Figure VI.1: Account Penetration in African Fragile States

of households and SMEs to access different types of financial services (including savings, loans, remittances, and insurance). Account penetration in African fragile states lags behind other African countries. On average, only 14% of adults living in African fragile states have an account at a formal financial institution, compared to 23% for the entire continent. In Burundi, Central Africa Republic, Chad, Congo, DRC, Guinea and Sudan, more than 90% of adults are unbanked (Figure VI.1). Poor infrastructure and security threats in fragile states are impediments to the expansion of access points. In addition, the lack of identification due to weak institutions constitutes a sizable barrier to account ownership in most fragile states.

Figure VI.1: Account Penetration in African Fragile States (%)

Burundi CAR ChadComoros Congo Djibouti DRC Guinea LiberiaSierra Leone Somalia Sudan TogoZimbabwe

Source: Dermiguc-Kunt and Klapper (2012). Note: Bars correspond to the share of adults with an account at a formal financial institution. Acronyms are: CAR (Central African Republic) and DRC (Democratic Republic of Congo).

By contrast, account penetration rates are much higher in Bosnia and Herzegovina (56%), Kosovo (44%) and Nepal (25%), which are fragile states in Europe and Asia. Coincidentally, these non-African fragile states have a higher CPIA, suggesting a better economic situation. Yet, as shown in Figure VI.2, adults in African fragile states are less likely to have an account at a formal financial institution compared to non-African fragile states even within the same income group category. Interestingly, the difference is more significant for the lower-middle income group where an African adult living in a fragile state is three times less likely than a non-African adult to have an account at a formal financial institution.

Adults in African fragile states report active use of formal accounts to receive remittances (66% in Somalia and 55% in Zimbabwe). This could be linked to high levels of poverty and shortage of resources prevailing in these countries which creates greater need for support from family members living abroad. High remittance flows represent an opportunity for financial