Financial Crime World

European Economies Make Strides in Financial Inclusion

A recent International Monetary Fund (IMF) report has highlighted significant progress made by emerging and developing European economies in improving financial inclusion for households and firms.

Improving Access to Finance in Armenia

According to the report, access to finance for households in Armenia is improving. Key indicators include:

  • A growing number of automated teller machines (ATMs) and commercial bank branches per capita
  • Total deposits with commercial banks have doubled over the past decade, reaching 40% of GDP

However, there remains a gender gap in financial inclusion, with only about 40% of women having a bank account compared to 60% of men.

Financial Literacy: A Key Challenge

Financial literacy is another area where Armenia has room for improvement. The country’s average financial literacy score is:

  • 11.4 out of 21
  • Only 27% of adults achieve the minimum target score

This lack of literacy is associated with negative attitudes towards saving, which is a major deterrent to people saving and prioritizing short-term needs.

Challenges in Rural Areas

Rural areas in Armenia continue to face significant barriers to financial inclusion, including:

  • Limited physical infrastructure
  • Large informality
  • Lower financial literacy
  • Lack of trust in the financial system

These challenges have resulted in fewer bank branches and ATMs in rural areas compared to urban areas.

Access to Finance for Firms: A Key Challenge

The report also highlights the importance of improving access to finance for firms, particularly small and medium-sized enterprises (SMEs). Key findings include:

  • Access to finance is the main challenge facing Armenian businesses, with 30% of respondents citing it as a major obstacle
  • Informal firms may have an unfair advantage over formal firms given that they can compromise on rules, taxes, and regulations

Conclusion

Addressing these challenges will require targeted efforts to:

  • Improve financial literacy
  • Increase access to finance for SMEs
  • Reduce informality in the economy

By taking a proactive approach to addressing these challenges, emerging and developing European economies can continue to make progress towards improving financial inclusion.