Abstract
Selected Issues
Measuring Financial Inclusion in Jordan1
The development of financial inclusion in Jordan has been slow during the past decade and lags its peer group, broadly in outreach, usage (for both individuals and firms), and literacy areas. Given strong linkages between financial inclusion, financial deepening, and economic development, this paper reviews the authorities’ strategy to accelerate financial inclusion and suggests potential areas for reforms in Jordan.
A. The Development of Financial Inclusion in Jordan
1. Measured by various indicators, the development of financial inclusion in Jordan has been slow and, in some cases, lagged those of regional peers.
2. Physical access to financial services has been relatively stagnant during the past decade. In 2015, there were 18.3 commercial bank branches per 100,000 adults in Jordan, even lower than the share of 19.5 in 2004. While Jordan compares well with MENAP average, it is well below Lebanon and has been exceeded by Morocco in recent years. Given that most branches were located in large cities, physical access to finance is likely to be very low in remote areas.
Branches of Commercial Banks
(Per 100,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF Financial Access SurveyBranches of Commercial Banks
(Per 100,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF Financial Access SurveyBranches of Commercial Banks
(Per 100,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF Financial Access Survey3. The usage of financial services remains low. Out of 1,000 adults, 6202 held a deposit account with commercial banks in 2015, and the account penetration has decreased over past years. For lending, 192 per 1,000 adults held a loan account in 2015, and the growth has been slow. In percent of total adults, only 25 percent have access to formal financial institutions (including credit unions, microfinance, etc.) in Jordan, which is lower than some MENAP countries including Morocco, Georgia, and Lebanon, and less than half of the average of middle-income countries. Meanwhile, non-formal channels are still used more frequently than formal finance channels. To meet financing needs, the majority of adults (86 percent) had borrowed money from family and friends, employers, stores, private informal lenders, and other non-formal channels, only 14 percent borrowed from a financial institution. As a result, the economy is still largely cash based.
Deposit and Loan Accounts with Commercial Banks
(per 1,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access SurveyDeposit and Loan Accounts with Commercial Banks
(per 1,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access SurveyDeposit and Loan Accounts with Commercial Banks
(per 1,000 adults)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access Survey
Accounts at a Financial Institution (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global FindexAccounts at a Financial Institution (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global FindexAccounts at a Financial Institution (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global Findex4. The usage of mobile banking is also relatively inactive. Only 0.5 percent of Jordanian adults held a mobile money account in 20143, which suggests a limited use of innovative financial tools. For those with an account, only 2.6 percent of them had made transactions using a mobile phone. The usage of mobile banking is also low across MENAP countries, with Jordan lagging other countries in the region. The usage of mobile banking in the region has also lagged middle-income countries.
Used an Account to Make a Transaction Through a Mobile Phone (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global FindexUsed an Account to Make a Transaction Through a Mobile Phone (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global FindexUsed an Account to Make a Transaction Through a Mobile Phone (2014)
(In percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global Findex5. There is a significant gender gap in access to finance. About 30 percent of male adults had an account at a financial institution in 2014, more than twice the share for female adults. The share of debt and credit card holders among female adults is around one third of that among male adults. The usage of loans and mortgages by males is also significantly higher than by females. The smallest gap exists in the mobile account usage, which indicates that females have accessed mobile accounts as often as males, although the overall usage is low.
Financial Inclusion: Gender Gaps (2014)
(in percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global Findex database.Financial Inclusion: Gender Gaps (2014)
(in percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global Findex database.Financial Inclusion: Gender Gaps (2014)
(in percent, age 15+)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Global Findex database.6. The usage of financial services by corporates is relatively high, although still seen as a hurdle. While the large majority (83.3 percent) of firms in Jordan holds a checking/savings account at a financial institution, with nearly half of them using banks to finance investments, about 43 percent of firms have identified access to finance as a major constraint in doing business, which is the highest level among peer countries.
Percent of Firms with a Checking or Savings Account (2013)
(In Percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009Percent of Firms with a Checking or Savings Account (2013)
(In Percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009Percent of Firms with a Checking or Savings Account (2013)
(In Percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009
Percent of Firms Identifying Access to Finance as a Major Constraint (2013)
(In percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009, Afganistan and mauritania in 2014.Percent of Firms Identifying Access to Finance as a Major Constraint (2013)
(In percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009, Afganistan and mauritania in 2014.Percent of Firms Identifying Access to Finance as a Major Constraint (2013)
(In percent)
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: World Bank Enterprise SurveyNote: *Syrian in 2009, Afganistan and mauritania in 2014.B. What Does a Financial Inclusion Index Indicate About Jordan?
