Bank of Russia conducts an analysis of financial inclusion in Russia
According to data1 released in the Bank of Russia’s second annual Review of financial inclusion, almost a third of Russia’s population (31.5%) uses remote bank accounts (Internet banking and/or mobile banking). This share has grown by 7.8 percentage points over the past year.
These remote and digital financial services will largely be able to offset the global trend towards a decrease in the number of physical locations of financial institutions. Over the past year, the number of branches and divisions of credit institutions has fallen by 8.7%; federal postal service organisations by 7.6%; and cash offices of bank payment agents by 4.6%. Meanwhile, the number of cash offices of payment agents (payment operators and payment sub-agents) has displayed a significant increase of 133.6%. Similar developments linked to the growth of digital financial services can be observed all over the world.
According to IMF estimates, in 2016 Russia ranked among the world leaders in terms of a number of indicators relating to household access to financial services (infrastructure), ahead of some G-7 countries and all BRICS member-countries.
Based on the Review, every third Russian adult (28.9%) used bank loans or loans provided by non-bank financial institutions. The most active users of bank loans are members of the middle generation
Non-bank financial institutions (microfinance organisations, consumer credit cooperatives, and pawnshops) are becoming increasingly important in towns and villages, where banks are fewer. It should be noted that only 0.6% of the population, mainly pensioners aged 71 years and over, and low-income earners, invest their funds in non-bank financial institutions. In view of the above, the Bank of Russia is paying close attention to the risks associated with such investments, since this segment is not subject to government deposit insurance.
At the time of the poll, 23.4% of small and medium-sized enterprises (SMEs) had active bank loans, while only 1.6% of SMEs borrowed from non-bank financial institutions, which can be explained by entrepreneurs’ general lack of awareness of this source of financing. As much as 14.6% of SMEs used bank deposits, while 1.8% of SMEs had undertaken loan contracts to place funds with non-bank financial institutions.
The Review notes that in the period from May 2016 to May 2017 the share of people with voluntary insurance fell by 4 pp to 12.4%, while the share with compulsory insurance remained relatively unchanged at 63.8%. The share of SMEs with voluntary insurance rose by 5.4 pp to 38%, while the share of entrepreneurs with compulsory insurance amounted to 40.2%.
In the process of calculating financial inclusion indicators, financial knowledge was measured as an aspect of financial literacy. The share of people who responded correctly to the question ‘what is the primary aim of insurance’ increased significantly by 6.3 pp to 24.7% in the period from May 2016 to May 2017. The share of people who correctly understand the notions of ‘inflation’ and ‘risk diversification’ remained practically unchanged, at 37% and 25.6% respectively. However, the share of people who responded correctly to questions about the economic content of the terms ‘interest rate’, ‘compound interest’, and ‘money illusion’ fell to 46.9% from 53.5%, 23.5% from 28.5%, and 20.3% from 21.8% respectively, due to which the financial knowledge indicator2 dropped from 1.86 to 1.78. This can be attributed to the fact that the ongoing complexity of financial products and services affects people's comprehension of the economic content of terms and gives rise to a new terminology which impacts the perception of traditional definitions.
The share of the population satisfied with financial services provided by credit institutions and their operation in turn grew by 1.6 pp to 82.3%. Alongside this, the share of SMEs satisfied with financial services provided by credit institutions to businesses and their operation increased by 7.2 pp to 78.2%.
1 Data of financial institutions’ statements for 2016 / as of the end of 2016. Data of the poll of the population and SMEs as of the end of April-May 2017 (for 12 months, from 1 May 2016 to 1 May 2017).
2 The financial knowledge index is calculated on a scale from 0 to 6, where 6 indicates that 100% of the population understands the economic content of all six financial and economic terms. The respondents were not asked to give definitions of the terms.