Retail investors in government debt: Can fintech bring about cheaper, more inclusive programs? by Sébastien Boitreaud and Leandro Puccini Secunho published by World Bank Blog (11/2020)
“Last summer, amid the high market volatility induced by COVID-19, analysts noted a striking source of activity in the US stock market: retail investors accounted for up to a quarter of the trading volume, up from less than 10 percent one year ago. Retail investors are individuals and families who directly invest small amounts of money for themselves rather than through financial firms.
Such analysis does not exactly surprise those familiar with the prominent role that these investors play in many government debt markets. In Ireland, 80 percent of the population owns directly at least one government debt instrument. In Hungary, more than a quarter of the government’s debt is directly owned by domestic retail investors. Governments have relied on retail investors to finance their debt for centuries, with early examples including ‘rentes’ and ‘consoles’ bought by French and British families to fund the Napoleonic wars. More recently, Italy has relied on a new retail debt instrument to finance emergency expenditures related to the coronavirus crisis.
Prospects for retail debt programs got a boost a few years ago, when breakthroughs in fintech started to provide governments with options to launch less costly and more inclusive programs. The trend has been reinforced by the current pandemic, as more people rely on online platforms to access financial services in general, as noted during the International Retail Debt Management Symposium, held last month. The event, organized by the World Bank and the US Department of the Treasury, takes place every two years, with the objective to facilitate information sharing among sovereign debt managers about these specific debt instruments…”