7. A comprehensive financial inclusion index is constructed to measure the financial inclusion in Jordan and facilitate cross-country comparison. Financial inclusion is a multidimensional concept, which encompasses two main dimensions, namely access to financial institutions and access to financial markets. The access to financial institutions dimension contains sub-dimensions including: outreach (access), usage by individuals, usage by firms, and quality of financial services (e.g., financial literacy). The access to financial markets dimension usually requires ascertaining market concentration, since a high degree of concentration reflects difficulties for new entries and small firms. 4 A composite index is constructed to capture these multiple characteristics across countries, and use it to identify Jordan’s position and analyze its weaknesses in a global context (see Annex I).
8. Based on the estimated financial index, Jordan’s financial inclusion lags those of most peer countries. The estimated financial inclusion index, shown in Figure 1, indicates a relative ranking of countries on the overall level of financial inclusion. It gives a world view of the state of financial inclusion in 2014, with indication of positions of Jordan and some selected MENAP countries. Overall, Jordan’s index is relatively higher than for some low-income and middle-income countries such as Sudan, Egypt, Pakistan, and Afghanistan, but lower than high income group countries including Kuwait, Saudi Arabia, and United Arab Emirates (UAE). Within same upper middle-income group, Jordan’s index is significantly lower than Lebanon’s and those of most other peer countries such as Iran, Turkey, and Tunisia.
Financial Inclusion Index: Jordan and the World
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access Survey; World Bank Global Findex; World Bank Enterprise Survey; Standard and Poor’s; country websites; and IMF staff estimates.Financial Inclusion Index: Jordan and the World
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access Survey; World Bank Global Findex; World Bank Enterprise Survey; Standard and Poor’s; country websites; and IMF staff estimates.Financial Inclusion Index: Jordan and the World
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: IMF Financial Access Survey; World Bank Global Findex; World Bank Enterprise Survey; Standard and Poor’s; country websites; and IMF staff estimates.9. On different dimensions, Jordan also lags its peer group broadly in outreach, usage (for both individuals and firms), and literacy areas. Figure 2 compares sub-indices of financial inclusion for Jordan and selected MENAP countries with the average of upper middle-income group. It indicates that in most measurements, including access to financial outreach, financial usage both for individuals and firms, financial literacy, and financial markets, Jordan does not only lag behind Lebanon (except for access to financial markets), but is also below the average level of the upper middle-income group. These measurements indicate that there is significant scope for Jordan to expand financial inclusion.
Sub-Indices: Jordan and Selected MENAP Countries
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF staff estimates.Sub-Indices: Jordan and Selected MENAP Countries
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF staff estimates.Sub-Indices: Jordan and Selected MENAP Countries
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Source: IMF staff estimates.10. The estimates also indicate that financial depth in Jordan is not matched by access. Figure 3 indicates that financial inclusion is highly correlated with financial deepening (measured by credit-to-GDP ratio) and economic development (measured by GDP per capita). However, while Jordan has relatively high financial depth—a 70.2 percent credit-to-GDP ratio in 2014—it is not reflected in similarly high level of access to financial services. In contrast, some MENAP countries that have lower level of financial depth, for example UAE and Saudi Arabia (with 65.4 percent and 44.4 percent of credit-to-GDP ratio, respectively), have developed much higher level of financial access.
Linkages Between Financial Inclusion, Financial Deepening, and Economic Development
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: World Bank Global Findex; and IMF staff estimates.Linkages Between Financial Inclusion, Financial Deepening, and Economic Development
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: World Bank Global Findex; and IMF staff estimates.Linkages Between Financial Inclusion, Financial Deepening, and Economic Development
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Sources: World Bank Global Findex; and IMF staff estimates.11. Enhancing financial access is essential for an inclusive economic development. Development does not work in silos. Financial access usually has a synergy effect with financial depth and economic development, as higher financial access leads to greater efficiency of financial intermediation and mobilization of domestic savings for credit activities. In turn, the strengthening of domestic savings leads to greater investment activities, promote economic growth, and reduce poverty. Cross-country studies indicate that income inequality is lower in countries with deeper and more accessible financial markets, and that financial development exerts a disproportionately positive impact on the relatively poor (Beck and others, 2004). To increase the synergy effect, it is essential for the government to develop a comprehensive strategy and set up an agenda to accelerate an inclusive economic development and enable access to a greater number of the population to the structured and organized financial system.
