WASHINGTON (Reuters) - In Brazil, bank customers can access their accounts aboard a floating bank on the Amazon River. In Mexico, rural residents find banking services inside popular stores like Walmart (WMT.N) or 7-Eleven, or at their local pharmacy.
Mobile technology and regulatory reforms have made it easier and cheaper for private and public companies around the world to offer banking services to the poor, youth, women and rural residents, and others who lacked access.
But in a new report released on Monday, the World Bank warns that while some services, like low-fee accounts, clearly benefit the poor and small firms, others - such as microcredit, microinsurance, and debt relief - can do more harm than good.
"We're very careful to make sure we're not saying that everyone should be borrowing," said Asli Demirguc-Kunt, the World Bank's director of research and co-author of the report.
Instead, the World Bank encourages governments to reduce regulatory barriers, legal hurdles or other factors that make financial services too expensive for some, such as boosting competition and protecting the rights of creditors.
Access to finance helps the world's poorest save so they can invest in education and improve standards of living, and enables small companies to borrow so they can grow. It also makes it easier for governments to target subsidies and financial assistance to the bank accounts of the neediest.
More than 50 governments have pledged to improve financial inclusion, or the number of people and companies that use financial services. World Bank President Jim Yong Kim last month also announced a target of universal financial access by 2020. Now, about 2.5 billion people, or half the world's adult population, lack access to financial services.
Microcredit, or tiny loans to the poor, came into vogue in the late 1990s as a way of providing banking services to the world's poorest in order to combat poverty and boost entrepreneurship.
But several studies in recent years have shown that microcredit, which often comes with very high interest rates, has little or no impact on the financial fates of people in nations such as Mexico, the Philippines, Morocco and India.
The World Bank said India in particular offers a cautionary tale about the overextension of credit, after reports of dozens of suicides by poor borrowers in 2010 in the southern state of Andhra Pradesh.
India lacked appropriate protection for consumers and legal provisions for personal bankruptcy, the bank said. In general, governments should avoid directed credit and lending through state-owned banks, as these interventions can become tied to politics, according to the World Bank.
But innovative financial instruments and new technology have made it easier to expand access, even in countries without strong institutions.
One experiment in rural Malawi collected the fingerprints of some farmers that wanted loans to grow paprika. The experiment showed that farmers who were at highest risk for default were more likely to pay back a loan if they were fingerprinted, since they worried they might not get another loan in the future.
The identification could also make lenders more likely to extend credit since they would have better information about borrowers.
"Recent research suggests that biometric identification (such as fingerprinting, iris scans, and so on) can substantially reduce information problems and moral hazard in credit markets," the World Bank said.
Other tools that can encourage people to save in formal bank accounts are commitment savings accounts, where people give up access to their money for a set period of time, or regular reminders of savings goals.
But the World Bank said it was important to have more educated consumers in addition to enabling government policies. For that, standard financial literacy classes generally fail at preparing people for major financial decisions.
"A person can learn the meaning of street signs, but this does not make him capable of driving in traffic," the bank said.
Instead, what seems to work better is providing information just as a person is starting a new job or purchasing a financial product.
"You need the right regulations in place, but also to educate consumers so that they watch out for themselves," Demirguc-Kunt said.
Reporting by Anna Yukhananov; Editing by Paul Simao