INTRODUCTION

Background

The G20 Global Partnership for Financial Inclusion (GPFI) has recognized financial inclusion as a key enabling element, both in the fight against poverty and in reaching the goal of inclusive economic development. About 40 countries around the world have publicly committed to financial inclusion objectives and targets.1 Reliable financial inclusion data are critical to inform policies, establish financial inclusion targets, and monitor the implementation and progress in achieving the targets. The G20 Financial Inclusion Indicators suggest that financial inclusion should be measured in three dimensions: ( i) access to financial services, ( ii) usage of financial services, and ( iii) quality of products and service delivery. To form a comprehensive view, the G20 Financial Inclusion Indicators include both supply-side and demand-side data. In addition, they provide further insight into access and usage aspects by including indicators on emerging branchless delivery channels such as mobile banking.

Russia is among the countries where access to financial services was identified as one of the country’s domestic policy priorities since 2007.2 It was estimated back then that over 40 percent of the population lacked access to banking services, and the supply of financial services outside Moscow was only 4 percent of that in Moscow. With respect to the G20 Financial Inclusion Indicators, most of the financial inclusion data for Russia reflect the supply side. While some data on the demand side are available from the World Bank Global Findex Survey (2011),3 more comprehensive and granular information is necessary to obtain a clear a picture of financial inclusion — as well as financial exclusion — in Russia.

In 2012, CGAP conducted a Financial Inclusion Landscaping study in Russia (Lyman, Staschen, and Tomilova 2013). The study found that by 2012, the progress of financial inclusion in Russia had been significant compared to that in 2007.4 The number of people not using any banking services reduced to 22 percent; the supply of financial services increased fivefold; and the number of bank branches per 100,000 adults grew to over 37 — which put Russia ahead of some highly developed countries. In the area of branchless banking, the advancement was even more rapid. From virtually no such services several years earlier, Russia developed various innovative financial service delivery channels that are now being used by about 50 percent of the population (though currently primarily for payments). This includes a specific Russian solution — cash-in payment terminals that are the primary points of service in the country for low-value payments.

However, despite all the progress, access to financial services is still a challenge in remote areas of the country. In terms of geographical distribution of bank branches — per 1,000 sq. km — Russia’s figures are far behind that of many developed countries. Certainly, being the largest country in the world, Russia has many uninhabited areas (and thus comparisons to densely populated countries may not be appropriate), but the same is true for the United States, for example. Yet in the latter, the number of bank branches per 1,000 sq. km is about 3.5 times higher than in Russia.

The study also highlighted that there are certain categories of people in Russia who remain unbanked and underbanked. However, there were no comprehensive and detailed data available at the time of the study that would provide insight into this segment’s specific profiles and needs, nor an understanding of the barriers preventing them from accessing and using financial services.

The goal of the research conducted by the National Agency for Financial Studies (NAFI) with support from CGAP and Beyond Philanthropy during April–June 2014 was to fill in some of the information gaps with respect to the demand-side aspects of financial inclusion in Russia.5

Specifically, the objectives of the research were to do the following:

• Identify characteristics of the segments of the Russian population who do not use or have no access to financial services.
• Determine the level of demand for financial products and services (by groups of products and services).
• Identify objective and subjective barriers to accessing financial services.
• Develop proposals on most effective ways to overcome the barriers to accessing financial services.

The research methodology included a national representative quantitative survey, as well as qualitative interviews with both users and nonusers of financial services and financial service providers, to get their insights into the issue of financial inclusion from the demand-side perspective (see Annex 1).

This research report is organized around the three areas of the G20 Financial Inclusion Indicators and provides insights into these areas from a demand-side perspective:

• Chapter 1 presents an overview of the physical access infrastructure for key financial services and delivery channels, to put the data on customer perspectives on access-related issues into a broader context. It then follows with the findings of the survey on customer satisfaction with physical infrastructure for financial services.
• Chapter 2 presents the survey findings on the current level of customer usage of financial services and financial service delivery channels, as well as awareness about them, and the intention to use financial services in the next 12 months.
• Chapter 3 presents the findings on quality-related aspects of financial inclusion in Russia. It summarizes results from both the survey and qualitative interviews and addresses various barriers to financial inclusion, such as the level of trust in financial service providers and specific financial services, key reasons for using or not using financial services from the customer perspective, financial literacy, and behavioral biases affecting people’s decisions to use financial services. It also presents a comparison of customer versus provider perspectives with respect to key barriers to financial inclusion, based on data from the qualitative research.
• The report concludes with a number of observations that could be useful for both financial service providers and policy makers working on financial inclusion issues in Russia, as well as researchers studying this topic.

The main text of the report is preceded with short reference information on the regional division of Russia. A glossary on the financial services and delivery channels discussed in the report is included in Annex 2.

Regions of Russia

As of January 2014, the Russian Federation consisted of eight Federal Districts (FDs):6

1. Central FD, Capital city: Moscow

2. Northwestern FD, Capital city: St. Petersburg

3. Southern FD, Capital city: Rostov-on-Don

4. North Caucasian FD, Capital city: Pyatigorsk

5. Volga FD, Capital city: Nizhny Novgorod

6. Urals FD, Capital city: Yekaterinburg

7. Siberian FD, Capital city: Novosibirk

8. Far Eastern FD, Capital city: Khabarovsk

Map 1. Federal Districts of the Russian Federation