C. Government Initiatives and Policy Recommendations
12. Many MENA countries have introduced reforms and initiatives to promote financial inclusion. For example, the Moroccan government has prioritized access alongside stability in its financial reform program, and has introduced measures to extend access through microcredit associations, banks, and a new postal bank. The Central Bank of Lebanon has introduced regulations that encouraged banks to finance startups, venture capital firms, and incubators. The Central Bank of Egypt has launched a multi-pronged financial inclusion agenda, including a new Licensing and Regulation Law to stimulate the creation of microfinance, leasing, and factoring companies. Governments in the region are playing an important role in enhancing the financial inclusion.
13. While still in the early stage, some encouraging developments have been seen in Jordan in an effort to improve access to finance.
A financial inclusion strategy is to be developed by Jordanian government to facilitate the expansion of access.5 The national strategy is to cover several key pillars including: improving SMEs’ access to finance, further developing necessary infrastructure (credit bureau and payment system), enhancing digital financial services, promoting financial literacy, and strengthening financial consumer protection. These pillars are expected to help tackle the key issues and challenges in expanding financial access.
The authorities have established a credit bureau, which will help expedite credit decisions for SMEs. The credit bureau has started operating in January 2016, and has received data from most banks. It has started compiling credit reports to assess borrower creditworthiness, which could expedite credit risk assessment decisions for borrowers, including SMEs.
The CBJ has increased its support to SMEs through financing the operations of the Jordan Loan Guarantee Corporation (JLGC). The CBJ has recently increased capital contributions to the JLGC, which is 50 percent owned by the CBJ and provides loan guarantees to SMEs. The size and number of loans guaranteed by the JLGC for SMEs have increased substantially since 2012, and funds have been created to provide additional loan guarantees or equity financing to SMEs and start-ups.6
Significant progress has been made in promoting digital financial services. In addition to the JoMoPay mentioned above, the government has required that all public institutions adopt digital payment systems for person-to-government (P2G), business-to-government (B2G), and has laid out plans for government-to-person (G2P). The CBJ has also launched the Electronic Bill Payment and Presentment System in 2014, which offers digital access to 130 government services, along with other services, including utilities, telecommunications, and universities.
Collaboration with existing postal network to expand physical access is undergoing. In 2009, the postal network in Jordan had 350 branches, compared to 656 commercial bank branches. Utilizing the existing post office, which is often the only institution serving the low income or rural population, is a promising approach in expanding physical access. The CBJ has been working collaboratively with Jordan Post Company (JPC) to upgrade their systems and provide trainings to JPC employees to act as super-agent on JoMoPay and offer the electronic bill presentment and payment system to the clients.
Programs are being developed to enhance financial literacy. The Jordanian Financial Education Program has been designed by the CBJ to target different social segments, with students as the main target group. Under this program, financial subjects and education materials were added to the schools’ curriculums up to 7th grade, and will be expanded to up to 12th grade and higher education in the future.
14. In light of experiences from other MENAP countries, further measures need to be included or enhanced toward developing the strategy, for example:
Removing administrative and institutional hurdles. It is not easy to switch from the cash-based system currently prevailing for most economic transactions to the use of bank accounts and credit cards. However, there are ways of encouraging the use of bank services. An array of financial sector administrative actions and institutional improvements could be considered. For instance, expanded account ownership could be achieved by: simplifying opening documentation requirements; offering basic low-fee accounts and other attractive products; and locating outlets in more remote areas on a more cost-effective basis.
Supporting women’s financial access. Overall, women’s access to financial services has largely lagged behind that of men. A women-supportive strategy is key to accelerate financial inclusion. A survey on women business owners in MENAP region has shown that women are largely optimistic and poised for growth, but in need of some direction and assistance to achieve their goal. Many business women have shown strong eagerness in expanding their businesses, and the financial inclusion strategy should be designed to support their efforts and help them address some key challenges including: learning financial management skills; finding and keeping good employees; access to capital; and managing high cost of public services.
