Promoting reflections on access to financial services in Latin America

(La Paz, September 20, 2011). CAF –Latin American development bank– presented its seventh Report on Economy and Development (RED after its initials in Spanish) entitled Financial Services for Development: Promoting Access in Latin America at a seminar attended by its executive vice-president, Luis Enrique Berrizbeitia, the vice-minister of the treasury and public credit, Edwin Rojas, executives of the Financial System Supervision Authority (ASFI), businessmen, representatives of Bolivia’s financial system, international cooperation agencies, the regulatory system, and the Association of Private Banks of Bolivia (Asoban), members of academy, and special guests.

Luis Enrique Berrizbeitia explained that CAF produces this report each year to make current, relevant information available to its shareholder countries: “Generating knowledge and research on issues of importance for the development of the region are contributions offered by CAF as an independent in center of independent thought.” With regard to the issue addressed by this year’s report, he said that the importance of its research and analysis stems from the fact that the health of financial systems is a critical factor for the economy of countries.

He pointed out that the report provides data that make it possible to conclude that improvement in the indicators for banked population, access of small and medium enterprises to loans, and the financial inclusion of micro enterprises invariably produces more development, increased capacity for generating jobs, and greater contributions to the economies of the region. “All this results in a better standard of living for families,” concluded Berrizbeitia.

Also present at this event was CAF’s vice-president of development strategies and public policies, Leonardo Villar, and its director and chief executive for socioeconomic research, Pablo Sanguinetti and Daniel Ortega, respectively.

They explained that a survey conducted by CAF in 17 cities and several countries of the region reveals that access to financial system services in Latin America is still limited. One example of this is that only 53% of the population has an account with a bank or a micro financial institution and only 12.3% of families have applied for and currently have a bank credit or loan.

“This finding suggests that Latin America is lagging way behind other regions. Among the reasons identified are: people’s level of income, the effects of economic phenomena such as inflation –which discourages deposits and loans-, macroeconomic cycles of economic vulnerability, and deep recessions that undermined people’s confidence in financial institutions. This attitude towards the banks is improving and is halfway on the path to recovery,” said Leonardo Villar.

CAF’s report also highlights the development of micro financial institutions and how they have contributed to enabling different segments of the sector to have access to their products and services.

The report gives over a chapter to the role of the State, highlighting the role of state-owned banks and describing successful experiences in expanding financial services to certain sectors of the population, although it also mentions some problems of governance and economic policy that these banks have. For that reason, it mentions the importance of providing them with good corporate governance schemes.

In the case of Bolivia, RED 2011 highlights the significant development of its microfinance system, which has permitted Bolivia to rank relatively well in Latin America in terms of access to services of this type.

Commenting on RED 2011

The vice-minister of the treasury and public credit, Edwin Rojas, stated that, for the Ministry of Economy and Public Finance, this report is extremely important as it addresses an issue that has taken on tremendous importance in recent years, when two periods of world crisis have forced countries to act in aggressive and unexpected scenarios, developing policies for generating growth and well-being for society.

“Mention needs to be made of the measures that were taken to improve access to financial services. In the first place, the model of the plural economy proposed by Bolivia’s Constitution (Constitución Política del Estado), which recognizes all forms of economic organization,” he said. He also stressed that the macroeconomic context was fundamental for development in the financial sphere.

Finally, Rojas stated that the policy of “Bolivianizing” financial operations has also managed to help the financial sector in Bolivia, minimizing the foreign exchange risk and contributing to the country’s economic stability.

Participating in the presentation of RED 2011 were prominent commentators specializing in the subject in question, such as Fernando Prado, the general manger of Próspero Microfinanzas Fund, Herbert Müller, a professor in finance, Evelyn Grandi, an economist specializing in microfinance, and Ronald Gutiérrez, the general manager of Banco Ganadero and director of Asoban.

The commentators pointed out that Bolivia is a very good example of the variety of offers being made available by regulated and non-regulated institutions, NGOs, and cooperatives that finance both micro entrepreneurs and small and medium enterprises. Despite progress made, training is needed in market orientation and risk coverage management and administration in line with the nature of the credit users, and less demanding rules and requirements that would make a family productive unit eligible to become a company are also necessary.

They considered that CAF had hit the mark with the approach adopted by the study, given the importance of the use of bank services for families’ well-being. They pointed out that identifying market shortcomings and barriers impeding access to the financial system provides a series of background facts that would allow the authorities to formulate appropriate public policies. They also commented that two issues were analyzed that should be subjects of national debate: “the role of state-owned banks” and “the role of regulation.”