The number of people in Latin America using the region’s banking systems has failed to match the improvements in economic growth rates, income levels and stronger financial systems.
The amount of assets held in banking systems in most countries hovers around 35% of GDP. In Brazil and Mexico, which account for more than 60% of the region’s GDP, the levels are 35% and 21%, respectively, according to the Latin American Federation of Banks (Felaban).
More startling, 75% of adults in the region do not have savings accounts and only 2% of adults have used mobile phones to pay bills or receive transfers, compared to 15% in sub-Saharan Africa.
Only Chile and Uruguay are above the 50% mark in South America, with Chile at 68% of GDP and Uruguay at 51%.
Queen Maxima told Emerging Markets during a March visit to Peru that access to credit had to be accompanied with an emphasis on savings.
“Learning to save is critical. There has been enormous focus on the issue of credit and expanding access to credit, but as important is savings and that is where the work needs to be done now,” she said.
PERU PLATFORM
One of the most innovative programmes under development is the creation of an inter-operable platform in Peru. It will involve all the banks in the financial system, mobile operators, retail outlets and the government.
The goal is to complete the platform by the end of this year and launch the first pilot projects in 2015. It will allow users to receive and make transfers, pay bills and access government programmes, such as the conditioned cash transfer scheme, Juntos.
“It is one of the most ambitious platforms and unique in the world. We are very excited that it is emerging in our region,” said Nancy Lee, general manager of the IADB’s Multilateral Investment Fund (MIF).
She said that financial inclusion in the region lagged behind income levels and the development of the financial system. “There is a lot of scope for improvements and we are in the midst of revolution in mobile access to financial services.”
There are still many hurdles. For the platform to work it will require the close collaboration of a large number of stakeholders and the kinds of transactions that will be made have small margins, which means sharing small margins with a larger number of players.
While the focus of financial inclusion has traditionally been on credit, the MIF and other international institutions are now stressing savings, payments and micro-insurance.
Research by the IADB and others has found that the poor in Latin America do have access to credit and they do save, but they do it through informal channels that are inefficient, costly and, ultimately, unreliable.
“The old assumption that the poor do not need financial services and that they do not save has really been discredited by a growing amount of evidence,” said Lee.