Improving corporate governance. Studies show that good corporate governance can help corporates improve financial performance and gain access to capital. As some institutes and regulators in MENAP region have promoted strong corporate governance, many microfinance institutions have experienced an increase in access to finance, higher profitability, a reduction in organizational inefficiencies, and have become more sustainable. A strategy should be established to help companies fully understand the benefits of corporate governance and improve governance practices, particularly in areas of board structures and roles, risk management, and audit.
Enhancing the production of financial services data and measurement. Improved data on financial inclusion and unbanked markets/customers is needed to underpin a sustainable expansion in access to finance. The CBJ has laid out a data collection methodology with a focus on the digital retail payments. Going forward, the CBJ could partner with other institutions (e.g., the department of statistics, the association for savings and credit unions, the insurance regulatory authority, and/or the association of microfinance institutions) to enhance the data production framework and improve data availability related to access, usage, and quality.
Annex I. Estimation of the Financial Inclusion Index
Concepts
1. Financial inclusion is a multidimensional concept that cannot be captured accurately by single indicators on their own. Generally, financial inclusion encompasses two main dimensions, namely, financial institutions and financial markets, while financial institutions have three main sub-dimensions: the outreach (access), usage (by individuals and firms), and quality of financial services. The outreach (access) dimension refers to the (physical) ability to easily reach a point of service. The usage dimension measures the use of financial services, including accounts, savings and borrowings, while the quality dimension measures the extent to which financial services address the needs of the consumers.
Diagram of Financial Inclusion
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Diagram of Financial Inclusion
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
Diagram of Financial Inclusion
Citation: IMF Staff Country Reports 2017, 232; 10.5089/9781484312063.002.A003
2. While there are numerous studies on financial inclusion, and some of them have constructed a Financial Inclusion Index (e.g., Cámara and Tuesta 2014, Amidžić and others 2014, Svirydzenka 2016, Čihák and others 2016), most of these indices were based on very limited set of indicators, which did not collect multidimensional information of financial inclusion.
3. To help summarize the complex nature of financial inclusion and monitor its evolution, a harmonized measure is used to aggregate indicators from each dimension into a single index. The information by dimension can help to better understand the problem of financial inclusion and be a useful tool for policy making and policy evaluation, and the index can be used to study the relationship between financial inclusion and other macroeconomic variables.
Indicators Selection
4. A number of indicators are selected from each of the dimensions of financial inclusion in the diagram. The selection of indicator also takes into consideration the availability of data.
5. For the outreach dimension, two indicators are selected: the number of automatic teller machines (ATMs) per 1,000 square kilometers and the number of commercial bank branches per 100,000 adults.
6. For the usage dimension for individuals, four indictors are used: account at a formal financial institution, and saved at a financial institution in the past year, loan from a financial institution in the past year, and used electronic payments to make payments, as proxies for the information on account, saving, borrowing, and mobile banking.
7. For the usage dimension for firms, two indicators are selected: firms with a checking or savings account and firms with a bank loan or line of credit, to capture the information on account and borrowing activities of enterprises.
8. The quality dimension can be theoretically characterized by financial literacy, market conduct, consumer protection, barriers to use, etc. Since most of the data on the quality dimension are rather scarce, only the indicator of financial literacy is used as a proxy for this dimension.
9. In addition to financial institutions, two indicators are used as proxies for access to financial markets: the number of listed companies per 1,000,000 people and the ratio of the market capitalization excluding top 10 companies to total market capitalization.
10. The data for these indicators come from the IMF Financial Access Survey, the World Bank Global Findex, the World Bank Enterprise Survey, Standard & Poor’s, and country websites. A summary of data sources is listed in Table 1 at the end of this Annex.
