remote areas,migrants, single parent households).While in the first case public policies should seek facilitating access to themiddle and low levels of the pyramid, in the second case they are typicallyaddressed at fighting segregation or discrimination against certainsegments of the society that, for different reasons, face difficulties inhaving access to formal financial services.The objective of Access to Finance needs to be balanced with the needto ensure the long term sustainability of the institution, in what the WSBIdefines as the “double bottom line” banking model, according to whichsavings banks have a clear dual mandate to (a) bring a return to thecommunities in which they operate, including to reach the unserved andunderserved groups and (b) try and make a reasonable profit so that theoutreach achieved can be self-sustainable. There is no trade-off betweenfinancial inclusion and profitability and the two objectives pursued byWSBI members are mutually supportive.WSBI members have traditionally worked towards fostering financialaccess as one of their main objectives. Consistent with this view, financialaccess occupies a prominent role in their mission statements and/or visiondesigns. Most of them have also adopted specific tools to achieve thesetargets and set performance indicators that measure their results in termsof Access to Finance. WSBI members globally make a substantialcontribution in deepening financial inclusion (or combating financialexclusion) in their respective regions or countries.20
For the particular case of developing and emerging economies, WSBImembers have consistently made efforts in this sense, as shown by thefact that of the estimated 1.4 billion accessible accounts existing atinstitutions across developing economies with an explicit mission to fosteraccess, some 1.1 billion are provided by savings banks 4 .1.4. Presentation of the studyThis study will address the link between Corporate Governance andAccess to Finance in WSBI members by means of (i) statistical evidencefrom previous studies, (ii) specific statistical data collected from WSBImembers through an ad-hoc questionnaire and (iii) five case studies, theselection of which was based on a sample to cover the diversity of WSBImembers, in terms of types of institutions, regional representation andnational income level.These five cases are Sparkassen Finanzgruppe in Germany, Kenya PostOffice Savings Bank/Postbank in Kenya, FEPCMAC (Federación Peruanade Cajas Municipales de Ahorro y Crédito) in Peru, the Postal SavingsBank in the Philippines and the Cajas de Ahorros (savings banks) groupedin CECA (Confederación Española de Cajas de Ahorros) in Spain. Afi visitedall these members during the research period, including visits to individualsavings banks when the member is an association (Germany, Spain andPeru). The case studies will be used along the text to illustrate some ofthe main ideas, practices and results. Table 1 highlights some of the keyfeatures of the selected institutions.This paper is distributed in six sections. The second section motivates thereport and explains the relationship between Corporate Governance andAccess to Finance, using some examples from the case studies to illustratethis link. The third section analyses the conceptual framework ofCorporate Governance, its definition, features and implementation indifferent organizational forms. The fourth section discusses Access toFinance issues, emphasizing its different dimensions and the difficultiesfor its measurement. The fifth section analyses the data collected andprovides some empirical evidence based on descriptive statistics for therelationship between Corporate Governance and Access to Finance.4 See Perspectives 52, September 2006 Savings banks and the double bottom line – A profitableand accessible model of finance, www.wsbi.org/uploadedFiles/Publications_and_Research_(ESBG_only)/Perspectives%2052.pdf.21
Page 6 and 7: BoxesBox 1. German Sparkassen 27Box
Page 9 and 10: EXECUTIVE SUMMARYBackground and obj
Page 11 and 12: nnAccess to Finance in enshrined in
Page 13 and 14: Chart A.Corporate Governance, Acces
Page 15 and 16: nThe study also shows that Corporat
Page 17 and 18: 1. INTRODUCTION1.1. Focus and objec
Page 19: WSBI members are by definition acco
Page 23 and 24: 2. THE LINK BETWEENCORPORATE GOVERN
Page 25: Table 2. Main features of the Missi
Page 28 and 29: Access to financeSparkassen promote
Page 30 and 31: All these examples illustrate how p
Page 32 and 33: In the case of Peru, the profits th
Page 34 and 35: Among the WSBI institutions that re
Page 36 and 37: BOX 2. KENYA POST OFFICE SAVINGS BA
Page 38 and 39: The fact that the banking system is
Page 41 and 42: 3. CORPORATE GOVERNANCE -CONCEPTUAL
Page 43 and 44: Figure 2. Sound Governance of Finan
Page 45 and 46: As can be seen in the figure above,
Page 47 and 48: nnnAt the same time, the distance a
Page 49 and 50: The first two elements (the ownersh
Page 51 and 52: nHowever, this does not mean denyin
Page 53 and 54: Cooperatives are similar to mutuals
Page 55 and 56: 3.4. FoundationsFoundations do not
Page 57 and 58: 3.5. Good Corporate Governance prac
Page 59 and 60: F. DISCLOSURE AND TRANSPARENCYPrinc
Page 61 and 62: 4. ACCESS TO FINANCE -CONCEPTUAL FR
Page 63 and 64: 4.1. Financial deepening and improv
Page 65 and 66: The board does not have any executi
Page 67 and 68: In other words, sustainable financi
Page 69 and 70: The following table shows how the W
Page 71 and 72:
The fourth dimension refers to the
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Table 8. Access to Finance in the f
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Only 27 members established in 21 c
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nnDCI (Depth of credit information
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5.2. Corporate Governance and Acces
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5.2.1. Corporate Governance and Ave
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Chart 8.Specific Corporate Governan
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5.2.2. Corporate Governance and Ave
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Chart 13. Corporate Governance comp
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Chart 16. Corporate Governance Inde
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Chart 19. Specific Corporate Govern
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ANNEX 1: REVIEW OFTHE LITERATUREThe
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Even among the relatively narrow un
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Figure A.1. Structure of agents' re
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The table captures the essence of s
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A case study built by Clarke et al
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A very recent contribution to the d
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For example, in Latin America, WSBI
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The paper examines whether a poor e
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For the survival of microfinance in
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ANNEX 2: CASE STUDIES 32CASE STUDY
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It is one of the major characterist
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Although Sparkassen are legally and
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Figure A.2. Corporate Loans Market
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Financial education is also an impo
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Corporate GovernanceKPOSB is wholly
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Among the initiatives that the gove
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Related to the concession of credit
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OPERATIONS1. Deposit Base: It was p
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Corporate GovernanceThe Central Ban
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To address the problem of capital,
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Financial inclusion ranges very hig
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CASE STUDY 4:SPANISH SAVINGS BANKS
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The uniform financial regulation of
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Figure A.3. Governing Bodies - Span
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The web-based tool www.rededucacion
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On the liability side, CMAC offer m
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A specificity of CMAC is that the m
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Table A.3.MissionMissionCMAC AREQUI
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As of September of 2009, the twelve
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Furthermore, the consensus culture
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ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
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ANNEX 4:THE HONOHAN INDEX 43COMPOSI
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COMPOSITE MEASURE OF ACCESS TO FINA
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ANNEX 5:QUANTITATIVE RESULTSCountry
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Overall Corporate Governance IndexO
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REFERENCES- Andrianova, S., Demetri
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- FSD Kenya (2009), Financial Secto
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- World Bank (2006) The Role of Pos
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WSBI - ESBG - The Global Voice of S
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