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Innovation driving financial inclusion in Latin America

Innovation driving financial inclusion in Latin America

​​​​​​​​​​​​WSBI shares success by members during FELABAN panel

>> FELABAN agenda

>> Learn about WSBI in Latin America

BRUSSELS, 14​ November 2017 –​ WSBI participated this week in the FELABAN conference, the largest venue in Latin America gathering banks doing international business. Held in Miami, WSBI's James Pieper took part in a panel on financial inclusion alongside Matthew Gamser from SME Finance Forum and Maria Bibiana Botero​, director of SMEs' customers strategy and governmental relations at Bancolombia. The session was moderated by Xavier Serbiá, financial commentator, syndicated columnist, and news anchor of CNN Dinero at CNN en Español.

​​Prior to the meetings, WSBI answered to a few questions about financial inclusion. Such topic is at the core of WSBI's and its members' work.

​How does WSBI define financial inclusion?  

For WSBI, savings and retail banks worldwide, financial inclusion means “An Account for everyone", as enshrined in our 2012 Marrakech declaration​. It is the process where every adult person can gain access to a basic banking account to help them reach their dreams. Access does not only mean having an account, but using it in ways to help them save for a rainy day, finance a home or business. Having an account also give people the opportunity to transact in their day to day life, making payments, sending and receiving money in a secure manner.

This definition was used when our members pledged a few years back to reach 1.7 billion clients and 400 million new transaction accounts by the end of 2020, as part of WSBI commitment to the World Bank ​Group's Universal Financial Access 2020​​. WSBI members continue to make progress towards it. Latest available data compiled by the Brussels-based institute point to 136 million new clients as of 31 December 2016, from the UFA commitment starting point set at year-end 2014. WSBI members, who are present in some 80 countries worldwide, had 1.57 billion clients as of year-end 2016. Relatedly, the number of new transaction accounts provided by WSBI through 2016, stood at 2.35 billion, up 236 millio​n based on the end-of-2014 benchmark. Much progress was made in the Latin American region.

What components should form part of a financial inclusion plan? ​

Understanding the market is paramount. The plan must identify the type of needs and what tools can be used to meet them. One example is the use of mobile phones / smartphones if a dependable phone network is in place. It could extend into culture on the ground, where village savings groups can help break barriers to access. In our case, we have “boots on the ground" to help locally focused banks and agent banks to drive efforts to bring people out of the financial wilderness and into mainstream accounts. We have case studies from Chile, Colombia and Mexico that helps people to gain access to a bank account, and help them start a business if they want. The plan also needs to find ways to not only get people into an account, but also find ways to incite them to use it. Smartphone apps have been a proven way to get people connected and clicking. A plan has to be smart, but it also must clearly state a shared definition of financial inclusion.

Why is it difficult to access financial services in the region? Is it a demand/supply issue? regulatory? or infrastructural?

A lot of it has to do with the mind-set. There are bright spots in Brazil and Chile, for example. But there are other countries where people and banks struggle to connect and stay connected. People must be aware and informed that tapping into mainstream banking services changes their life for the better. WSBI members in the region try to instil this sense of hope. They also provide a lot of support beyond the account. We have 554,000 social housing loans on the books; we help women in Peru to gain skills and start a business whose wares supply the world. Sometimes, the challenge is to regularly con​nect with people. This makes us think about not only access to accounts, but by how we fulfil peoples' needs. One example, in the Dominican Republic, is our member APAP: it led to a first-of-its kind effort to train staff in sign language to help the hearing impaired. Our member CAIXA in Brazil has a riverboat used as a floating bank, serving villages on the banks of the Amazon basin.

It shows that banks have to be creative to keep people plugged in and thriving. Bricks and clicks, and sometimes “sign" and “sailors", are needed too. Staff need to be on-board, both literally and figuratively!

On the SME financing front, data show that the region stacks up pretty well against other developing markets. The trick is to make sure banks fill a need for SME financing, which in most of our membership is still the case.

When talking about inclusion, should we only think about infrastructure, service, products or also education?  

Education is the pathway to inclusion. We have 5,000 banking outlets in the region and 137,000 staff trying to connect with people every day. SchoolBank​ – a way to teach money and banking basics – has been a success in many countries around the world. Perhaps it could be used more to bring awareness to a new level and hopefully change the way people think about highly personal subjects such as money. This should be done at an early age, and often.

​As for infrastructure, it can help immensely. Especially when it comes to roads, utilities and phone / internet networks. When those are working, it becomes much easier to join people with bank services. Products have to be tailored to the needs while staying dependable. We see a lot of innovative products coming out of the Latin American region, especially on the digital front. When they innovate, banks see big gains in account numbers and use. Banks are in business to stay afloat and thrive, so they want to balance service with meeting needs, while addressing costs. Technology is really helping address this in so many ways, including in agent banking, payments and account use as well as back-office work. The digital wave sweeping banking will help bring more people out of the financial wilderness.

>> FELABAN agenda

>> Learn about WSBI in Latin America

Financial inclusion; Financial education; SME finance; Innovation Hub; Digitalisation; Innovation