Jordan: List of Indicators
Jordan: List of Indicators
| Variable | Category | Sub-Category | Data Source |
|---|---|---|---|
| Number of ATMs per 1,000 square kilometers | Outreach | IMF FAS | |
| Number of commercial bank branches per 100,000 adults | Outreach | WB FinStats | |
| Account at a formal financial institution (% age 15+) | Usage | Account (individuals) | WB Global Findex |
| Loan from a financial institution in the past year (% age 15+) | Usage | Borrowing (individuals) | WB Global Findex |
| Saved at a financial institution in the past year (% age 15+) | Usage | Saving (individuals) | WB Global Findex |
| Used electronic payments to make payments (% age 15+) | Usage | Mobile Banking (individuals) | WB Global Findex |
| Percentage of adults that answered at least 3 out of 4 financial questions correctly (% adults) | Quality | Financial literacy | Standards and Poor’s |
| Firms with a checking or savings account (%) | Usage | Account (Enterprises) | WB Enterprise Survey |
| firms with a bank loan or line of credit (%) | Usage | Borrowing (enterprises) | WB Enterprise Survey |
| Number of listed companies per 1,000,000 people | Financial markets | WB FinStats and country websites | |
| Market capitalization excluding top 10 companies to total market capitalization (%) | Financial markets | WB FinStats |
Jordan: List of Indicators
| Variable | Category | Sub-Category | Data Source |
|---|---|---|---|
| Number of ATMs per 1,000 square kilometers | Outreach | IMF FAS | |
| Number of commercial bank branches per 100,000 adults | Outreach | WB FinStats | |
| Account at a formal financial institution (% age 15+) | Usage | Account (individuals) | WB Global Findex |
| Loan from a financial institution in the past year (% age 15+) | Usage | Borrowing (individuals) | WB Global Findex |
| Saved at a financial institution in the past year (% age 15+) | Usage | Saving (individuals) | WB Global Findex |
| Used electronic payments to make payments (% age 15+) | Usage | Mobile Banking (individuals) | WB Global Findex |
| Percentage of adults that answered at least 3 out of 4 financial questions correctly (% adults) | Quality | Financial literacy | Standards and Poor’s |
| Firms with a checking or savings account (%) | Usage | Account (Enterprises) | WB Enterprise Survey |
| firms with a bank loan or line of credit (%) | Usage | Borrowing (enterprises) | WB Enterprise Survey |
| Number of listed companies per 1,000,000 people | Financial markets | WB FinStats and country websites | |
| Market capitalization excluding top 10 companies to total market capitalization (%) | Financial markets | WB FinStats |
11. It is difficult to obtain adequate data for all indicators for all country samples. It is even more difficult to have time series data for all indicators for the majority of the countries. There is a trade-off between reducing the country samples or indicators to get time series data and reducing time series to maintain as many as possible country samples and indicators. We chose the latter solution. Therefore, we use the data of 2014 (or most recent value) to calculate the financial index, which enables us to take a snapshot of the position of most countries in the world, including Jordan.
12. The dataset is used to calculate composite indices for 132 countries by using 11 indicators from different dimensions of financial inclusion. The country coverage includes 20 low-income, 67 middle-income (33 lower-middle-income and 34 upper-middle-income), 45 high-income (14 non-OECD and 31 OECD) countries. A summary statistics of the underlying data is shown in Table 2 at the end of this Annex.
Jordan: Summary Statistics of the Underlying Data
Jordan: Summary Statistics of the Underlying Data
| Name | Obs | Mean | Std. Dev. | Min | Max |
|---|---|---|---|---|---|
| Outreach | |||||
| Number of ATMs per 1,000 square kilometers | 132 | 109.7 | 437.2 | 0.1 | 3,869.9 |
| Number of commercial bank branches per 100,000 adults | 132 | 21.1 | 27.8 | 0.8 | 256.3 |
| Usage for Individuals | |||||
| Account at a formal financial institution | 132 | 54.3 | 32.1 | 3.5 | 100.0 |
| Loan from a financial institution in the past year | 132 | 12.6 | 7.6 | 0.4 | 40.5 |
| Saved at a financial institution in the past year | 132 | 23.3 | 19.2 | 0.9 | 78.4 |
| Used electronic payments to make payments | 132 | 18.9 | 25.1 | 0.0 | 88.2 |
| Usage for Firms | |||||
| Firms with a checking or savings account (%) | 132 | 88.4 | 15.2 | 29.7 | 100.0 |
| Firms with a bank loan or line of credit (%) | 132 | 36.8 | 17.2 | 3.8 | 79.6 |
| Financial Literacy | |||||
| Percentage of adults that answered at least 3 out of 4 financial | |||||
| questions correctly (% adults) | 132 | 37.5 | 13.7 | 13.3 | 71.3 |
| Financial Markets | |||||
| Number of listed companies per 1,000,000 people | 132 | 19.0 | 36.7 | 0.0 | 229.4 |
| Market capitalization excluding top 10 companies to total | |||||
| market capitalization (%) | 132 | 41.7 | 25.0 | 0.0 | 99.0 |
Jordan: Summary Statistics of the Underlying Data
| Name | Obs | Mean | Std. Dev. | Min | Max |
|---|---|---|---|---|---|
| Outreach | |||||
| Number of ATMs per 1,000 square kilometers | 132 | 109.7 | 437.2 | 0.1 | 3,869.9 |
| Number of commercial bank branches per 100,000 adults | 132 | 21.1 | 27.8 | 0.8 | 256.3 |
| Usage for Individuals | |||||
| Account at a formal financial institution | 132 | 54.3 | 32.1 | 3.5 | 100.0 |
| Loan from a financial institution in the past year | 132 | 12.6 | 7.6 | 0.4 | 40.5 |
| Saved at a financial institution in the past year | 132 | 23.3 | 19.2 | 0.9 | 78.4 |
| Used electronic payments to make payments | 132 | 18.9 | 25.1 | 0.0 | 88.2 |
| Usage for Firms | |||||
| Firms with a checking or savings account (%) | 132 | 88.4 | 15.2 | 29.7 | 100.0 |
| Firms with a bank loan or line of credit (%) | 132 | 36.8 | 17.2 | 3.8 | 79.6 |
| Financial Literacy | |||||
| Percentage of adults that answered at least 3 out of 4 financial | |||||
| questions correctly (% adults) | 132 | 37.5 | 13.7 | 13.3 | 71.3 |
| Financial Markets | |||||
| Number of listed companies per 1,000,000 people | 132 | 19.0 | 36.7 | 0.0 | 229.4 |
| Market capitalization excluding top 10 companies to total | |||||
| market capitalization (%) | 132 | 41.7 | 25.0 | 0.0 | 99.0 |
Methodology and Computation of the Index
13. A standard three-step approach is used to construct the financial inclusion index. This approach is found in the literature on reducing multidimensional data into one summary index: (i) normalization of variables; (ii) determination of dimensional sub-indices; and (iii) aggregation of sub-indices into the final index. This procedure follows the OECD Handbook on Constructing Composite Indicators (OECD, 2008), which is a good reference for methodological suggestions.
14. By using above selected indicators, we construct a total of five sub-indices, which are used to measure the outreach, usage for individuals, usage for firms, quality, and market access. At the end, these sub-indices are aggregated into the overall measure of financial access—the Financial Inclusion index. The results are shown in Figures 1 and 2.
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World Bank, 2008, Finance for All? Policies and Pitfalls in Expanding Access, World Bank.
Prepared by Helen W. Wagner (MCM).
Including households and resident nonfinancial corporations (public and private).
Progress has been made since 2014 when the CBJ launched the Jordan Mobile Payment system (JoMoPay) to enable unbanked adults to transact, transfer, and save via electronic means. As of early November 2016, over 60,000 active digital wallets have been registered at banks. JoMoPay is also offered to microfinance Institutions (MFIs) for loan disbursement and micro-insurance, which has been used by the biggest MFI in Jordan.
This dimension can be measured by percentage of market capitalization outside of top 10 largest companies, percentage of value traded outside of top 10 traded companies, government bond yields (3 months and 10 years), ratio of domestic to total debt securities, and ratio of new corporate bond issues to GDP, etc. (Čihák and others 2012).
The government has established a steering committee, chaired by the CBJ Governor, to develop the strategy. A technical committee, chaired by a deputy governor of CBJ, and six working groups have been set up to work on different pillars. With the help of GIZ, the CBJ has started to conduct a comprehensive study assessing the detailed level of financial inclusion in Jordan and identifying key issues and challenges. The strategy is expected to be developed by end-2017.
Recently, the CBJ and commercial banks have co-financed a JD30 million Fund, managed by the JLGC, to provide loan guarantees to SMEs and start-ups. A $100-million fund (jointly financed by the CBJ and the World Bank and managed by the JLGC) will also be created to provide equity financing to SMEs and start-ups.
